JP Morgan Chase Bank & Ors v Springwell Navigation Corp

the conduct of all the parties;

whether a party has succeeded on part of his case even if he has not been wholly successful;

any payment into Court or admissible offer to settle made by a party which is not an offer to which costs consequences under Part 36 apply.

The conduct of the parties includes the specific matters set out at CPR 44.3(5), inter alia: (a) conduct before, as well as during, the proceedings; (b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; and (c) the manner in which a party has pursued or defended his case or a particular allegation or issue.

only allow costs which are proportionate to the matters in issue; and

resolve any doubt as to whether costs were reasonably incurred or reasonable and proportionate in amount in favour of the paying party.

In contrast, where the indemnity basis is applied, the rule does not refer to proportionality and the Court will resolve any doubt in favour of the receiving party.

In Reid Minty v Taylor (Footnote: ¹), May LJ at paragraphs 27-29 said the following:

“27.

In my judgment, the judge here was wrong to constrain himself in the way that he did. He was, I think, implicitly guided by pre-CPR authorities which are no longer apt for the new procedural code in this respect. Under the CPR, it is not, in my view, correct that costs are only awarded on an indemnity basis if there has been some sort of moral lack of probity or conduct deserving moral condemnation on the part of the paying party. The court has a wide discretion under Rule 44.3 which is not constrained, in my judgment, by authorities decided under the rules which preceded the introduction of the CPR. The discretion has to be exercised judicially, in all the circumstances, having regard to the matters referred to in Rule 44.3(4) and Rule 44.3(5). The discretion as to the amount of costs referred to in Rule 44.3(1)(b) includes a discretion to decide whether some or all of the costs awarded should be on a standard or indemnity basis. Rule 44.4 describes the way in which an assessment on each basis is to operate, but does not prescribe the circumstances in which orders on one or the other of the bases is to be made.

28.

As the very word ‘standard’ implies, this will be the normal basis of assessment where the circumstances do not justify an award on an indemnity basis. If costs are awarded on an indemnity basis, in many cases there will be some implicit expression of disapproval of the way in which the litigation has been conducted, But I do not think that this will necessarily be so in every case. What is, however, relevant to the present appeal is that litigation can readily be conducted in a way which is unreasonable and which justifies an award of costs on an indemnity basis, where the conduct could not properly be regarded as lacking moral probity or deserving moral condemnation.

29.

The circumstances referred to in Rule 44.3(4) include any payment into court or admissible offer to settle which each of the parties may have made. But it seems to me that in the present appeal the letter of 1st September 1999 by itself, although relevant, may not take the case for indemnity costs very far. I do not see that there is much to be made of an analogy for defendants with Rule 36.21. That rule applies to claimants. There is no equivalent rule for defendants who must, in my view, look elsewhere for means of putting themselves in the strongest possible position as to costs.”

As May LJ indicated, all the relevant circumstances had to be taken into account.

Mr. Michael Brindle QC, leading counsel for Springwell, relied on the following passage in the judgment of Simon Brown LJ (as he then was) in Victor Kermit Kiam II v MGN Limited (Footnote: ²) at paragraph 12 (where the judge commented on the above passage in Reid Minty), to argue that the threshold for an award of indemnity costs remained a high one:

“I for my part, understand the Court there to have been deciding no more than that conduct, albeit falling short of misconduct deserving of moral condemnation, can be so unreasonable as to justify an order for indemnity costs. With that I respectfully agree. To my mind, however, such conduct would need to be unreasonable to a high degree; unreasonable in this context certainly does not mean merely wrong or misguided in hindsight.”

However, as Mr. Mark Hapgood QC, leading counsel for Chase, pointed out, in Excelsior Commercial & Industrial Holdings Limited v Salisbury Hammer Aspden & Johnson & Another (Footnote: ³), Lord Woolf, CJ, having referred to Kiam, said as follows, at paragraphs 31 and 32:

“31.

In the context of that case I see that those paragraphs set out the need for there to be something more than merely a non–acceptance of a payment into court, or an offer of payment, by a defendant before it is appropriate to make an indemnity order for costs. Insofar as that is the intent of those paragraphs, I have no difficulty with them. However, I would point out the obvious fact that the circumstances with which the courts may be concerned where there is a payment into court may vary considerably. An indemnity order may be justified not only because of the conduct of the parties, but also because of other particular circumstances of the litigation. I give as an example a situation where a party is involved in proceedings as a test case although, so far as that party is concerned, he has no other interest than the issue that arises in that case, but is drawn into expensive litigation. If he is successful, a court may well say that an indemnity order was appropriate, although it could not be suggested that anyone's conduct in the case had been unreasonable. Equally there may be situations where the nature of the litigation means that the parties could not be expected to conduct the litigation in a proportionate manner. Again the conduct would not be unreasonable and it seems to me that the court would be entitled to take into account that sort of situation in deciding that an indemnity order was appropriate.

32.

I take those two examples only for the purpose of illustrating the fact that there is an infinite variety of situations which can come before the courts and which justify the making of an indemnity order. It is because of that that I do not respond to Mr. Davidson's submission that this court should give assistance to lower courts as to the circumstances where indemnity orders should be made and circumstances when they should not. In my judgment it is dangerous for the court to try and add to the requirements of the CPR which are not spelt out in the relevant parts of the CPR. This court can do no more than draw attention to the width of the discretion of the trial judge and re–emphasise the point that has already been made that, before an indemnity order can be made, there must be some conduct or some circumstance which takes the case out of the norm. That is the critical requirement.”

Again, the width of the trial judge’s discretion was emphasised.

In Amoco (UK) Exploration v British American Offshore Ltd (Footnote: ⁴), Langley J awarded indemnity costs, having concluded that the claimant had pursued the litigation on the basis that its commercial interests took precedence over the rights and wrongs of the situation and in order to exert commercial pressure on the defendant. He continued (Footnote: ⁵):

“If a party embarks on or brings upon itself and pursues litigation of the magnitude of this litigation in such circumstances and suffers a resounding defeat, involving the rejection of much of the evidence adduced in support of its case, in my judgment that provides a proper basis on which it is appropriate to award costs on an indemnity basis. Judged by the same standards, I think [the defendant] should now recover the costs it has incurred in consequence unless of course [the claimant] can show that they were unreasonable.”

In Three Rivers v BCCI SA (Footnote: ⁶), Tomlinson J noted that the discretion to award indemnity costs is extremely wide but there must be “some conduct or some circumstance which takes the case out of the norm.” For this purpose, the Court can and should have regard to the conduct of an unsuccessful claimant during the proceedings, both before and during the trial, as well as to whether it was reasonable for the claimant to raise and pursue particular allegations and the manner in which the claimant pursued its case and its allegations. Specifically, as he said:

“I have already referred to the guidance given by Lord Woolf in the Excelsior case as to the circumstances in which an indemnity order may be appropriate – where there is some conduct or some circumstance which takes the case out of the norm. I agree with the Bank that the authorities, including IPC Media Ltd v. Highbury Leisure Publishing Ltd [2005] EWHC 283 (Ch) (Laddie J), Cambridge Antibody Technology Ltd v. Abbot Biotechnology Ltd [2005] EWHC 357 (Ch) (Laddie J), Amoco (UK) Exploration Co v. British American Offshore Ltd [2002] BLR 135 (Langley J) and Cepheus Shipping Corporation v Guardian Royal Exchange Plc [1995] 1 LL Rep. 647 (Mance J) demonstrate that the following principles should guide the Court’s determination whether the Claimants should be required to pay the Bank’s costs of the action on an indemnity basis: -

(1)

The court should have regard to all the circumstances of the case and the discretion to award indemnity costs is extremely wide.

(2)

The critical requirement before an indemnity order can be made in the successful defendant’s favour is that there must be some conduct or some circumstance which takes the case out of the norm.

(3)

Insofar as the conduct of the unsuccessful claimant is relied on as a ground for ordering indemnity costs, the test is not conduct attracting moral condemnation, which is an a fortiori ground, but rather unreasonableness.

(4)

The court can and should have regard to the conduct of an unsuccessful claimant during the proceedings, both before and during the trial, as well as whether it was reasonable for the claimant to raise and pursue particular allegations and the manner in which the claimant pursued its case and its allegations.

(5)

Where a claim is speculative, weak, opportunistic or thin, a claimant who chooses to pursue it is taking a high risk and can expect to pay indemnity costs if it fails.

(6)

A fortiori, where the claim includes allegations of dishonesty, let alone allegations of conduct meriting an award to the claimant of exemplary damages, and those allegations are pursued aggressively inter alia by hostile cross examination.

(7)

Where the unsuccessful allegations are the subject of extensive publicity, especially where it has been courted by the unsuccessful claimant, that is a further ground.

(8)

The following circumstances take a case out of the norm and justify an order for indemnity costs, particularly when taken in combination with the fact that a defendant has discontinued only at a very late stage in proceedings;

(a)

Where the claimant advances and aggressively pursues serious and wide ranging allegations of dishonesty or impropriety over an extended period of time;

(b)

Where the claimant advances and aggressively pursues such allegations, despite the lack of any foundation in the documentary evidence for those allegations, and maintains the allegations, without apology, to the bitter end;

(c)

Where the claimant actively seeks to court publicity for its serious allegations both before and during the trial in the international, national and local media;

(d)

Where the claimant, by its conduct, turns a case into an unprecedented factual enquiry by the pursuit of an unjustified case;

(e)

Where the claimant pursues a claim which is, to put it most charitably, thin and, in some respects, far-fetched;

(f)

Where the claimant pursues a claim which is irreconcilable with the contemporaneous documents;

(g)

Where a claimant commences and pursues large-scale and expensive litigation in circumstances calculated to exert commercial pressure on a defendant, and during the course of the trial of the action, the claimant resorts to advancing a constantly changing case in order to justify the allegations which it has made, only then to suffer a resounding defeat.”

A full review of all the cases and the relevant principles is contained in National Westminster Bank v Rabobank (Footnote: ⁷), where Sir Anthony Colman awarded indemnity costs following a lengthy trial in which allegations of fraud were made against five senior officials of National Westminster Bank. He identified the concept of unreasonableness as the “frontier to be crossed” before an order for indemnity costs was justifiable (Footnote: ⁸). He held that that test was satisfied in a case in which such serious allegations had been made and pursued without evidential basis. He concluded that the underlying foundation of the core allegation in that case was so improbable as to be far-fetched (Footnote: ⁹). Mr. Hapgood pointed to paragraph 44, which, he contended, had a resonance with the present case:

“ … if there were to be constructed an edifice of fraudulent misrepresentation involving allegations of personal dishonesty against senior bankers with impeccable records employed by one of the leading banks in the field of corporate workout, the available evidence had to be at least potentially compelling in order to satisfy the requisite standard of proof. In order to load-test allegations of dishonesty motive is often crucial. Had the extremely tenuous evidence in this case been properly load-tested as it should have been, the extreme improbability of any motive would have been identified. The prosecution of the allegations of fraud can thus be regarded as highly speculative even if not doomed from the outset. That notwithstanding, they were vigorously pursued throughout a long trial by means of extensive cross-examination of witnesses who were accused of very serious dishonesty.”

Mr. Hapgood submitted that Rabobank, and the other cases referred to, showed that indemnity costs will be appropriate where a party pursues large scale litigation, particularly involving allegations of dishonesty, without facing up to the reality of the evidence. That, submitted Mr. Hapgood, is not normal litigation. He pointed to paragraph 45, where Sir Anthony Colman considered that the procedural history of the claims:

“… evidences a party casting around for a viable basis on which to claim in the face of very slender evidence and demonstrating considerable reluctance to give up points which had already been shown to be untenable. I have no doubt that these vain fluctuations in claim increased the overall costs by comparison with what could be normally expected even of a relatively heavy commercial case which had been pursued on a consistent basis.”

Mr. Hapgood sought to draw a parallel with the present case.

Mr. Brindle also relied on Rabobank, where, at paragraph 28, Sir Anthony Colman commented on Tomlinson J’s summary of principles in the following terms:

“Where one is dealing with the losing party's conduct, the minimum nature of that conduct required to engage the court's discretion would seem, except in very rare cases, to be a significant level of unreasonableness or otherwise inappropriate conduct in its widest sense in relation to that party's pre-litigation dealings with the winning party or in relation to the commencement or conduct of the litigation itself. It is important to distinguish in Tomlinson J's formulation of relevant considerations between that underlying concept and his identification of examples of more specific patterns of conduct capable of rendering a party's overall conduct relevantly unreasonable or inappropriate. Grounds (4) to (8) inclusive are specific examples of conduct which, taken alone, or in combination, may in all the surrounding circumstances often be capable of giving rise to a conclusion that the losing party's conduct has been so unreasonable or inappropriate overall as to justify an order which gives him a more effective costs indemnity than would be the case under the standard order. But in each case in which the costs of the whole litigation are under consideration, the conduct adversely criticised must be looked at in the context of the entire litigation and a view taken as to whether the level of unreasonableness or inappropriateness is in all the circumstances high enough to engage such an order.”

In IPC Media Ltd v Highbury Leisure Publishing (Footnote: ¹⁰), Laddie J made an order for indemnity costs in an “extraordinarily expensive action”, on the basis that it would be:

“… contrary to the interests of justice if the defendants were not properly and fully compensated for the cost it has incurred in fending off a thin and, in some respects, far-fetched claim brought by the claimant.”

Another useful summary is that of Christopher Clarke J in Balmoral Group Limited v Borealis (UK) Limited [2006] EWHC 2531 (Comm) where, having adopted Tomlinson J’s summary, he said this:

“The discretion is a wide one to be determined in the light of all the circumstances of the case. To award costs against an unsuccessful party on an indemnity scale is a departure from the norm. There must, therefore, be something – whether it be the conduct of the claimant or the circumstances of the case – which takes the case outside the norm. It is not necessary that the claimant should be guilty of dishonesty or moral blame. Unreasonableness in the conduct of the proceedings and the raising of particular allegations, or in the manner of raising them may suffice. So may the pursuit of a speculative claim involving a high risk of failure or the making of allegations of dishonesty that turn out to be misconceived, or the conduct of an extensive publicity campaign designed to drive the other party to settlement. The making of a grossly exaggerated claim may also be a ground for indemnity costs.”

the scale of Springwell’s claim;

Springwell’s reliance on false and exaggerated evidence;

the fact that Springwell’s case was particularly weak and insubstantial, not merely viewed with the benefit of hindsight, but also by reference to the manner in which the case developed and was pursued at trial;

the unjustified allegations of serious impropriety, including fraudulent misrepresentation, pursued by Springwell in the absence of any support, which were advanced and not made out, or advanced but ultimately abandoned;

Chase’s settlement offer, as contained in its letter dated 30 March 2007.

So far as the scale of the case was concerned, although this was obviously a very substantial case, it was not without precedent, and mere scale could not justify an award of indemnity costs. The scale of the case was a function, inter alia, of the length of Springwell’s relationship with Chase, the volume of transactions in Russian investments and, in particular, the fact that tapes of such a very large number of relevant conversations had survived. The transcripts accounted for the vast bulk of the chronological bundles and the existence of transcripts on that scale was an unusual feature of the case. Both parties put the whole of the relationship in issue, albeit for different reasons. None of that could make the conduct of the case unreasonable, let alone unreasonable “to a high degree”. It simply made the case a very substantial case to try.

Insofar as Chase relied upon the alleged weakness of Springwell’s case, that did not justify an award of indemnity costs. Although, in dismissing the pre-default claims, the court found against Springwell on a large number of issues, losing was not itself a reason for an award of indemnity costs. Whilst ultimately unsuccessful, on any view, Springwell’s case was a substantial one. That was reflected in the length of the first judgment and the time it took to produce. With the benefit of hindsight, some allegations were stronger than others, but that was not a relevant test for unreasonableness in any case, let alone a case of this complexity. And, in any event, the same criticism could be made of key aspects of Chase’s case. Nor, unlike Three Rivers, was this a case which was irreconcilable with the documents. On the contrary, and by way of example, the content of the transcripts was at the heart of the allegations of advisory duty and breach, and bore out substantial elements of Springwell’s case that were denied to the end by Chase.

Nor, unlike Three Rivers, was this a “constantly changing” case. Chase’s suggestion that the advisory case “fluctuated time and again” and was “subject to amendment after amendment” was simply wrong. There was only one set of substantive amendments to the paragraphs in the Counterclaim dealing with Chase’s contractual and tortious duties, and those were amendments provided to Chase in April 2006, a year before the trial began. The court found that the emphasis in the advisory case shifted during the course of the trial. But, even if that were so, as the court also found, it was a case that was open to Springwell on its pleadings. Shifts of emphasis in a case are nothing unusual or out of the norm, a fortiori in a case of such complexity and with such a volume of material to be marshalled.

As to the reliance placed by Chase on what it contended were unjustified allegations of serious impropriety, Mr. Brindle submitted as follows. Allegations of impropriety were obviously serious allegations. But this case was completely different from those presented to the court in either Three Rivers or Rabobank. In those cases, the allegations of impropriety were at the very core of the case, and the principal causes of action being advanced. Here, by contrast, the core of the pre-default claims were the negligent advice claim and the negligent misrepresentation claim. The claim in fraudulent misrepresentation was dropped before the trial, and the other allegations of impropriety Chase identified accounted for probably five or six pages of a three hundred page judgment. These allegations can, therefore, fairly be characterised as on the periphery of the case. As to the allegation that FS acted improperly in securing Springwell’s signature to the Relevant Documents, whilst the court rejected the allegation that FS knew he was acting improperly, the court did nonetheless regard his conduct as “shoddy” and “unattractive”, and expressed real concern during Chase’s closing submissions as to the approach which had been adopted by Chase in procuring Springwell’s signature to the Relevant Documents.

Mr. Brindle made further detailed submissions in response to Chase’s arguments that unjustified allegations of impropriety were made. These further submissions are summarised in Appendix 2A.

Mr. Brindle also submitted that, in addition to the matters referred to above, the court should also have regard to:

Mr. Brindle submitted that the significance of the foregoing was that it put Chase’s complaints about Springwell’s conduct in a proper context. In particular, he submitted that an order for indemnity costs would be wholly unjust in circumstances:

In conclusion, Mr. Brindle submitted that, as Sir Anthony Colman stated in Rabobank, where the costs of the whole litigation (or in this case, the whole of the pre-default claims) are under consideration, the conduct adversely criticised must be looked at in the context of the entire litigation. Accordingly, he submitted further that there was nothing to take this case out of the norm, particularly if regard was had to: (i) the strengths of the case; (ii) the complexity of it and the volume of the material that Springwell had to marshal; (iii) the way the case was fought; (iv) Chase’s “shoddy” and “unattractive” conduct before the litigation; (v) aspects of Chase’s conduct during the litigation; (vi) the substantial monetary recovery in fact achieved by Springwell; and (vii) the fact that such allegations of impropriety as were made were on the periphery of the case, any order that Springwell pay the costs of the pre-default claims on the indemnity basis would be wholly unjust. Finally, he submitted, no sufficient case has been articulated by Chase in support of indemnity costs in respect of the post-default claims.

The scope and range of the allegations made by Springwell was extensive. Springwell’s case, both in negligence and misrepresentation, involved a detailed examination of the relationship between Chase and Springwell over a ten-year period, including investigations of what might have been said many years ago. In effect, Springwell questioned and impugned Chase’s conduct of its trading relationship with Springwell and sought, by presentation of oral evidence, to undermine, or disregard, each and every successive contractual document which (as I have held) defined the relationship between the parties over the years. Thus the scale of the litigation was massive.

Springwell could, if it had chosen to do so, have focused its breach of duty/negligence claim much more narrowly. For example, it could have limited its claim as against the Private Bank in relation to the last two years of trading, and the alleged failure of the Private Bank properly to advise on diversification. It chose not to do so. Instead, it sought to make the most wide-ranging allegations of negligence and misconduct against JA (in particular) and Chase generally, which were ultimately unsuccessful.

Springwell’s case was that it sought to abrogate all responsibility for the investment decisions which AP made over the years, seeking instead to place the entire responsibility for Springwell’s alleged investment losses of $290 million at Chase’s door. Although Mr. Brindle and AP accepted, during the course of the trial, that some deduction for contributory negligence on Springwell’s part might be appropriate, even if the court were to find in Springwell’s favour on the duty of care issue, there was no realistic assessment at any time of any actual figure for contributory negligence. Springwell’s case was that, from the start, and notwithstanding the substantial profits that it had made over the years (in respect of investments to which, as I have found, AP was well-aware, there was attached a significant degree of risk) Chase should never have allowed Springwell to invest in the class of investments which it did. To my mind, that approach was an example of a general lack of recognition of commercial reality on Springwell’s part in the conduct of this litigation.

Every point that could be taken was taken by Springwell. In many areas of the case (the misrepresentation case is an example) unsubstantiated allegations were made. Chase, of necessity, had to deal with such claims in laborious detail. The Shipping Claim (which potentially increased the damages claim by $450 million) necessitated a substantial factual inquiry into the history of the Polemis fleet. It never became necessary for me to decide the claim, but no attempt was made to hive it off as a separate issue, probably because of the presence, until shortly before trial, of the deceit claim. But, in my judgment, if a party chooses to litigate a commercial case of this sort on such a wide and extravagant canvas, he must take the risk that, ultimately, if unsuccessful, he may have to pay the costs of the exercise on an indemnity basis. Such a sanction, if nothing else, is a salutary means of encouraging focus, restraint and proportionality in heavy commercial disputes.

Springwell raised, and pursued, various serious allegations of dishonesty, impropriety and deceit against Chase, in respect of both the pre-default and the post-default claims. As Mr. Hapgood summarised in paragraphs 37 et seq of Chase’s skeleton argument annexed to this judgment, certain of the allegations of dishonesty and deceit against JA were dropped very shortly before trial. But others were persisted in, although effectively dropped after cross-examination of the Chase witnesses.

Further serious allegations of impropriety were made in respect of Chase’s conduct in respect of the post-default period (see paragraph 44 et seq of Chase’s skeleton argument). By these allegations (which were not part of the original action, but were introduced by way of amendment in June 2006), Springwell in effect asserted that Chase, as an institution, deliberately sought to ensure that its customers lost out in post-default negotiated settlements with counterparty banks to the advantage of Chase. These allegations were rejected by me. The fact that a party chooses to raise and pursue allegations of fraud and impropriety and then abandons them, shortly before trial, or alternatively, seeks to make them good, are well-established reasons for an award of indemnity costs.

There was a wide divergence between the evidence originally adduced in Springwell’s inordinately lengthy witness statements and the actual oral evidence given by Springwell’s witnesses at trial. Of course, this happens in many cases, often where (as I strongly suspect was the case here) the witness statements are meticulously crafted by lawyers. But here, the departure was particularly striking, especially in the case of AP, although other Springwell witnesses likewise deviated significantly from their written statements. Moreover, the ever-changing nature and shift in emphasis in Springwell’s case must necessarily have made it a difficult and costly case to rebut. Springwell’s pleadings which, to this reader, were unacceptably Byzantine must have been of doubtful utility in identifying the actual case, as it developed over time, which Chase had to meet.

I also take into account, albeit to a limited extent, the offer, made by Chase in a letter dated 30 March 2007, to settle the litigation upon payment of $15 million, in effect to enable Springwell to cover a substantial proportion of its costs. I regard this offer as a sensible approach by Chase to settle the litigation which, in retrospect, Springwell would have been wise to accept.

The above features, taken in combination, in my judgment take this case outside the norm and justify the exercise of my discretion to award indemnity costs. However, there is also a wider commercial consideration which I take into account in the exercise of my discretion. The exigencies of financial markets require that parties, who engage in substantial volume trading in sophisticated financial instruments, clearly record their relationships and trades with counterparties in written contracts and other documents. Certainty is the lifeblood of such trading (Footnote: ¹¹). Such markets are not for the uninitiated or the faint-hearted. If the market turns adversely to one party and he (unsuccessfully) seeks to tear up the contractual documentation upon the basis of which he has been trading with the counterparty over a period of years, in an attempt to construct an elaborate and extensive claim based on what he alleges is the “true” or wider relationship between the parties outwith the contractual documents, it is eminently reasonable, in my view, that he should expect to pay the costs of such an exercise on an indemnity basis. Otherwise, claims for misrepresentation or “over-arching duties of care” are all too easily made, and, once made, can be deployed as unjustified negotiating tools.

The sums at stake were very large.

Not only were the allegations very serious but their breadth was almost unlimited, and led to detailed examination of conduct and investments over a 10 year period.

Springwell’s allegations of breach of duty extended to claims for damages in respect of 68 impugned purchases of Russian and Indonesian investments, and alleged investment losses of $290 million.

Springwell pursued a wholesale and unrelenting attack on Mr. Atkinson. Even after it had abandoned its allegations of fraud (see below), it pursued “the most wide-ranging allegations of negligence” against him, “addressing and attacking at every level” his competence as a salesman (Judgment I paragraph 72).

The shipping claim increased the damages sought by $450 million and necessitated a substantial factual enquiry into the history of the Polemis fleet, the Polemises’ business methods and Chase’s understanding of those methods, together with a detailed expert enquiry into the state of the shipping market and the price and viability of new tonnage.

The claim in misrepresentation was a remarkable one, in which separate claims were made in respect of 149 alleged representations of fact. This of itself necessitated an enormous exercise in response, even though (and for good reason) the claim was disposed of in relatively short form in Judgment I (paragraphs 655-723).

The post-default claims necessitated a detailed examination of events following the Russian default, together with evidence of Russian law.

Given the breadth of the allegations, the disclosure process was a mammoth task, during the course of which Springwell pressed time and again for more and more documents, including the transcription of more and more conversations. The breadth of the allegations also led to the need to undertake a reconstruction of Springwell’s entire trading history.

Springwell sought to prove its case by extensive factual and expert evidence. By way of example:

Adam Polemis’s assertion that leverage increases happened “automatically”, when in fact he was the driving force behind them (Judgment I paragraphs 244-245).

Adam Polemis’s evidence, given with vehemence and implausible certainty, that Mr. Atkinson did not discuss the GKO-Linked Note risk disclosures with him, in accordance with Mr. Atkinson’s usual practice (Judgment I paragraph 326).

Adam Polemis’s central contention that he just followed whatever Mr. Atkinson said (like a rubber-stamp or the relationship of a dog to a master), when in fact he retained control over all decision-making (Judgment I paragraphs 373, 448, 639).

Adam Polemis’s further contention that he was an unsophisticated investor who knew very little about the markets or indeed what he was doing. In fact, and as found, he was a “hugely experienced and sophisticated emerging markets investor” (Judgment I paragraph 432(v)), who was well aware of what he was doing.

The clearest indication of the inherent difficulties with the pre-default case was that it fluctuated time and again in an attempt to deal with difficulties or bolster Springwell’s position. Vague at the best of times, in a journey described in Judgment I at paragraphs 35-41, Springwell’s case as to the advisory relationship was subject to amendment after amendment, resulting only in confusion and difficulty. The same occurred in respect of Springwell’s case on its investment objectives (Judgment I paragraphs 620-623): a clear though “fanciful” case was asserted in 1999 and continued thereafter in the litigation. Yet in 2006 (some eight years after the default), Springwell took it upon itself to change its case about its investment objectives. As observed in Judgment I (paragraph 623), the likely inference was that this occurred for entirely collateral purposes (namely to improve Springwell’s numbers on the alternative portfolio), as well as because of the obvious lack of attraction in the original case. Several of the authorities referred to above identify a constantly shifting case as a prime indicator of litigation which merits an order for indemnity costs.

Equally telling was the manner, approaching desperation, by which Springwell sought to extricate itself from the consequences of the numerous documents which it signed. In a remarkable piece of pleading, Springwell occupied 105 paragraphs of its Reply in asserting ever more elaborate routes to avoid the documents. But these comprised either narrow and strained arguments of construction which reflected “an unrealistic approach to the construction of a commercial document” (Judgment I paragraph 506), or allegations whose central premise, namely that Adam Polemis would have refused to sign the documents or would have ceased dealing with Mr. Atkinson if only he had known about the terms of the documents, was itself rejected as “incredible” (Judgment I paragraph 212) and “approaching fantasy” (Judgment I paragraph 216).

Whilst the Payment Claim was a matter of construction, the weakness of Springwell’s position was evident by the tortuous nature of the arguments, described in Judgment II variously as “uncommercial” (Judgment II paragraph 164) and having “an air of unreality” (Judgment II paragraph 175). More than this, however, and as was noted at Judgment II paragraph 144, these were all arguments that contradicted the fundamental and agreed nature of the notes as pass-through instruments, so much so they were described by Springwell’s own Counsel as “counter-intuitive”.

Over the course of many years, Springwell made explicit allegations of dishonesty and deceit against Mr. Atkinson in connection with the entirety of his dealings with the Polemises between October 1997 and August 1998. Those allegations were first raised in the US proceedings in 1999. They were pursued with vigour for many years in the present action. As late as 1 December 2006 (by the service of further information), Springwell quantified the claims at $292 million. However, these claims were abruptly abandoned on 5 March 2007 in the immediate aftermath of a letter from Clifford Chance expressing concern over a newspaper article on the case, and very shortly before the start of trial. Despite several requests from Clifford Chance (see the correspondence attached to Ian Moulding’s witness statement), Springwell refused to give any explanation for its volte face. The obvious inference is that it was only the imminence of trial which forced Springwell’s hand to withdraw deeply personal and damaging allegations, which should never have been made.

Although the deceit allegations were dropped, the pleadings on the pre-default claims contained a number of further allegations of either conscious impropriety or serious misconduct. Although Springwell was invited before trial to drop these allegations also, it expressly confirmed in its letter of 9 March 2007 that these further allegations were all maintained. Yet, and although the allegations remained on the pleading, Springwell did not even attempt try to prove some of them at trial. For example, the allegation that Chase “stuffed” Springwell with paper that no-one else would buy, a wide-ranging allegation of serious malpractice which had been on the pleading throughout, was not put to any witness and apparently just evaporated.

Those further allegations that Springwell did try to prove were pursued vigorously in cross-examination of JA, FS, DP and other witnesses but were comprehensively rejected in Judgment I, on the basis that they had no evidential foundation and should never have been made.

It was originally pleaded that, from October 1997, JA recommended investmentsthat he must have known were unsuitable. Amendments to the Counterclaim were provided to Chase in April 2006 which supplemented the claim by reference to express statements in the transcripts, and limited the period of the claim to representations made in the period from 1 May 1998. In respect of that period, there was a divergence between the recommendations JA was making and the Chase research which had been disclosed. The divergence was reflected both in the starkly lower levels of Russian concentration in the Chase model portfolio and, more generally, in the recommendations being given. Mr. Brindle pointed out that, when it came to cross-examination, JA had accepted that these matters had not been communicated to AP.

On 5 March 2007, in the run-up to trial, and having considered again all the material now marshalled in the trial bundles, and with a view to focusing the case effectively, the claim in fraudulent misrepresentation was dropped, and Springwell accepted that Chase would be entitled to its costs in the claim. As correspondence made clear at the time, the dropping of the claim was nothing to do with the letter from Clifford Chance which had been received on 28 February 2007. It was the result of normal pre-trial preparation. The fact that it was also shortly after the Clifford Chance letter was coincidental.

This is because at all times there was a parallel and alternative claim in negligent misrepresentation alleging all the same representations, the same reliance, and the same falsity. The only difference between the claims related to the mental state alleged, with the alternative claim in negligence alleging (in summary) that JA ought to have known that the representations were false. In the circumstances, almost all the work associated with the claim in fraudulent misrepresentation was also required for the claim in negligent misrepresentation. Mr. Brindle submitted that Chase’s suggestion that the fraudulent misrepresentation claims had “shaped the course of the litigation for many years” was therefore wrong.

By the same token, there was nothing in Chase’s point that, when Chase applied to strike out the Shipping Losses claim, it was considered on the basis that, there being an extant allegation of fraudulent misrepresentation, issues of foreseeability did not need to be considered. Exactly the same approach was required by the fact of Springwell’s claim in negligent misrepresentation under s2(1) of the Misrepresentation Act (as Springwell’s skeleton for the strike-out application made clear).

the allegations relating to dumping GKOs from Chase’s proprietary book were not pursued in the light of the evidence given by Chase’s witnesses. But there was nothing improper in bringing them to trial in circumstances where, inter alia:

The allegation that Chase took advantage of AP and placed its own interest above that of Springwell was rejected by the court. Given the way Springwell had put its case on this basis (see section 22.2.2 of Springwell’s closing submissions) that was inevitable in the light of the Court’s findings, inter alia, as to AP’s expertise and that JA’s appreciation as to what Springwell’s investment objectives were was accurate. But there was nothing improper in bringing the claims to trial.

This was hard-fought and well-fought litigation. At the end of the first judgment, the court complimented the legal teams on both sides as to “the exemplary way this long and complex commercial trial has been conducted”. A similar comment was made at the end of the second judgment. That is incompatible with Springwell’s conduct having amounted to unreasonableness justifying an award of indemnity costs.

Similarly, during the interlocutory stages, there were a number of contested applications, but, as Schedule B to the eighth witness statement of Chase’s solicitor, Mr. Ian Moulding, demonstrates, in the majority of those Springwell was successful. Again, that is incompatible with Springwell’s conduct having amounted to unreasonableness justifying an award of indemnity costs.

Although Chase’s skeleton argument referred to the decision of Langley J in Amoco v British American Offshore, there was no attempt made by Chase to suggest that Springwell’s conduct was motivated by anything other than a bona fide desire to have the rights and wrongs of Chase’s conduct established, and what Springwell saw as their rights vindicated. This was not a case which was brought simply to exert commercial pressure or for some ulterior or collateral motive.

Springwell recovered approximately $644,000 in respect of the Custody Fees claim. That claim was resisted until judgment.

In May 2004, Springwell recovered $6.843 million in respect of the VTB settlement. Those were monies originally paid to Chase in June 1999. It was only when, in the light of Springwell’s Defence and Counterclaim, Springwell threatened to apply for summary judgment in respect of them, that Chase paid the monies over.

In July 2004, Springwell recovered $258,000 in respect of the Sberbank settlement of $324,000. Those were monies originally paid to Chase in March 2001. Springwell knew nothing of this until Chase’s Defence in May 2004, despite requests for information about the fate of the Sberbank forwards. And it was not until 16 October 2007 that Chase made a further payment in respect of principal and interest so as properly to account for the 2001 Sberbank settlement.

In November 1998, Chase asserted a set-off against Inkombank retaining a payment of $227,000. Again, Springwell knew nothing about this until Chase’s Defence in May 2004, despite requests for information. Springwell was entitled to a pro-rata share of $24,000 which it did not receive from Chase until July 2004.

Chase withheld substantial sums of money from Springwell, without justification and, in some cases, without disclosure, which sums would not have been recovered but for the litigation.

There were substantial aspects of Chase’s conduct which the Court correctly characterised as “shoddy” or “unattractive” and falling below that to be expected of “a responsible bank”:

Although the court exonerated Chase of negligence, it did so with “hesitation” in the case of the Private Bank (see paragraph 632 of the first judgment). The following comments made by the court reflect those concerns:

“MRS JUSTICE GLOSTER: What could be said against you is that the bank, with this very lengthy close relationship with the family and in circumstances where they are making substantial profits, never actually applied their mind, despite have a relationship with Mr. Polemis at a high level, to saying: well, actually this is the advice that this, okay, sophisticated in one sense of being a sophisticated businessman, but somebody needs to give his family some serious advice about not having all their eggs in one basket. It is the absence of any kind of real world life that anybody in a professional relationship with these client might just strike one – and I’m not saying necessarily Mr. Atkinson, because I take your point that he was a salesman.

MR. HAPGOOD: Yes.

MRS JUSTICE GLOSTER: You may say, well, that is not an approach that is consistent with the pleadings or the contractual framework, et cetera, et cetera, but that factually is the discomfort that I think you have in your case.”

“MRS JUSTICE GLOSTER: I think that is what I find surprising. Again, I’m not putting any legal pegs on this, but I find it surprising if they were trying to encourage him into diversification that someone at a senior level doesn’t record in writing the, at least potentially, very great risks of having so much money in emerging markets.

MR. HAPGOOD: Yes.

MRS JUSTICE GLOSTER: And particularly concentrated in the way they were. That is I think what I’m looking for and haven’t found.

…

MRS JUSTICE GLOSTER: It is a shock horror point and I find it – it is a shock horror point, isn’t it, in one sense, and I find it surprising that the bank didn’t think: well, we must record in writing, whether the client reads it or not, but this is a corporate client who is horrifically concentrated in one asset class.

MR. HAPGOOD: Yes, absolutely.

MRS JUSTICE GLOSTER: If we are going round giving him a bit of advice about diversification, we should spell out the dangers of being concentrated in the way that he is.”

Important aspects of Chase’s case were unrealistic and unsupported even by Chase’s own evidence.

Chase also quite unnecessarily complicated the case by putting in expert reports from Augusto Lopez-Claros (a macro-economist, not someone who had been selling at the relevant time) which disagreed with his own articles and research from that time. This was productive of much wasted effort and expenditure.