Rubenstein v HSBC Bank Plc
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rix,Lord Justice Lloyd,Lord Justice Moore-Bick |
| Judgment Date | 12 September 2012 |
| Neutral Citation | [2012] EWCA Civ 1184 |
| Docket Number | Case No: A3/2011/2552 |
| Court | Court of Appeal (Civil Division) |
| Date | 12 September 2012 |
[2012] EWCA Civ 1184
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION,
BRISTOL MERCANTILE COURT
HHJ HAVELOCK-ALLAN QC
9BS40313
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Rix
Lord Justice Lloyd
and
Lord Justice Moore-Bick
Case No: A3/2011/2552
A3/2011/2557
Mr Adrian Palmer QC and Mr John Virgo (instructed by Clarke Willmott LLP) for the Appellant / Claimant
Mr Stephen Cogley QC and Ms Claudia Wilmot-Smith (instructed by DG Solicitors) for the Respondent / Defendant
Hearing dates : Wednesday 9 th May 2012
Thursday 10 th May 2012
This is a case about the claim of a consumer (someone who is described in the Financial Services and Markets Act 2000 as a "private person"), against a bank, for negligent advice in the recommendation of a financial investment. In August/September 2005 the investor wanted to find a safe place for the proceeds of the sale of his home pending the purchase of another property. He wanted to find an investment, if that were possible, that provided a higher interest rate than a standard bank deposit, but he emphasised that he could not afford to risk his capital at all. He said that the prospective time scale was unlikely to be longer than a year, but in the event he had been unable to find another home three years later, so that, when the market turmoil which surrounded the collapse of Lehman Brothers in September 2008 occurred, he was still invested. His claim has been brought for breach of statutory duty, and in contract and tort. The judge found that the bank was negligent in the advice which it gave, and in breach of various statutory duties, and that the investor relied on the bank's advice. However, the judge also found that the loss suffered by the investor was not caused by the bank's negligence or breach of duties: it was rather caused by unprecedented market turmoil, and was unforeseeable and too remote. The investor was therefore awarded merely nominal damages in contract.
The judge gave permission to both parties to appeal. He gave permission to the investor to appeal against his conclusions as to causation, foreseeability and remoteness. He gave the bank permission to appeal his conclusions as to the existence of any contract, as to negligence, and as to breach of the statutory duty as to the suitability of the investment. It is not clear to me that the bank needed permission to appeal. I treat its notice of cross-appeal as a respondent's notice.
The bank disputed every possible issue at trial: for instance, in addition to the issues which arise on appeal, issues no longer relevant as to whether any advice had been given at all and as to whether the investor had relied on any advice. Those last two issues are no longer live. It is now accepted that the bank provided advice (albeit not it is said pursuant to any contract) and not merely information; and it is accepted that the investor relied on that advice. Nor is it said any longer, as it had been said at trial, that Mr Rubenstein had selected the investment for himself. However it is submitted that the investor got what he wanted and cannot complain, that at any rate in September 2005, at the time of the investment, the investment could have been regarded as safe, and that the judge was in any event right to say that no damages flow from any breach.
The investor resists the cross-appeal and submits that the judge was wrong to hold that no loss flowed from the established breaches. He had been told that the recommended investment carried no risk of capital loss because it was the same as a cash deposit: in the event, he had suffered a loss of capital, for the very reason that it was not the same as a cash deposit, and carried no obligation to return the capital invested but only an aliquot share of a fund invested in products which, apart from cash, varied in value with the market. He was therefore not only misled but suffered loss of a type which should have been foreseen, and was in fact foreseen but not explained. The fact that the size of the loss may have been greater than could have been expected was beside the point.
The major factor on which the bank has relied in resisting the investor's appeal is that the bank had no duty which extended beyond the investor's own projection that he would be unlikely to need the investment for more than a year. No loss was suffered within that year, or for well beyond it. Any projection for the year beyond September 2005, when the investment was made, would have been that any risk associated with the investment was minimal. Therefore, whether viewed as a matter of scope of duty (SAAMCO v. York Montague Ltd [1997] AC 191) or in terms of the reasonable contemplation of the parties ( The Achilleas [2008] UKHL 48, [2009] 1 AC), or in terms of breach of statutory duty, which it is said must follow the same paths, or whether viewed in terms of causation, foreseeability or remoteness, there could be no liability for any loss which occurred three years later, even putting aside the extraordinary events of that latter time, but especially in the light of them. This is the leitmotiv which flows through the bank's written and oral submissions on this appeal.
An oddity of these proceedings is that this theme was barely played below, and is absent from the judge's careful judgment. I do not mean that the bank's defence or the judge's judgment do not mention, as part of the events of the case, the investor's projection of an investment unlikely to last more than twelve months: but no legal point was addressed by reference to that fact. On the contrary, the test put forward was whether, as of the time of the investment itself, the investment was more or less safe (see para 21(iii) of the 35 page defence). The fact was deployed in the defence only in connection with a plea of contributory negligence (see para 22(vi), another point no longer raised on appeal) and only surfaced in the bank's closing written submissions at trial as a short submission (at para 8.1(iii)), but bound up with numerous other ideas. It is understandable that the judge did not give it separate treatment. In the circumstances, it is harder to evaluate than might otherwise have been the case. However no pleading point is taken.
The judge at trial was His Honour Judge Havelock-Allan QC, sitting as a high court judge in the mercantile court of the Bristol District Registry. His judgment may be found at [2011] EWHC 2304 (QB).
The advice
The investor is Mr Adrian Rubenstein, a solicitor. In 2005 he was a customer of HSBC Bank plc (HSBC or "the bank"). Mr Rubenstein is the claimant, and in this court the appellant. HSBC is the defendant, and here the respondent.
In around the middle of August 2005 Mr Rubenstein, then 38 years old, was anticipating the receipt of £1.25 million on the completion of the sale of his matrimonial home in London, and approached the bank about a safe place for those proceeds. He and his wife intended to rent for a period before looking to buy another home. They wanted to deposit the proceeds where they could be readily accessible, in case of a repurchase. They could not afford to risk a loss of capital. They had two young children. It was not suggested by the bank that Mr Rubenstein was other than a private, retail, customer.
Mr Rubenstein had researched the bank's deposit rates, but those on offer were capped at a maximum of £1 million. He thought he might do better than that if he made a direct approach. His initial proposal was for an interest bearing deposit with ready access for no more than about 6 months. The bank introduced him to Mr Matthew Marsden, a financial adviser employed at its private client department in Cardiff. He was a fully qualified independent financial adviser (IFA), but was only permitted to recommend financial products which were on the bank's approved list.
Mr Rubenstein and Mr Marsden first spoke on the telephone on 22 August 2005. The judge rejected Mr Marsden's evidence that Mr Rubenstein was looking for something other than a deposit, and found rather that Mr Rubenstein did not rule out a deposit, but was looking to improve on the rates identified in his internet research. Mr Marsden's immediate reaction was to mention an investment in the AIG Premier Access Bond (PAB). He said it was an insurance product and said he would send some literature.
On 23 August 2005 Mr Marsden e-mailed Mr Rubenstein. His e-mail was headed "Account information". Attached to the e-mail were AIG's product brochure and key features document (see below). The e-mail quoted a gross equivalent rate basis for £1 million plus of 5.78% (on a fee basis) and 5.12% (on a commission basis). The corresponding rate for a deposit at HSBC was 3.93%. The difference between a fee basis and a commission basis was explained by Mr Marsden in a further e-mail later that day. The message informed Mr Rubenstein that he could "pay for the advice" in one of two ways: either by way of a fee at £190 plus VAT per hour, with a minimum of £1500, with any commission received rebated in the form of a higher return, or, as he implied, by way of commission. This e-mail attached the bank's "key facts" about their services and the cost of them.
On 24 August 2005 Mr Rubenstein e-mailed in response as follows:
"I've done a few sums to try to compare the impact of the two payment mechanisms. Underlying all this is the fact that we are very unlikely to need this account for more than a year; probably less.
Over the course of that year,...
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