Mr Les O'Hare & Mrs Janet O'Hare v Coutts & Company
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Kerr,Mr Justice Kerr |
| Judgment Date | 09 September 2016 |
| Neutral Citation | [2016] EWHC 2224 (QB) |
| Docket Number | Case No: HQ13X05701 |
| Court | Queen's Bench Division |
| Date | 09 September 2016 |
[2016] EWHC 2224 (QB)
The Honourable Mr Justice Kerr
Case No: HQ13X05701
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Paul O'Doherty & Darragh Connell (instructed by Cooke, Young & Keidan LLP) for the Claimant
Tamara Oppenheimer & Giles Robertson (instructed by Dentons LLP) for the Defendant
Hearing dates: 13–15, 18–22, 25–26 July 2016
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
A financial adviser has a duty to exercise reasonable skill and care when advising a client on making investments. In this case, the main issue is whether that duty was breached in the case of five investments made by the claimants (Mr and Mrs O' Hare, or the O'Hares) on the advice of the defendant (Coutts) in 2007, 2008 and 2010. The O'Hares also claim £250,000 under an alleged agreement between them and Coutts to settle a complaint by Mr O' Hare about the manner in which another Coutts product was sold to them.
Coutts denies the claims. Its defence to the main claims is that the investment advice given by its private bankers was sound and the investments were suitable; the complaints are of poor performance, informed by hindsight, which is different from unsuitability. Coutts says the alleged contract was a non-binding statement of intent to provide $250,000 (US dollars) through future discounts or credits to the O'Hares' accounts, as a gesture of goodwill.
In the alternative, Coutts submitted that if, contrary to its primary case, it undertook a binding contractual obligation as alleged, the obligation was to credit $250,000, not £250,000; and that it performed that obligation in whole or at least in part, by crediting the O'Hares with certain sums by way of discounts, to which the O'Hares were not otherwise entitled (the settlement agreement issues).
There was a dispute in that regard about the nature of certain sums passing between the parties, the amounts of which eventually became common ground at the trial and were embodied in an agreed table. Coutts said that credits shown in the table were voluntarily given to the O'Hares as a goodwill gesture. The O'Hares said the amounts shown in the table were not good evidence of performance of obligations under the settlement agreement.
In relation to three of the five investments in issue, made in 2007 and 2008, Coutts also pleads a limitation defence to the negligence claim in so far as brought in contract (i.e. for breach of the contractual duty to exercise reasonable skill and care) on the ground that the alleged breaches of contract pre-dated the claim by more than six years.
Coutts accepts that the claims brought for breach of the equivalent duty in tort were brought in time, since time runs from the date of the loss suffered, not the date of the breach of duty. The O'Hares accept that alleged breaches of contract prior to 28 November 2007 did indeed pre-date the claim by more than six years, but says this makes no practical difference, since the corresponding claims in tort were brought in time.
The total claim is for just under £3.3 million, plus interest. The causes of action relied on are breach of contract, negligence, breach of statutory duty and negligent misrepresentation. The statutory duties relied on are those that arise under the Conduct of Business Sourcebook (COBS), which, it is agreed, are actionable if breached. The claim for negligent misrepresentation was not developed in argument; the O'Hares did not suggest it adds anything material to the other causes of action, and I need say no more about it.
A further claim was advanced for alleged wrongful "churning", i.e. sale and purchase transactions by a fund manager which, though not unsuitable in themselves, are unsuitable because they are unnecessarily frequent and, by inference, done for the purpose of generating commission. That claim was never quantified and was abandoned after the expert witness instructed by the O'Hares said in oral evidence that he no longer supported it.
Coutts denied causation of loss in total, as well as denying any breaches of duty. Coutts also pleaded that in respect of one of the investments, made in 2010, the O'Hares "failed to mitigate their losses, inter alia, by terminating the Autopilot investment 2 years before the end of its term", resulting in a loss of £52,000 of the £8 million invested, which would otherwise have been avoided. This contention was not abandoned but was not developed in submissions or put to the O'Hares.
Facts: Narrative
I come to the facts of the case. Mr O' Hare is an experienced businessman with a background in cable-jointing and, subsequently, chemical engineering. He lives in Warrington with Mrs O' Hare, his wife of many years, and they live for part of each year in Florida, USA where they own a substantial property. He built up a successful chemical engineering business which he has since sold.
Mrs O' Hare's background is in business administration. He consults her on any major financial decision such as whether to make a substantial investment. She acts as a sounding board. Their investment decisions are taken jointly and their investments are made jointly, after Mr O' Hare has found a proposition and put it to Mrs O' Hare, and she has approved it. Their aggregate overall wealth has been estimated at various times in a range from about £25 million to about £38 million.
Some of that is in US dollars (dollars, or $) which they use when living and doing business in the USA. Their wealth was held partly in their individual names and partly through a pension scheme, the O' Hare Engineering Ltd Directors Retirement Benefits Scheme (the pension scheme). Until 2006, they also held shares in O' Hare Engineering Limited, their trading company, through a different retirement benefit scheme, a Funded Unapproved Retirement Benefit Scheme (FURB).
At various times, the O'Hares have invested in cash and bonds, property and (aided by a stockbroker from 1999) some equities. At that time and later, they invested in some corporate business ventures, on a relatively modest scale, with investments often of less than £100,000, or little more. They also engaged in two US property deals, with varying success. When exchanging sterling for dollars, Mr O' Hare tries to get the best rate he can, sometimes by forward transactions based on a future rate.
Coutts is a bank of high repute, which provides private banking services to, among others, high net worth individuals such as the O'Hares. Their relationship with Coutts began in 2001, after Mr O' Hare heard about their private banking services through a business acquaintance on a golf course in Scotland. Mr O' Hare was soon introduced to Mr Kevin Shone, a private banker at Coutts' Liverpool office, who became their main contact and relationship manager from 2001 until he left Coutts in 2008.
The O'Hares opened accounts with Coutts in August 2001. Straight away, Mr Shone recommended a product called Orbita Capital Return (OCR). The O'Hares invested $3 million into it, of which $1 million was cash and $2 million borrowed from Coutts. This later led to a complaint of mis-selling, which is indirectly relevant to the settlement agreement issues. Mr Shone reported to his credit committee that Mr O' Hare was "very keen" to make this investment and " keen" to consider "leveraging the [pension scheme]".
Coutts' case was that this keenness resulted from Mr O' Hare's sophistication and experience as a substantial investor, and owed little or nothing to Mr Shone's salesmanship and powers of persuasion. The O'Hares submitted that Mr Shone was a persuasive salesman who described the O'Hares as " keen" to denote his success in persuading them to accept his recommendations to invest in more high risk products than they would otherwise have favoured.
Mr Shone, indeed, in his documents repeatedly thereafter attributed keenness to Mr O' Hare to make investments which he, Mr Shone, recommended as suitable, but without mentioning any impetus from himself in engendering Mr O' Hare's keenness.
Mr Shone's Absence
It is necessary at this point to interrupt the narrative and address the difference between the parties about whether Mr O' Hare took the lead in asking for particular types of investment, showing his experience and sophistication as an investor and his appetite for gambling and high risk, or whether Mr O' Hare was led and persuaded by Mr Shone to make higher risk investments than was consistent with Mr O' Hare's unconditioned risk appetite.
Mr Shone was not called to give evidence. Mr O' Hare was. Coutts did not dispute that Mr Shone was a material witness and that its solicitors had identified him as such, though before contacting him. The only explanation for his absence was in a late witness statement, which I allowed, from Mr Dylan Williams (of Coutts) saying that Mr Shone told Mr Williams in 2016 that he was too preoccupied with other business responsibilities, following the death of his business partner, to devote time to these proceedings.
Ms Oppenheimer, for Coutts, submitted correctly that Mr Shone's hearsay notes are admissible as evidence of the truth of their content (see the White Book 2016, vol. 1, note at 32.2.4). Thus, there is admissible hearsay evidence to be derived from the notes that Mr O' Hare and not Mr Shone drove the content of the investments the latter said were suitable.
She went on to submit that despite Mr Shone's absence from the trial, they should be preferred to Mr O' Hare's...
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