Peekay Intermark Ltd v Australia and New Zealand Banking Group Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Moore-Bick,Mr. Justice Lawrence Collins,Lord Justice Chadwick |
| Judgment Date | 06 April 2006 |
| Neutral Citation | [2006] EWCA Civ 386 |
| Docket Number | Case No: A3/2005/1263 |
| Court | Court of Appeal (Civil Division) |
| Date | 06 April 2006 |
[2006] EWCA Civ 386
Lord Justice Chadwick
Lord Justice Moore-Bick and
Mr. Justice Lawrence Collins
Case No: A3/2005/1263
2004 Folio 733
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION, COMMERCIAL COURT
(MR. RICHARD SIBERRY Q.C.)
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr. Christopher Pymont Q.C. and Mr. Jonathan Russen (instructed by Reed Smith Rambaud Charot LLP) for the defendant/appellant
Mr. David Railton Q.C. and Mr. Shantanu Majumdar (instructed by Nelsons, Leicester) for the claimants/respondents
This is an appeal against the order of Mr. Richard Siberry Q.C. sitting as a Deputy Judge of the Commercial Court giving judgment for the first claimant, Peekay Intermark Limited ("Peekay") against the defendant, Australia and New Zealand Banking Group Limited ("ANZ" or "the bank") , on its claim for damages for misrepresentation under section 2(1) of the Misrepresentation Act 1967.
Peekay is a company incorporated in the Isle of Man which has a branch in Umm Al Qiwain in the United Arab Emirates and trades from an address in Dubai. It is used as an investment vehicle by its shareholders who include the second claimant, Mr. Pawani. The company trades in a variety of investments including bonds, bills, emerging market instruments and derivatives, as well as bullion and currencies. Investment decisions are taken by Mr. Pawani and his fellow directors. The judge found that Mr. Pawani is a man of substantial means who has considerable investment experience. He began investing in emerging market instruments with ANZ in 1996.
ANZ is the ultimate parent of the various subsidiary companies which make up the group. At the time of the events with which this appeal is concerned it operated an investment banking division under the name 'ANZ Investment Bank' from offices in the City of London. ANZ Investment Bank was itself made up of a number of separate departments, each of which was treated for administrative purposes as having a separate account within the bank.
ANZ itself and other companies within the group carried on a private banking business under the name 'Grindlays Private Banking' ("GBP") . One of those companies, ANZ Grindlays Bank Ltd ("ANZ-GBL") , had a branch in Dubai. Mrs. Ranjita Balasubramaniam was a Regional Manager of GPB employed by ANZ-GBL. She was based in Dubai but reported to GBP in London. Mr. Pawani began making investments on behalf of Peekay through ANZ sometime in 1995. About a year later he met Mrs. Balasubramaniam and thereafter regularly invested in emerging market instruments with ANZ through her, or occasionally through a Mr. Wood who was employed in the General Sales Team of ANZ Investment Bank dealing with emerging markets. Russia was one of the emerging markets in which Mr. Pawani invested during that period.
Throughout 1997 and the early part of 1998 the Russian government issued a series of bonds known as Gosudarstvenniye Kratkosrochniye Beskuponniye Obligatsio ("GKO") . These were short-term non-interest-bearing bonds denominated in roubles which were quoted at a discount to face value. The right to hold GKOs was limited to 21 Russian banks and one western bank, Credit Suisse First Boston ("Credit Suisse") . During the latter part of 1997 and the early part of 1998 GKOs were traded at a substantial discount to their face value and therefore represented an interesting investment opportunity, albeit one which carried a substantial level of risk. In response to an initiative on the part of Credit Suisse in the latter part of 1997 the Structured Products Group within ANZ Investment Bank developed an investment product described as a 'structured US Dollar hedged Russian Treasury bill deposit'. The product was structured as a dollar deposit with ANZ with repayment linked to the performance of a reference obligation in the form of a GKO with a specified maturity date. The risk of depreciation of the rouble was to be hedged by ANZ by means of a forward contract with a major Russian bank for the purchase of US dollars. The rate of return to the investor would be represented by the discount to face value at which the GKO was traded at the time of the investment less the cost of the hedge. The main risks to which the investor would be exposed were a default on the part of the Russian Central Bank in making payment of the GKO at maturity and a default on the part of the bank with which the hedge contract had been placed. ANZ also produced a proposal for a similar tradable form of this investment structured as a note, the main details of which were set out in an Indicative Term Sheet produced by GPB for the purposes of generating interest among potential investors.
At some time in January 1998 Mr. Aggarwal of GPB in London told Mrs. Balasubramaniam that an opportunity had arisen for the bank's clients to invest in GKOs with a US dollar hedge. He sent her a copy of the Indicative Term Sheet which described the product as "a high yield note linked to Russian bonds hedged into US dollars offering a return equivalent to 16–17% per annum". The term sheet drew attention to the fact that the investor took various risks in relation to the GKO and the currency contract, including sovereign default by the Russian government, in which case the principal could be at risk. In the light of what she had been told by Mr. Aggarwal Mrs. Balasubramaniam spoke by telephone to Mr. Pawani on at least two occasions on 1 st and 2 nd February 1998 to see if he would be interested in investing in the proposed GKO-linked deposit. At some point during their discussions she also sent him a copy of the Indicative Term Sheet describing the proposed GKO-linked note. However, the judge found that she did not tell him that the product he was being offered was a structured deposit linked to a GKO or that in the event of sovereign default investors would have no control over the manner in which the investment was liquidated because that was not how she understood the position.
As a result of their discussions Mr. Pawani acting on behalf of Peekay told Mrs. Balasubramaniam that he wished to invest US250,000 in the product she had described to him, that is, the GKO-linked deposit. However, no binding contract came into existence at that stage since Mr. Pawani had not received any detailed terms of the proposed investment and did not therefore have sufficient information to enable him to place an order of any kind. A document containing what were described as final terms and conditions ("FTCs") relating to a hedged Russian Treasury bill was sent to Mrs. Balasubramaniam from London on 2 nd February as an attachment to an e-mail. They described the investment as a deposit and set out various terms relating to it, including the maturity date and the projected rate of return. In the ordinary way she would have opened the e-mail when she came into the office the next day, but because she was occupied with other matters she did not do so until 4 th February. The judge found that, having opened the e-mail, Mrs. Balasubramaniam printed off the documents attached to the e-mail but did not read them in any detail because she assumed that if there had been any significant difference between the investment to which they related and the product that had previously been described to her, that would have been drawn to her attention.
The FTCs themselves were accompanied by a document described as an 'Emerging Markets Risk Disclosure Statement' which was to be signed by the client and returned to the bank together with its instructions to proceed with the investment. On 4 th February Mrs. Balasubramaniam sent copies of all the documents by fax to Mr. Pawani for signature on behalf of Peekay and a draft letter of instruction to the bank to transfer the funds needed to make the investment. Mr. Pawani knew from his previous dealings with ANZ that it would be necessary to sign a document of this kind, but apparently he regarded it as a mere formality. The judge found that he looked over the documents briefly but did not read them, assuming that they reflected what Mrs. Balasubramaniam had told him about the investment. He did notice that the FTCs were headed "USD Hedged Russian Treasury Bill", but he regarded that as consistent with the description of the product that she had given him. Together with one of Peekay's employees he initialled each page of the documents and signed the Risk Disclosure Statement which he returned to the bank under cover of a letter dated 7 th February 1998 to which I shall refer in a moment.
Although the FTCs were sent to Mr. Pawani apparently to confirm the terms of the investment that Peekay was being invited to make, they did not in fact set out the terms of a contract between the investor and the bank. Instead they described a deposit of US2 million by "ANZ Private Bank" with "ANZ Bank" in relation to a structured US Dollar Hedged Russian Treasury Bill with a trade date of 2 nd February 1998, an effective date of 9 th February 1998 and a maturity date of 16 th October 1998. They also referred to a "Reference Obligation" which was identified as GKO No. 21110 maturing on 14 th October 1998, to International Moscow Bank as "Reference Forward Counterparty" and to a deposit rate of 21.50% "subject to the provisions in Appendix 1".
Appendix 1 contained a number of provisions relating to Non Payment Events. They included the following:
"ANZ makes the following disclosure...
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