JP Morgan Chase Bank & Ors v Springwell Navigation Corporation

This is an appeal by the defendants from an order made by Gloster J in the Commercial Court on 14^th March 2005 whereby she struck out four paragraphs of the Amended Defence and Counterclaim (“ADCC”) pursuant to CPR 3.4(2) and in the inherent jurisdiction of the court. She refused to permit the defendants to rely on similar fact evidence because she did not consider that it would have been logically probative of any of the issues in the case and, alternatively, because she was not willing to allow such slight probative value as the evidence might possess to outweigh the serious practical consequences and disruption which would follow if it were admitted.

The parties to this dispute are the Chase Manhattan Bank (“Chase”) and a number of its affiliates (to whom the judge referred as “CMIL”, “CMSCI”, “CMBI” and “CIBL”) on the one side and members of the Polemis shipping family on the other. Chase has now changed its name to JP Morgan Chase Bank. Adam and Spiros Polemis and their mother, who are one of the longest established Greek shipping families, are the effective claimants in the case, through their wholly owned corporate vehicle Springwell Navigation Corporation (“Springwell”). Springwell, a company incorporated in Liberia, was acquired by the Polemis family in June 1986 for the purpose of holding the profits that flowed from their shipping operations. At all material times Adam Polemis (whom we will call “Mr Polemis”) took all Springwell’s important decisions.

The family’s relationship with Chase goes back 50 years, and Adam and Spiros Polemis have had dealings with the bank themselves for over 30 years. At the time when Springwell was acquired it was the family’s practice to place their unwanted liquid funds on time deposits in the names of one or other of their shipping companies. This spare liquidity was then transferred to Springwell who opened an account with Chase’s shipping finance department. At that time Mr Van Mellis was head of the department. In 1990 he moved to what was called the Private Bank within Chase, which administered the funds of a number of Greek shipping families. Springwell’s account was transferred to the Private Bank in that year, and Mr Van Mellis continued to be in charge of it until he left Chase in 1994.

It is common ground that in 1987 some of Springwell’s funds were taken off time deposits and invested in debt securities, which bore a higher rate of interest. It was at this time that Springwell was first introduced to Mr Justin Atkinson. Mr Atkinson was then employed by CIBL. Springwell says that he was introduced to them as someone who could advise them as to alternatives to time deposits for their funds which would give them a better rate of return. They understood him to be part of Mr Van Mellis’s team, subject to his supervision and control. The fact that he was actually a salesman was not explained to them. It is an important part of their case that Mr Atkinson gave them investment advice throughout his dealings with them over the next 11 years, and that Chase, through him, performed the role of investment adviser. Springwell say that they were not sophisticated in these matters, and that they relied heavily on his advice as to the investments they should and should not buy.

Chase’s statement of case paints a very different picture. Between 1987 and 1990 Mr Atkinson, they say, was working in a department within CIBL whose work was mainly focussed on buying and selling Euro Commercial paper (“ECP”). He then moved to a different department where he was mostly engaged in buying and selling debt securities in emerging markets. This department was transferred to CMIL in 1996. It was in his capacity as a salesman, Chase say, that he bought investments from, and sold investments to, a number of their customers, including Springwell.

They say that on 7^th December 1987 one of the vice-presidents in their shipping finance department introduced Mr Polemis to the idea of investing in ECP, and on 7^th January 1988 Springwell made their first purchase of ECP. Similar investments followed, to the extent that by March 1989 Springwell’s investments in ECP with Chase had risen to US$48 million. Chase considers it likely that Mr Van Mellis himself or the vice-president in question introduced Mr Atkinson to Mr Polemis as a salesman of ECP who could source and offer alternative investment products to the Polemis group. They adamantly deny that Mr Atkinson performed the role of investment adviser. They say he was a non-advisory execution-only salesman of debt securities, and that Chase were known to have an interest in debt securities. They also adamantly deny that Springwell were unsophisticated in investment matters: they describe them as sophisticated, knowledgeable and increasingly experienced investors in debt securities, in particular those issued in or linked to emerging markets.

It is an important part of Springwell’s case that at all material times a competent investment adviser would have classified them as investors with a conservative attitude to risk, for whom capital preservation and liquidity were the most important concerns. Chase, on the other hand, contend that this claim is entirely belied by the facts, and that at all material times, and particularly as the 1990s progressed, Springwell’s investment objectives were driven by the pursuit of high levels of potential profit, despite the increased risk involved. In paras 81-86 of their Reply, Chase give a number of examples of Mr Polemis’s desire for higher returns, even though the accompanying risks were higher. In internal memoranda in 1990 and 1991 Chase executives expressly commented on the Polemis family’s propensity to take a higher level of risk, or to invest in relatively risky paper.

By the end of 1989 Springwell had started to invest in debt securities in emerging markets in Latin America. Chase gives details of these investments in paras 32 to 50 of their Reply. Springwell were now borrowing increasingly large sums of money from Chase – by May 1993 their credit line had risen to US$300 million – and Chase contend that from 24^th April 1992 credit for the purchase of investments was being provided to Springwell pursuant to the terms of a Master Forward Agreement (“MFA”). Mr Polemis says that it was on Mr Atkinson’s advice that he signed the MFA on Springwell’s behalf (para 105 of the ADCC). He says that he did not study the document before he signed it, and Mr Atkinson offered him no explanation of its detailed terms. Nor did he discuss with him whether or not it was appropriate for Springwell to enter into the MFA, having regard to their investment objectives and their attitude to risk (for which see para 7 above).

Most of this history is by way of background, although the parties are so far apart on a number of important matters that it is inevitable that a lot of time will be taken up at the trial in investigating the history of their relationship between 1986 and 1996 in order to assess the credibility of their respective cases. From late 1995 onwards we move to the foreground. The scene is set by Chase in paras 58 and 59 of the Reply:

Springwell’s account of the way in which they started investing increasing amounts of their funds in Russian and former Soviet Union debt has a different slant. They say that in about 1995 Mr Atkinson began advising them to buy bonds issued by sovereign, municipal and corporate borrowers based in Russia and the former Soviet Union without warning them about what are described in the ADCC (para 123) as the “Russian Investment Risks”. Instead, his comments about economies of the former Soviet Union countries were always positive. Examples of the gist of his comments were given in para 125. Paras 126-128 state that:

It is the loss sustained by Springwell during 1998 from their investment in GKO-linked Notes and other Russian and Indonesian investments around which this dispute revolves. These losses exceeded US$200 million (excluding interest), and Springwell claim an equivalent figure as consequential loss. The value of GKO-linked Notes turned on the performance of short term zero coupon bonds issued by the Russian government. These were known as GKOs, and they were purchased and payable in roubles. CMSCI, a Chase affiliate based in Jersey, issued the notes, which passed to the holder the returns and risks of investing in the particular issue of GKOs to which the returns and risks of the particular Note were referenced. The Notes also incorporated the returns and risks associated with the forward foreign exchange contracts entered into with selected Russian banks (including CMBI) to which the Notes made reference. These were intended to convert the Russian roubles (paid on the maturity of the relevant GKO) into US dollars.

Springwell bought 42 Notes between April 1996 and August 1998. On September 1997 they signed a global master repurchase agreement (“GMRA”) with Chase. This governed the sale and repurchase of the Notes. On 17^th August 1998 the Russian government and the Russian Central Bank declared a moratorium in the payment of GKOs which were due to mature before 31st December 1999, and Springwell lost a substantial part of their investment in eleven of these Notes as a consequence of the moratorium and the subsequent actions of the Russian government.

Chase and their affiliates retained an enormous amount of information while Chase were acting as Springwell’s bankers. From 1993 onwards Springwell’s affairs generated a large amount of email traffic, both internally within Chase and also externally. From May 1997 onwards Chase kept tape recordings of virtually all their (and in particular Mr Atkinson’s) telephone conversations which touch on the issues in this litigation. Although the process of disclosure in the action has not yet been completed we have been told that the cost to Chase already exceeds £2 million. (The issues with which the present dispute are concerned have been excluded from the disclosure exercise for the time being). This sum includes the cost of over 3,600 billed hours spent reviewing audiotapes and transcripts, and about the same amount of time reviewing over 21,000 emails and listing the relevant portions for disclosure. The total cost of the transcription exercise to date has been over £675,000, and the total cost of the email exercise only slightly less. Disclosure is not yet complete, and we were told that Springwell has been pressing for the disclosure of still more documents that are not in the present lists.

A result of all this tape-recording is that there is a contemporary record of about 94% of Mr Atkinson’s telephone conversations in the period between May 1997 and the end of August 1998. 1,055 transcripts of internal and external telephone conversations have so far been disclosed. It is common ground that Chase’s dealings with Springwell were “overwhelmingly conducted by telephone.”

So much for the history of the parties’ dealings. It was Chase who initiated the present proceedings. They are seeking a declaration that they owe no liability, whether in contract, tort or otherwise, in respect of the losses Springwell sustained. Springwell for their part contend that Chase are liable to them in damages for breach of contract, negligence and breach of fiduciary duty and (in relation to the period from October 1997 onwards) for fraud arising out of the advice which Chase (and, in particular, Mr Atkinson) gave them. In essence they say that Chase bore legal responsibility for the advice they gave them in their capacity as investment advisers, and also that they should have advised them by reference to their investment objectives (for which see para 7 above). Instead they were advised to place their money in emerging market investments which were inappropriate and unsuitable both individually and collectively. As a result, when the Russian economy collapsed in 1998, they suffered substantial losses because they held a substantial portfolio of high risk and illiquid securities. The allegations of fraud arise from Springwell’s contention that from October 1997 onwards Mr Atkinson made representations to them (on which they relied) which he knew to be untrue (see paras 219-224 of the ADCC for details of this plea).

Chase’s answer to these charges is that the composition of Springwell’s portfolio in August 1998 was the product of their own investment strategies and decisions, and in particular the pursuit of investments in emerging markets with potentially high yields. They accept that Mr Atkinson discussed market developments and products on the telephone with Mr Polemis and, in particular, when requested to do so, offered his own honest belief as to investment opportunities, but they deny that any of this constituted investment advice in any legally relevant sense.

Since the hearing before the judge Springwell have served 119 pages of voluntary further particulars of their counterclaim which are entirely based on the contents of transcripts disclosed by Chase. Springwell contends that this evidence supports their general case about Chase’s investment advisory role in eight different respects:

We turn now to the paragraphs of the ADCC which raise the similar fact issues with which we are concerned. In their original form (with the abbreviations removed) they read:

The judge summarised Springwell’s case as meaning that the facts relating to the Greek families were relevant to the following two issues:

In response to a request for further information, Springwell said that they relied on the "experiences" of the Kollakis, Kedros and Afentakis families, together with statements made by Mr Diamantis Diamantides in litigation against Chase in New York. When asked to particularise the advice and the investments said to be relied upon, Springwell said that they did not know the names of particular investments. Their allegation was not concerned with specific investments or advice but with "the general tenor of Mr Atkinson's advice, which was to invest in Russian and former Soviet Union paper".

In response to a further request for information Springwell provided no further information and detail about the alleged “experiences”. When invited to particularise the advice given to the Greek families, Springwell said that:

The judge said that it was implicit in the further information provided by Springwell and explicit in the submissions she had received from Mr Brindle QC, who appeared for Springwell, that the Greek families' evidence was to be relied on as similar fact evidence supporting Springwell’s contention that Chase’s role in connection with what were described as “the investment transactions” included an advisory role. Mr Brindle told her that Springwell's case was not confined to their relationship with the Chase investment banking corporate entities. Instead, their case was that, throughout the period of their dealings with Chase, they were a long-standing shipping client of Chase and that Mr Atkinson dealt with them as such. Chase's liability for his actions must therefore be understood in this context. The importance of Chase’s role in this respect was said to be critical to a proper understanding of the basis on which Springwell believed that they were dealing with Chase. Their case was that when Chase presented Mr Atkinson to them in 1987 as an investment advisor they had a good understanding of the customer relationship they enjoyed with Springwell and the treasury function Springwell was performing within the Polemis group as a whole.

Springwell pleaded (and Chase admitted, at least in part) that Chase dealt with the Greek shipping families as a unit (or group) which was known as "the Hellenic group". Springwell's case was that the Polemis family were not alone among the Greek families in being targeted by Chase as potential investors in their capital markets programme. They contended that Chase’s introduction of Mr Atkinson as an advisor to the Polemis family and to other Greek ship-owning families was performed with a view to persuading a high net worth group of customers, well-known to Chase as having a traditionally conservative attitude to investment, to move out of timed deposits and into capital market products. Moreover, this was part of a coordinated strategy conceived within Chase to earn greater profits from the Hellenic group. In effect, Springwell maintained that the fact that Mr Atkinson also recommended the other Greek families to invest in similar derivatives demonstrated that there was indeed an advisory relationship, not only between Springwell and Chase, but also between Chase and the Greek families.

In these circumstances the matters alleged in paras 190 - 193 were said to be admissible and relevant for the following detailed reasons:

In her judgment the judge first considered issues relating to the relevance of the similar fact evidence to the issues in the litigation between Springwell and Chase. As to the issue identified in para 19(i) above, the judge said that Springwell’s allegation raised an issue of causation. Whether their heavy exposure was indeed the result of advice given by Chase or was driven by their own desire to have a section of their funds so invested (given the spread and asset allocation of the remainder of their funds) or by a combination of both factors must depend on the particular circumstances of their own participation in the “investment transactions”. This would no doubt be ascertained by reference to the transcripts of conversations and other evidence which related to the strategies deployed by Springwell in the management of their investment portfolio. What other Greek families may or may not have done in other circumstances with different considerations, different beneficiaries and different (or, indeed, similar) investment or risk criteria, could not, in her judgment, assist in determining this issue of causation as between Springwell and Chase.

As to the issue identified in para 19(ii) above, the judge reminded herself that the telephone conversations for the relevant periods were all recorded. There would therefore be no issue as to precisely what it was that Mr Atkinson said to Mr Polemis. Whether or not he did make such recommendations would be readily apparent from the tenor of such conversations and any e-mails or other communications passing between them.

As to Springwell’s contention that they were concerned only with "the general tenor” of Mr Atkinson's advice (namely, to invest in Russian and former Soviet Union paper), the judge could not see that evidence as to the general tenor of his conversations with other Greek families or the fact that the general tenor of his advice to these families was to invest in Russian and former Soviet Union paper (even if that had been the case) was relevant to the question whether Mr Atkinson (and therefore Chase) gave advice to Springwell and Mr Polemis, and if so what advice he gave.

The judge said that the fact that certain statements were made to certain of the Greek shipping families who were customers of Chase did not predicate, nor was it in any way logically probative of, any of the following matters:

This was particularly so when Springwell was not alleging that the advice said to have been given to the other Greek families was given negligently or in breach of Chase's duty. The judge said that it was difficult to see what probative value such evidence might possess when Springwell appeared to be accepting that they were not going to set out to prove that the statements made by Mr Atkinson to the other Greek families were other than perfectly proper in the context of their own situation and relationship with Chase.

She said that the real thrust of Mr Brindle's argument was that the evidence relating to the other Greek families would show that Chase was indeed acting in an advisory capacity to Springwell. In short, that there was a strong "relationship in time and circumstances between Springwell's case and the experiences of the four Greek families". The judge referred to the comparison that had been drawn between the allegations in Mr Diamantides’s proceedings and those contained in Springwell's statement of case.

She took the view, however, that the facts and circumstances of the other Greek families, and the intricacies of their commercial relationship with Chase, were unlikely to be logically probative of the question whether or not such a relationship existed between Springwell and Chase. In order to identify the nature or character of a commercial relationship, one had to look at the contractual documents that defined that relationship. If it was being alleged, as in this case, that its true nature could not be found merely in the written documents that governed the relationship, it might become necessary to look at what was actually said and done beyond the framework of those documents. The fact that, in relation to one or more of the other Greek families, Chase might, in the light of what they said or did, have been acting in an advisory capacity, or might have given advice on one or more occasions, simply did not lead to the conclusion that such was the case in relation to Springwell.

To ascertain Springwell’s relationship with Chase the court would have to look at what was said and done between those two parties. Of course if, and in so far as, there might be any Chase documents which suggested that advice was indeed being given to Springwell and other members of the Hellenic group, those documents would be discloseable. A board minute or memorandum, for instance, that made it clear that the nature of the relationship between all members of the Hellenic group and Chase effectively imposed an advisory role on Chase would be admissible because it related to Springwell. Such a document would have to be disclosed notwithstanding the exclusion of similar fact evidence relating to the Greek families.

The judge made it clear that she was basing her decision on the submissions that had been made to her, even if they had not yet been formally pleaded. She assumed that, if it were necessary, the ADCC could be amended to plead the relevant connection. However, she did not consider, viewing the matter sensibly, that the fact that Chase might have had an advisory relationship with, or given advice to, one or more of the Greek families, was logically probative of Chase having had such a relationship with Springwell. The answer was that it all depended on the precise facts relating to their relationship with Chase.

This would have been sufficient to dispose of the application, but the judge went on to say that even if it could be said, theoretically at least, that the evidence relating to the Greek families had some probative value in relation to the issues in this litigation, its value would be extremely slight. In the exercise of her discretion she was not prepared to allow what was already a complicated trial to be overburdened by the reception of evidence relating to what Chase said, or did, in relation to the other Greek families. Such slight probative value could not in her judgment outweigh the serious procedural consequences and disruption which would follow if such evidence was admitted.

This was essentially a case management issue. She had to balance the strength of the probative value of the evidence against the disruption, cost and prejudice that could arise if it were admitted. Although criticism had been made of the fact that Chase had put forward no evidence to support their contention that the reception of the evidence relating to the Greek families would be disruptive of the trial, in her judgment, no such evidence was necessary because the consequences were obvious.

If such evidence were to be admitted, it would necessarily involve an investigation by the court as to the contractual relationships between the families and Chase, the investment criteria and risk profiles of the various families' portfolios over the relevant period of time, and the investments that were undertaken. It would also require an analysis of the (no doubt) numerous conversations between Mr Atkinson or other employees at Chase, on the one hand, and the relevant decision taker on behalf of the other Greek families on the other. It would, in effect, involve a detailed analysis of the whole "advisory relationship" (on the assumption that any such relationship existed) between Chase and the other members of the Hellenic group, together with a comparison of the respects in which Chase's relationship with Springwell was "the same" or "different".

This would involve disclosure of a very substantial number of extra documents, and witness evidence being required in relation to Chase's arrangements with the relevant families. This would inevitably prolong the trial and widen the issues the court had to determine. The timetable was already quite tight, and there were already heavy disclosure obligations on Chase in relation to the existing issues in the litigation. Added to this, the other Greek families might object to details of their investments being disclosed in the litigation, let alone being the subject of an investigation conducted in public at the trial.

Even if the inclusion of this additional evidence did not necessitate a complete rescheduling of the current timetable, it would clearly have a serious and detrimental impact on it. It would also necessarily increase the length, cost and complexity of the trial by a potentially significant margin.

Mr Brindle had said that the court should keep in the forefront of its mind the fact that the sums at stake in this case were extremely large, and that if it considered what was proportionate against the quantum of the claim there was no reason for concluding that the widening of the inquiry at the trial would be disproportionate.

The judge did not agree. She said that a parallel inquiry into the relationship between Chase and four other Greek families, and indeed (possibly) other customers, would not be of sufficient probable utility to justify what would necessarily be a substantially increased cost. There would be a huge additional cost involved (probably in excess of US$1 million) if the proposed exercise were entered into.

The judge also took into account in the exercise of her discretion the fact that there was a considerable wealth of evidential material already available. She concluded that if the Greek families' evidence were admitted, the trial would not be dealt with expeditiously and fairly, nor would the available court resources be usefully employed in what would necessarily be a satellite inquiry with no, or at least very limited, probative utility. She said that she had of course taken into account the importance of the case and the amount of money involved in reaching her conclusions. But even the nature and size of these, and the respective financial strengths of both parties, could not justify what in her judgment would most likely turn out to be a dubious use of time. She therefore struck out paras 190-3 of the ADCC and directed that no evidence relating to the Greek families should be called in support of such paragraphs or otherwise, save with the leave of the court.

In support of his clients’ arguments on this appeal, Mr Brindle repeated a point he had made to the judge, namely that Chase had dealt with the Greek shipping families as a unit. Indeed they admitted in their Reply that they sought where possible to co-ordinate the services they offered to Hellenic Group customers so as to provide a more effective service. Against this background Chase’s strategy, effected through Mr Atkinson, was to move these high net worth customers away from a conservative investment policy into capital market products in order to earn greater profits from the group as a whole. Hence, he says, the importance of the similar fact evidence. The judge had been shown two internal Chase memoranda which were said to provide strong support for Springwell’s case. In the first, written in May 1993, Mr Van Mellis himself said:

In the second, written in May 1996, Springwell’s relationship manager at Chase’s Private Bank showed how that bank viewed the Greek ship-owners as a distinct market segment and tailored its strategies accordingly. The memorandum recorded the existence of credit lines available to the “Hellenic clients” for the “Hellenic programme” and went on to say:

Mr Brindle said that his clients’ core case ran along these lines:

He said that what was at the centre of this litigation was the fact that Chase denied all these allegations. It was common ground that no contractual documentation existed between Chase and Springwell, apart from the basic account mandate. Instead Chase sought to rely on the MFA, dated 24 April 1992 and the GMRA, dated 22 September 1997 (which were both financing agreements), and two pro-forma letters, dated 28 May 1993 and 22 September 1997, as evidence in support of their contention that the terms of its relationship with Springwell excluded an advisory relationship. Springwell says that these documents came into existence 5-10 years after the start of the relationship. In any event they dispute the validity and effect of these documents.

We have set out in paras 22-23 above the way in which the relevance of the similar fact evidence was put before the judge. Mr Diamantides’ statements, in proceedings brought against Chase in New York in 1999, are remarkably similar to what Springwell are saying in this case. They were along the following lines:

Mr Brindle said that it was common ground that Mr Atkinson developed relationships with the other Greek families, too, and that they, too, possessed Russian investments which included GKO-linked Notes. He complained that the judge had formed an overly-narrow view of the issues. He said that the similar fact evidence was logically probative of the following issues in the action:

He said that the judge had been wrong to accept that the transcripts of conversations between Mr Polemis and Mr Atkinson between May 1997 and August 1998 would be determinative of what (if any) advice was given to Springwell, and when she accepted Chase’s argument that the Greek families’ evidence could have no probative value if Springwell were not alleging that the advice Chase gave the Greek families was negligent or in breach of duty. He said that the similar fact evidence would support Springwell’s case as to the terms on which Mr Atkinson was introduced to them.

Mr Brindle complained that the judge had failed to take any notice of his contentions that little account or contractual documentation was likely to exist if the position of the Greek families resembled Springwell’s position, and that the task of disclosure in relation to transcripts of conversations might not be as formidable as suggested. So far as Mr Diamantides and Pollux were concerned, the necessary transcripts either existed already or would have to be brought into existence in connection with their litigation against Chase (which was also now proceeding in the Commercial Court). He had told the judge that “snapshots” of the Greek families’ portfolios at regular intervals would suffice. And he had floated the possibility that if the scale of the work involved in disclosure was really too great, then his clients’ similar fact case could be cut back from four Greek families to two, or even to one. He complained that the judge took none of these suggestions or possibilities into account when she was weighing up the procedural consequences of admitting the Greek families’ evidence.

His main complaint, however, was that the judge had been wrong to attribute little, if any, significance to the relevance of the Greek families’ evidence. This error vitiated the balancing exercise she had to perform in relation to her case management decision. She had also accepted Chase’s submissions that there would be “serious procedural consequences” without any evidence as to what those consequences would be. And she took account of matters she should not have considered, such as the suggestion that an investigation into the Greek families’ investment objectives would be needed. She also failed to give appropriate weight to the size of the sums at stake.

With his skeleton argument on the appeal Mr Brindle proffered some amendments to the similar facts pleas in paras 190-3 of the ADCC. They now read:

Mr Hapgood QC, who appeared for Chase, said that the judge was correct, for all the reasons she gave. This was a classic case of a trial judge in the Commercial Court reaching a practical and sensible result for the management of an already difficult and unwieldy piece of litigation. Chase’s case was that the Polemis brothers were experienced businessmen, and Springwell’s investment activities were prodigious. As at August 1998 they held a portfolio of 114 different instruments purchased from Chase with a total face value of US$724 million, quite apart from a sizeable investment portfolio with Merrill Lynch. They were now seeking to lay on Chase the entire blame and responsibility for the decline in value of their portfolio following the Russian debt moratorium, even though there was no written agreement had ever existed whereby Chase were appointed their investment advisers. Instead, they sought to nullify the effect of documents which excluded such a relationship by a raft of elaborate arguments, involving estoppel, mistake and so on.

The nub of their case was that the “advice” Chase had been giving them for over ten years was not only wrong but massively wrong. Instead of purchasing hundreds of millions of dollars worth of emerging market bonds, Springwell were now saying that they should have been purchasing gilts, T-bonds and other blue chip bonds held for income, and also that they should have been advised to do so, consistently with the extremely conservative investment objectives they were now professing.

Because it was common ground that the dealings between Mr Atkinson and Mr Polemis were conducted overwhelmingly on the telephone, there was a wealth of evidence of what Mr Atkinson had actually said, at least from May 1997 onwards. Chase suggested that although Springwell’s allegations of breach were said to start “from 1995 onwards” and their first purchase of a GKO-linked Note was in April 1996, the majority of the investments in respect of which losses were claimed were bought in the second half of 1997 and in 1998, which was the period covered by the transcripts.

An important issue in the court below related to the detrimental impact on the cost and length of these proceedings of allowing Springwell to conduct what Chase described as a roving inquiry into their dealings with a cherry-picked group of other Greek customers, themselves a small minority within a much larger group of Greek customers. The judge had rightly regarded as “obvious” the suggestion that any such enquiry would add materially to the cost and length of the proceedings, but because Chase had been criticised for not filing evidence, they now proffered, without objection, a witness statement from Mr Moulding, partner in Clifford Chance, which cleared up a number of the uncertainties that had been present in the discussion before the judge.

Mr Moulding said that an in depth review in relation to the Diamantides family relationship with Chase would be an extensive exercise. Disclosure alone would be a very large undertaking. The task would multiply if disclosure were also ordered in relation to the other three families. He added that Chase might feel it appropriate to produce evidence from other Greek customers to show that no “advisory relationship” existed with them. Confidentiality would also give rise to problems, because no evidence had been adduced to the effect that any of the other Greek families had consented to their dealings with Chase being disclosed to Springwell and examined in court.

In addition to the 1,055 transcripts of telephone conversations already disclosed by Chase in these proceedings, Mr Moulding said that transcript evidence was similarly likely to be highly relevant to the issue whether or not there was an advisory relationship with any of the other Greek families. The search for recordings of taped telephone conversations with these four families would be a huge undertaking. Mr Moulding described in detail just what would be involved. He added that giving disclosure of other paper and electronically held documents relating to these families was also likely to be a very considerable exercise. Even if it were thought sensible to confine any disclosure exercise to removing the redactions on all the documents so far disclosed which referred to the Greek families in question, this alone would be a large undertaking, for reasons he explained.

In this context he was responding to a suggestion made by Springwell’s solicitors in a letter dated 26^th July 2005 to the effect that the Greek families should be limited to three, that disclosure should be limited to transcripts that have already been brought into being, with the relevant redactions lifted, and that six-monthly “snapshots” of the portfolios of the three families should be limited to the period from January 1996 onwards, finishing with one as at 17^th August 1998.

Mr Hapgood repeated the submissions which persuaded the judge to rule that the Greek families’ evidence was irrelevant. It was certainly irrelevant if the evidence established that they retained Chase on different contractual terms, or had different investment objectives, or that they were given no investment advice, or different investment advice. But he said that even if the evidence showed what Springwell contended that it would show, it would simply raise the same issues as already arise between Springwell and Chase (apart from the negligence issue, which is not being raised in the context of the Greek families), and would do nothing to assist in the resolution of those issues. He maintained that the question with which the court would be concerned at the trial was whether Chase owed a duty of care to Springwell, and whether they broke that duty, if it was found to exist. There would be plenty of evidence already available on that issue, and the court would not be assisted by other disappointed investors saying “So far as we were concerned we got advice.” Mr Atkinson’s “normal conduct” was not a material issue of fact in this context. Whether a party owed a duty of care to another was not a matter of “normal conduct” but of interpretation of the facts relevant to the relationship and dealings between the two parties.

After repeating his contention that Springwell was concerned in a cherry-picking exercise, regardless of whether the families they picked were representative of Chase’s Greek shipping customers as a whole, Mr Hapgood drew attention again to the possibility that Chase might wish to identify and lead evidence about other customers who did not invest so heavily or at all in emerging markets.

In his submissions on case management issues, Mr Hapgood relied heavily on the additional time, cost and general disruption that would be involved if the similar fact evidence were admitted. He dismissed the possibility that the scale of the exercise could be cut down in any of the ways that Springwell suggested, saying that if an issue relating to a particular customer was raised, Chase must be entitled to investigate the whole history of their relationship and dealings with that customer, and there would be a genuinely exponential increase in the ambit of the trial. This would lead to material delay. Confidentiality issues would also cause problems. So far as Mr Diamantides was concerned, there would be risk of conflicting findings in two different trials.

Mr Brindle responded by emphasising what it was that Springwell sought to prove and what Chase continued to deny, notwithstanding all the evidence to the contrary they had disclosed which tended to show that Mr Atkinson was indeed performing an advisory role. Indeed he showed us an attachment to an internal email in January 1996, at a time when the British financial regulatory authorities were inquiring into these matters, which appeared to state in terms that investment advice was being given to Springwell by CIBL. He also showed us the transcript of an internal conversation within Chase on 7^th July 1994 which appeared to show that Mr Polemis was begging for investment advice, and that the head of Chase’s shipping department, Springwell’s customer relationship adviser, together with Mr Atkinson would go and advise him about the merits of a prospective shipping loan. The conversation contained these extracts:

Mr Brindle said that if in the teeth of this, and other, evidence Chase continued to deny that they performed an investment advisory role, and if they continued to assert that Mr Atkinson and CIBL/CMIL were simply acting as execution-only salesmen, then justice demanded that his clients should be entitled to call evidence from other Greek shipping customers of Chase that they had had exactly the same experience as Springwell.

He said that if necessary his clients would be willing to restrict the scope of their similar fact evidence still further to accommodate Mr Moulding’s anxieties about spiralling costs. At our request he produced a revised version of the plea during the course of the hearing of the appeal. It was in these terms:

Mr Brindle said that his clients were keen to meet any genuine case management difficulties provided that the extent of any further work created by the Greek families’ evidence was weighed properly against the importance of establishing Springwell’s case and against the sums at issue in these proceedings. Springwell’s primary position was that three families would be the right number, but if case management difficulties were thought to be serious, Springwell would be content with two families (or even one). They were willing to drop the contention that the Greek families were not expert or sophisticated investors, in order to meet Mr Moulding’s concerns on this score, and he submitted that the changes his clients were willing to make would greatly reduce the volume of disclosure that would be required. The evidence would now be focussed on two narrow periods of time, the first surrounding Mr Atkinson’s original appearance on the scene in relation to a Greek family’s banking affairs, and the other surrounding the advice which Mr Atkinson gave in relation to investments in Russian debt securities and GKO-linked Notes.

Chase were not willing to make any similar concessions. They proposed no alterations to their pleaded case, and Mr Hapgood reiterated in oral argument the submissions he had already advanced in his written skeleton argument.

The law relating to these matters is now relatively straightforward. The judge applied the principles set out in the judgments of this court in O’Brien v Chief Constable of South Wales [2003] EWCA Civ 1085. Although the Chief Constable appealed, the House of Lords made the principles for admissibility even simpler when it dismissed his appeal (see the report at [2005] UKHL 26; [2005] 2 WLR 1038). There is a two-stage test: (i) Is the proposed evidence potentially probative of one or more issues in the current litigation? If it is, it will be legally admissible. (ii) If it is legally admissible, are there good grounds why a court should decline to admit it in the exercise of its case management powers? Lord Bingham suggested at para 6 three matters that might affect the way in which a judge exercised his/her discretion in this regard:

He ended by saying:

Lord Phillips identified a relevant consideration at para 56:

We turn, then, to our conclusions. In our judgment the judge took too stringent a view of the first issue (the relevance of the similar fact evidence). Although she never stated exactly what test she was applying, she appeared to require that the evidence should be of itself, and standing alone, probative of the nature of the relationship between Springwell and Chase. For instance, she said (at para 38 of her judgment) that

That puts the test for the relevance of any evidence, and conspicuously for the relevance of similar fact evidence, far too high. Cross & Tapper, Evidence (9^th edition), p55, suggest that as a definition of relevance it is not possible to improve on article 1 of Stephen’s Digest:

A fact may therefore be probative either on its own or because it renders a conclusion more likely when taken in conjunction with other facts. The latter is essentially the role of similar fact evidence. The relationship of Chase with the other Greek families, taken on its own, clearly cannot prove anything about the relationship between Springwell and Chase. But it might explain, illuminate or put in context evidence about that latter relationship that would otherwise be ambiguous or difficult to understand.

We would therefore hold, differing from the judge, that the evidence of Chase’s dealings with other Greek families is, depending on its content, potentially relevant to the contested issues in relation to the dealings between Springwell and Chase, and thus passes the first test for admissibility.

That said, however, we would not wish to make too much of the assistance that the court is likely to obtain from the similar fact evidence. There is already an abundance, it might be said a superabundance, of evidence about the actual dealings between Springwell and Chase, from which it ought to be possible to draw conclusions about the nature of the relationship and the role of Mr Atkinson. If that evidence taken on its own yields a clear answer, one way or the other, then the evidence about other families would be irrelevant. The similar fact evidence will only assist the court if the primary evidence leaves the court in doubt, but by contrast with the primary evidence clear conclusions can be drawn from the experience of the other families that can be safely relied on as undermining claims made as to the implications of the direct evidence of the dealings between Springwell and Chase.

It may be worth observing, moreover, that a case of the present type is essentially different from cases in which similar fact evidence is more usually deployed, a recent and conspicuous example being O’Brien v Chief Constable [2005] UKHL 26. There, the claimants’ case was unusual, largely depended on oral testimony, and made allegations of a gravity that needed to be clearly proved: see per Lord Bingham of Cornhill at para 6. That the same people had done the same things on other occasions was plainly a cogent, and probably a necessary, matter to offset what might otherwise simply have been seen as the unsupported implausibility of the claimant’s allegations. But in our case the transaction under investigation, whichever of the disputed forms it took, was an orthodox and not in any way unusual commercial transaction, supported by a wealth of documentary record. What is likely to be added by similar fact evidence is thus much less obvious.

The judge having approached the matter on an incorrect basis, it falls to this court to take the decision afresh. We appreciate that the judge herself performed that task, on the assumption that she was wrong on her first point; but she did so (see para 40 of her judgment) on the basis that even if the similar fact evidence had some probative value that value would be “extremely slight”. For the reasons set out above, that was a misappreciation, and one which affected her approach to the second limb of the admissibility issue. Accordingly, and although the latter is, as the judge said, essentially a case management issue, this court must consider for itself whether the evidence, although relevant and potentially probative, should nonetheless not be admitted.

The basic difficulty is that the nature of the relationship between Chase and the other Greek families is likely to be as controversial, and to have taken the same form, whatever it was, as that between Chase and Springwell. To identify matters within those relationships that might play the role suggested in para 75 above could, it was argued by Chase, take as much time as investigation of the principal case. Chase said that this was a classic example of the extension of the trial; distraction of the decision-maker; and overburdening of the parties; that is frequently relied on as a reason for not admitting similar fact evidence.

Much of this Springwell found it difficult to gainsay. Mr Brindle however suggested, as we have described, that any such difficulties could be met by a significant limitation on the evidence that was sought to be called. That would be limited not only in the terms of the proposed amended paras 190-193 of the pleading, and to three or even two other Greek families, but also would be limited to evidence about the terms in which Mr Atkinson was introduced to those other Greek families, and what he had said to them about investments in Russia and in GKO-linked notes when he introduced those products to them.

The difficulty about that limitation is that pointed out by Mr Hapgood. Chase does not, and cannot be expected to, accept at face value claims by other Greek families about the (oral) terms in which Mr Atkinson was introduced to them, any more than it accepts those same claims made by Mr Polemis. Just as in the case of Springwell the undocumented claims have to be tested by a detailed inspection of the way in which the relationship was in fact pursued, so would Chase be entitled to a similar investigation of similar claims made by or on behalf of the other Greek families. It was simply unfair for Springwell by limiting its own case to seek to limit what Chase might, relevantly, adduce in answer. And the relevant conversations occurred between about ten and 18 years ago, with all the evidential problems to which the lapse of time inevitably gives rise.

We see no answer to that objection, which we are satisfied is not advanced simply for forensic reasons. At best, there must be a high level of uncertainty before the court has descended into the actual trial as to how far it will prove to be necessary and reasonable for Chase to test the Greek families’ evidence by further exploration of the relationship in the light of the e-mail evidence and the transcripts. If Chase wished to take that course, and it was clear that the exploration would be relevant, and was not being proposed simply to obstruct the trial, then we do not see how the judge could fairly limit it. And those considerations are, it seems to us, the more pressing when a party seeks to meet a case that is put against him. It is one thing to say to a party that he may not adduce similar fact evidence in the first place, because of the uncertainty and waste of judicial time that it may cause. It is quite another to say to his opponent that the evidence may be adduced, but for those reasons he is to be limited in what he can say in answer.

All this threatens either to overburden the trial or, if steps are taken that are directed simply to avoiding that burden, to deprive Chase of effective scrutiny of the case put against it. Neither outcome is acceptable. There is in the end an unavoidable choice to be made between trying one case - the present one - and trying three.

We therefore dismiss the appeal and uphold the judge’s order, albeit for reasons somewhat different from those that she herself gave.