Mr. Gary Bleach and Another
| Jurisdiction | England & Wales |
| Judge | MR. K. LEWISON QC |
| Judgment Date | 22 February 2002 |
| Judgment citation (vLex) | [2002] EWHC J0222-3 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 22 February 2002 |
| Docket Number | Case No: 3-M-2002 |
[2002] EWHC J0222-3
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice,
Strand,
London, WC2A 2LL.
MR. K. Lewison QC
Case No: 3-M-2002
(260 of 2001)
MISS S. KNIGHTS appeared on behalf of the APPLICANT
MR. W. BEGLAN (Biebuyck Solicitors, 121 New London Road, Chelmsford, Essex, CM2 OQT) appeared on behalf of the RESPONDENT.
(As Approved)
Friday, 22nd February, 2002.
In the Colchester County
Court on 12th December 2001 by his order, District Judge Hallett adjudicated Mr. Bleach bankrupt. The petition on which the bankruptcy is based was issued following the issue of a statutory demand by the joint liquidators of Branston & Gothard Limited, claiming a sum of fifty-five thousand and twenty-one odd pounds.
That sum is a sum which they say represents the debit balance on the account of a
Mr. Cooper-Reid who traded in options and other financial derivatives, through the brokerage of
Mr. Bleach.
Mr. Bleach was a self-employed stockbroker; a registered representative with Branston & Gothard. He entered into a revised agreement on 1st July 1997. I am told that agreement replaced an earlier agreement, whose date I do not know; and I am also told that the only relevant revisions are changes to the commission-sharing structure.
Clause (1) of the agreement says that Mr. Bleach is engaged by B&G under a contract for services and that he is a self-employed stockbroker authorised to transact investment business.
Clause (3) reads: 'You hereby acknowledge responsibility for any default of your clients and that you will reimburse B&G in respect of any and all losses that it may suffer by reason of their default, including any additional costs which may be incurred by the company in securing, recovering or attempting recovery of any and all debts.'
Clause (4) says: 'Any dispute with a client introduced by you will be settled by the directors of B&G. The cost of settlement of any such dispute will be borne by you unless, in the course of the settlement process, it becomes apparent that the dispute arises as a result of a fault in the administration or dealing facilities provided to you by B&G.'
Clause (6) says: 'You hereby acknowledge the
authority of the directors and associate
directors of B&G.'
Clause (7) says: 'B&G reserves the right to refuse to execute any transaction on behalf of any of your clients where, in its sole discretion, B&G believes that it has reason to do so. Such reasons shall include, but shall not be limited to, circumstances where there are doubts as to the creditworthiness of a client, or suspicion of insider dealing, or spoiling of another client's business.'
In a draft statement which was placed before the District Judge, Mr. Bleach said that he was a self-employed registered representative with B&G and that following the Labour victory in the 1997 election, the stockmarket rose rapidly. Two clients who had been operating on the basis there would be a downfall in the market, one of whom was Mr. Cooper-Reid, sustained losses.
He says that a meeting took place, which he attended together with Mr. Krays and Mr. Levers, both directors of B&G. He urged Mr. Krays to close down Mr. Cooper-Reid's account to dispose of securities which were held by B&G and to discharge the liabilities of both clients.
He said that Mr. Krays refused to deal with the matter in this way, contrary to his advice. Mr. Bleach says he was told by Mr. Krays that his decision was based on the fact that if he closed down the accounts there would be a loss of future commission.
Mr. Bleach goes on to say that had his advice been accepted, the securities would have been realised, the indebtedness of Mr. Cooper-Reid would
have been discharged and that would have been an end to the matter, and he —that is, Mr. Bleach —would have received his commission.
As it happened, however, trading continued and in November 1997, after large falls in the stockmarkets in both Tokyo and in London, the account was closed down as a result of a further decision by Mr. Krays, by which time Mr. Cooper-Reid's indebtedness had doubled. Mr. Bleach continued in his statement:
'Any loss to B&G has been caused entirely by the decision of Mr. Krays, which I opposed. Had he followed the appropriate course, there would have been no loss whatsoever.'
Now, Mr. Krays denies that that meeting took place. He says that a decision was taken to close down Mr. Cooper-Reid's account on or about 4th December 1997; that Mr. Bleach agreed to that closure, and said that the positions had been giving him a sleepless night.
There is, clearly, an issue of fact as to what happened in April 1997 and that dispute of fact is not capable of being resolved at this stage. Of course the dispute of fact is only a relevant dispute of fact if it has any legal consequences.
Mr. Beglan, appearing on behalf of Mr. Bleach, says that this dispute of fact does have legal consequences. He says that if Mr. Bleach's account of the meeting is accepted, it paves the way for one of two arguments.
The first argument is that Mr. Bleach is only liable to indemnify B&G in respect of any and all losses that it may suffer "by reason of" a client's default. He submits that if the real reason for the default is that B&G have caused it, by allowing the client to continue to trade, then it is not within the indemnity in clause (3).
The second way in which he puts the case is that it is an implied term of the agreement that if the management, in exercise of their power, under clause (6) of the agreement, overrule the self-
employed stockbroker and require him to continue to service a client whom he had introduced, then clause (3) does not apply.
Miss Knights, on behalf of the petitioning creditor, says that there is no evidence of any such implied term. She points out, quite correctly, that the agreement of 1st July 1997 was entered into some months after April 1997 when Mr. Bleach was overruled. Consequently, she submits, he must have known the position when he entered into the agreement on 1st July 1997.
She says that Mr. Bleach was, no doubt, compensated by receiving commissions and other benefits provided by B&G and that, because of those other benefits, there is no need to imply a term.
I am not persuaded that clause (3) can be construed in the way that Mr. Beglan suggests. By reason of their default, is a phrase which, in my judgment, does not allow the court to go behind...
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