Camerata Property Inc v Credit Suisse Securities (Europe) Ltd

The defendant (to which I will refer as “Credit Suisse”) applies by Application Notice dated 14 October 2011 for an Order under CPR Part 3.4 striking out those paragraphs of the Particulars of Claim which relate to the claim in respect of the so-called “Lehman Brothers Note”, alternatively for summary judgment under CPR Part 24 dismissing that claim.

In summary, Credit Suisse’s case is: (i) that the claim in respect of the Lehman Brothers Note is precluded by reason of issue estoppel arising out of a judgment of Andrew Smith J dated 9 March 2011 ([2011] EWHC 479 (Comm)) in proceedings between the same parties (2009 Folio 940) which also concerned the Lehman Brothers Note; (ii) that the pursuit of that claim in the present proceedings is an abuse of process; (iii) that even if not an abuse of process, the claim in respect of the Lehman Brothers Note in the present proceedings is unsustainable in the light of the findings of Andrew Smith J in that judgment, so that either the claim should be struck out or summary judgment should be entered in favour of Credit Suisse dismissing the claim.

The claimant (to which I will refer as “Camerata”) is a company incorporated in Belize in 2005. It is an investment company owned by a Panamanian Trust, the Frosio Foundation, of which Mr Charalambos Ventouris, is the sole beneficiary. Mr Ventouris is a wealthy man. His father founded a shipping business about fifty years ago, which has now been divided between Mr Ventouris and other members of his family. He manages bulk carriers, having once had a fleet of seven vessels. Through sales, this has been reduced to two vessels. At the time of his investment through Credit Suisse in 2007, he had funds of some $50 million for investment, which came from the operating profit from the vessels and from sales of the fleet.

In 2005, Mr Ventouris was introduced to Mr Fokiades who worked for Credit Suisse in Switzerland. Mr Fokiades in turn introduced him to Mr Petros Siakotos-Konstantinidis who worked for the Private Banking division of Credit Suisse in London as a relationship manager, dealing mainly with Greek clients. Mr Fokiades had told Mr Ventouris that he could earn a better return than that paid on bank deposits without risking his capital, which is why he introduced Mr Ventouris to Mr Siakotos-Konstantinidis, because the latter had experience of structured products.

From about May 2006 onwards and on the advice of Mr Siakotos-Konstantinidis, Mr Ventouris made investments in various such structured products, starting with the so-called Index Based Note. From early 2007, investments were made through Camerata, because Mr Siakotos-Konstantinidis had suggested that Mr Ventouris use an off-shore company. The details of these early investments are set out at [14] to [32] of the judgment of Andrew Smith J.

In about March 2007, Mr Ventouris indicated that Camerata wished to open an account with Credit Suisse (Guernsey) Limited (“CSG”) and Mr Ventouris instructed Dr Lustenberger, a commercial lawyer in Zurich who was the sole director of the Frosio Foundation. Details of the documents which were sent by CSG to Dr Lustenberger on behalf of Camerata and specifically, the application form for opening a corporate account and the brochure entitled “Special Risks in Securities Trading” are again set out by Andrew Smith J at [33] to [39] of his judgment. For present purposes, it is only necessary to highlight two points.

The first is that the brochure contained a section about structured products which, as Andrew Smith J noted at [37], stated that they all had their own risk profile from the interaction of the component risks. The brochure continued:

“With structured products, buyers can only assert their rights against the issuer. Hence, alongside the market risk, particular attention needs to be paid to issuer risk. You need therefore be aware that, as well as any potential loss you may incur due to a fall in the market value of the underlying, a total loss of your investment is possible if the issuer should default. Market makers, who in most cases are the issuers themselves, normally guarantee that structured products are tradable. Nonetheless, liquidity risks cannot be excluded.”

The second point is that, in completing that part of the application form which was entitled “Investment Objectives (Risk Tolerance Indicator)”, Dr Lustenberger answered the questions in such a way as to produce the conclusion that Camerata had “Low Risk Tolerance”, the lowest of the five tolerances contemplated by the form.

On 16 May 2007, Mr Siakotos-Konstantinidis signed a “Client Profile” document in respect of the proposed account which described the use of the account in terms which he agreed in cross-examination before Andrew Smith J was referring to products that would involve medium to high risk. He thought he had not seen the Risk Tolerance Indicator completed by Dr Lustenberger and accepted that he was at fault for failing to do so. Andrew Smith J was very critical of Mr Siakotos-Konstantinidis’ approach, concluding this section of his judgment at [42]:

“Mr Siakotos-Konstantinidis, however, must have been aware that Camerata had stated in Credit Suisse's formal documentation that they did not wish to take risks with their investments. He could not have overlooked this when he completed the form. I can only conclude that he thought that he had a better understanding of his client's real wishes and objectives than they had formally stated, and so disregarded the formal statement of their position. He showed a similar attitude towards Credit Suisse's procedures in failing to read, or at least failing to read with any care, the forms that Camerata were required to complete. As I have said, he did not observe Credit Suisse's procedures for completing file notes of discussions with clients and so there is no record of his conversations with Mr Ventouris upon which Mr Siakotos-Konstantinidis relied to justify his indifference to Camerata's formal statements of their wishes. Indeed, as I shall explain, his assistant, Mr Kelly, asked Camerata to sign the client agreement in blank and to allow CSSE to complete it as they saw fit.”

At a meeting in London in June 2007 to discuss possible investments, Mr Siakotos-Konstantinidis mentioned to Mr Ventouris that he might consider investing in the Lehman Brothers Note which had come to Mr Siakotos-Konstantinidis’ attention in the middle of May 2006. He thought that it might interest Mr Ventouris because the latter was familiar with the movement of the US dollar against the Euro through his shipping business, which operated in dollars but the overheads of which were calculated in Euros.

The Note was a Five Year Autoredemption Note issued by Lehman Brothers Treasury BV, a subsidiary of Lehman Brothers. It paid no regular coupon, but it could be automatically redeemed throughout its life on certain observation dates (at six monthly intervals), if the exchange rate between the Euro and the US dollar was at or below the “strike rate” of 1.3740 US dollar per 1 Euro. At maturity (assuming it had not been redeemed early), provided the exchange rate had never been above the “knock-in rate” of 1.5755 US dollar per Euro, the Note would redeem 100%. However, if at maturity, the Note had at any stage been at or above that knock-in rate, the investor was exposed to the negative performance of the dollar against the Euro from strike and the redemption price would be equal to the strike rate divided by the final exchange rate.

This was all explained on the face of the issuing documentation, which included a table setting out examples of the effect of negative performance of the dollar if the knock-in rate had been reached at any stage. The most pessimistic example given was if the final exchange rate was US$1.60 to €1, in which case the Note would redeem at 85.88% of the original investment. Of course theoretically, the final exchange rate at maturity could be worse if the dollar had fallen catastrophically against the Euro, but the investor would only suffer a total loss of his investment in the event of issuer default.

In an email on 3 July 2007, Mr Siakotos-Konstantinidis advised Mr Ventouris about what investments he should make. In addition to the Lehman Brothers Note in which he recommended half the funds for investment should be placed, he recommended a 20% investment in an Enhanced Return Note based on four indices. His email concluded: “This allocation matches my perception of your medium term investment approach and your desire to put on varying degrees of risk for an average return in the 12-16% range”.

Andrew Smith J made the following findings about this advice at [59] of his judgment:

“Mr Siakotos-Konstantinidis acknowledged that Mr Ventouris had not told him that he was looking for a return of 12-16%. He said that he stated his own perception of what Mr. Ventouris wished, so that Mr Ventouris could comment upon it. Mr Ventouris did not do so, and did not correct or question this "perception" of Mr Siakotos-Konstantinidis. However, he did not invest in the range of products that Mr Siakotos-Konstantinidis suggested but only in the Note. He said in evidence that this was recommended to him both by Mr Fokiades and by Mr Siakotos-Konstantinidis as an ultra-safe investment. He also said that Mr Siakotos-Konstantinidis advised that it was more conservative than the Enhanced Return Note (which had a higher coupon than the Note), and Mr Ventouris thought that, since the Enhanced Return Note was described as presenting capital risk only in a "catastrophic scenario", the Note would be extremely safe. Whatever precisely was said, I accept that Mr Ventouris was led to think that the investment was a safe one. I do not need to make further findings about this, and, because this might be the subject of a separate claim, I do not do so.”

On 17 July 2007, Mr Ventouris suggested waiting a little longer before investing in the Lehman Brothers Note, in the hope that the dollar might fall further against the Euro. As Andrew Smith J found at [61] of his judgment:

“Mr. Siakotos-Konstantinidis replied that "Given the current dollar weakness", investment in the note "looks very compelling now".He reiterated the basic terms of the Note, and added an explanation about "the possibility of putting the capital at risk". Mr Ventouris also asked whether structure of the Note could be revised to pay a coupon on a quarterly basis. Mr Siakotos-Konstantinidis explained that capital would be at risk if the Euro/US$ exchange rate went above 1.5686.”

There was also a discussion about leverage or borrowing to invest in the Note and, on 18 July 2007, Mr Siakotos-Konstantinidis sent Mr Ventouris a loan facility letter for leverage for investment in the Note, a term sheet for the Note and a notice headed “Private Customer Risk Warning Notice for Structured Capital at Risk Products”. Before Andrew Smith J, Credit Suisse relied upon various warnings in the term sheet and this Warning Notice. The detail of these is set out at [63] to [66] of his judgment and for present purposes, it is only necessary to highlight two matters.

First, under “Important legal notice/disclaimer” the term sheet stated:

“The investor should be aware that the value of the investment is not solely dependent on the performance of the investment but also of the creditworthiness of the issuer.

….

The investment product is a structured derivative and may therefore be complex and involve a high degree of risk. It is intended only for investors who understand and are capable of assuming all risks involved. Before entering into any transaction, an investor should determine if this product suits its particular circumstances and should independently assess (with its professional advisers) the specific risks (maximum loss, currency risks, etc.) and the legal regulatory, credit, tax and accounting consequences. Credit Suisse makes no representation as to the suitability of this investment product for any particular investor nor as to the future performance of this investment product.”

Second, as Andrew Smith J said at [66] of his judgment, the term sheet included a link to various market disclaimers issued by Credit Suisse, which stated:

“In the event of defaulting by the issuer of the investment, and/or any third party the investment and income derived from such contracts is not guaranteed and you may get back none of, or less than, what was originally invested”.

On 24 July 2007, Mr Ventouris decided to invest $12 million in the Lehman Brothers Note, with $4 million by way of equity and $8 million leverage. On 7 August 2007, the purchase of the Note was confirmed by Credit Suisse. In fact, as Andrew Smith J found at [74], although Camerata invested $12 million in the Lehman Brothers Note, Mr Ventouris was not aware who the issuer was and thought it was likely to be Credit Suisse.

Subsequently, Camerata invested in three further structured products: the so-called Multi-Index Note in September 2007, an Equity Yield Note in December 2007 and a Restructured Bank Note in October 2008. The detail of these investments and the advice given by Mr Siakotos-Konstantinidis is set out at [75]-[82] and [93]-[94] of Andrew Smith J’s judgment. The complaint about the advice given by Credit Suisse in relation to those investments forms part of the claim in the present proceedings, but because the present application by Credit Suisse is not concerned with those investments, it is not necessary to say any more about them.

Andrew Smith J also made detailed findings about the turbulent events in the financial markets in the period from March 2008 onwards, including the “fire sale” merger of Bear Stearns with JP Morgan Chase in March 2008 and the collapse of Lehman Brothers in September 2008, with consequent bankruptcy and default of the issuer of the Lehman Brothers Note: see in particular [83] to [96] of the judgment. As I will discuss in more detail later, those findings were important in the context of the proceedings he was trying, since Camerata’s essential complaint was about the advice or lack of it in that period between March and September 2008, it being contended that, if properly advised, Camerata would have sold the Lehman Brothers Note during that period.

On 3 December 2008, Mr Siakotos-Konstantinidis and Mr Ventouris met at the Apollo Hotel in Athens. Mr Ventouris recorded their conversation on his mobile phone and a transcript of it was in evidence before Andrew Smith J. Mr Siakotos-Konstantinidis made a number of allegations against Credit Suisse, specifically that, from about March 2008, it had ceased using Lehman Brothers as a counterparty because of concerns about its creditworthiness, a matter which was not drawn to the attention of clients, including Camerata and Mr Ventouris. Obviously that was a very serious allegation which left Mr Ventouris angry and appalled. It formed a central plank of Camerata’s claim in the first action. Andrew Smith J set out the detail of the conversation at [97]-[101] and [204]-[205] of his judgment.

In his evidence before Andrew Smith J, Mr Siakotos-Konstantinidis said that he could not particularly recall the conversation but was under a lot of pressure at the time and was antagonistic towards Credit Suisse, so that some of what he said in the conversation was untrue (see the findings at [99] of the judgment). So far as the suggestion that Credit Suisse had stopped using Lehman Brothers as a counterparty was concerned, he assumed he was repeating what had been alleged by another client of Credit Suisse who had invested in Lehman Brothers and suffered a loss.

Andrew Smith J rejected that evidence, finding at [205] as follows:

“When he was asked about this, Mr Siakotos-Konstantinidis said that he was repeating what had been alleged by another client who had invested with Lehman and who was making representations to Credit Suisse about his loss, and also that he was speculating about what might have happened. This evidence was not given in his witness statement, and there is nothing in the transcript of the conversation that lends support to the explanation that he was repeating, and perhaps building upon, the complaints of another client. On the other hand, the transcript does not indicate that he had any specific basis for what he was saying, and did not state clearly why Credit Suisse stopped using Lehman as counterparty. Moreover, it seems improbable that, during the difficult months before and after Lehman's collapse, Credit Suisse would have entrusted sensitive information of this kind to an employee of Mr Siakotos-Konstantinidis' status. I do not consider that his rather emotional comments on 3 December 2008 provide satisfactory evidence to support this part of Camerata's case. For whatever reason, he told untruths against Credit Suisse, as he had about other matters in that conversation.”

Ultimately, that finding was one of the reasons why Camerata’s claim in the first action failed, although there is no doubt that Mr Siakotos-Konstantinidis said what he is recorded as saying and that, at the time, Mr Ventouris had no reason to disbelieve him.

Camerata’s solicitors, Thomas Cooper, wrote the first letter before action in relation to the Lehman Brothers Note on 7 January 2009. This stated that the investment had been made on the advice of Credit Suisse and that Camerata held Credit Suisse liable for the loss and damage it had suffered by reason of Credit Suisse’s breach of contract and/or negligence. In particular it was alleged that the investment was unsuitable for Camerata in the light of its investment objectives, continuing: “We will maintain, in this regard, that a suitable investment could not have been made with Lehman Brothers so that the risk in relation to this counter-party ought never to have been incurred”.

Thomas Cooper wrote to Credit Suisse again on 13 January 2009 taking issue with the suggestion made by Mr Siakotos-Konstantinidis in an email that the collapse of Lehman Brothers was unforeseeable. The letter asserted that Credit Suisse had or should have had sufficient information to identify the risks associated with the Note being placed with Lehman Brothers by early 2008, if not before. The letter concluded by reserving all Camerata’s rights in respect of the suitability of the investment itself and the counterparty.

It is noticeable therefore that these early letters before action specifically raise the issue of the suitability of the Lehman Brothers Note at the time the investment was made, specifically, although not exclusively, in relation to whether Lehman Brothers was a suitable counter-party.

The first proceedings were issued on 15 May 2009. The Particulars of Claim pleaded that, by reason of the client profile documentation completed at the time the account with CSG was opened, Mr Siakotos-Konstantinidis should have been aware of Camerata’s aversion to risk. The pleading also set out the advice given before the investment in the Lehman Brothers Note (which I have summarised at [10] to [14] above) and that Camerata invested in the Note in reliance on that advice. However, there was no allegation that that advice was in breach of contract or negligent and hence no allegation about the suitability of the Note at the time the investment was made, notwithstanding what had been said in the letters before action.

Rather, the allegations of breach and negligence were limited to the various assurances Mr Siakotos-Konstantinidis had given Mr Ventouris during the course of 2008 about the creditworthiness of the issuer. It was alleged that he should have warned Mr Ventouris that the issuer was not creditworthy and that Credit Suisse had itself stopped using the issuer as a counterparty in about February 2008, as Mr Siakotos-Konstantinidis had told Mr Ventouris at their meeting on 3 December 2008. It was alleged that, if Camerata had been properly advised about the doubtful creditworthiness of the issuer, it would have liquidated the Note before the collapse of Lehman Brothers. Instead: “[it] did not liquidate the Note and when the Issuer filed for bankruptcy the entire value of the Note, alternatively the great majority of its value was lost”.

In the Defence in the first action, at [34], Credit Suisse picked up that, although the email advice in July 2007 about investment in the Note was pleaded in the Particulars of Claim, no criticism was made in the pleading about the advice, nor was there any allegation of unsuitability at the time of investment. The Defence stated: “The premise of this action is accordingly that the Note was a suitable investment for the Claimant, which was consistent with Mr Ventouris’ investment objectives and attitude to risk”.

In response, in a letter of 17 August 2009, Thomas Cooper stated:

“…we wish to make it clear, for the avoidance of doubt, that it has been and remains our client’s position that all of the structured investments recommended to our client by your client were unsuitable. Your client has accepted that the Note would automatically have been redeemed in January 2009…so that it follows that our client would have received reimbursement [at a profit]. Therefore, although the suitability of the investments made on the advice of your client may not be relevant to these proceedings, our client specifically reserves all rights with regard to the suitability or otherwise of the three other products referred to at paragraph 28 of the Defence”.

The reference to what would have happened in January 2009 is to the fact that, as was common ground both before Andrew Smith J and before me, had the bankruptcy not occurred, the Note would have been automatically redeemed on the next observation date in January 2009 at a profit. That Camerata was not making a complaint about the suitability of the Lehman Brothers Note at the time of the investment in August 2007, was reiterated in a further letter on 8 September 2009, in which Thomas Cooper stated:

“… we were merely making the observation that the loss in this case does not arise as a result of the unsuitability itself. As you are aware the loss arises as a result of the matters which we have pleaded in detail in our client’s Particulars of Claim.”

That the first action was limited in this way was confirmed in the Case Memorandum which stated:“C does not bring a claim in respect of the original recommendation made by Mr Siakotos-Konstantinidis to purchasethe Note…”

This is how matters stood until October 2010, about three months before the trial, which had been fixed for January 2011. On 20 October 2010, Camerata applied to amend the Particulars of Claim in the first action to add in a mis-selling claim, but one which was limited to the three other Notes in which it had invested. No similar complaint was made about the Lehman Brothers Note. The application for permission to amend was refused by HHJ Mackie QC at a hearing on 27 October 2010.

On 8 December 2010, Thomas Cooper wrote to Credit Suisse’s solicitors, Allen & Overy, enclosing a draft Re-Amended Particulars of Claim in which the proposed amendments now being put forward were limited to allegations concerning the advice given in relation to investment in the Lehman Brothers Note. The letter stated that although fresh proceedings would have to be commenced in relation to the other three Notes, costs would be saved if all issues in relation to the Lehman Brothers Note were dealt with in one trial and invited Credit Suisse to consent to the amendment.

The last paragraph of the letter stated: “While we acknowledge that the trial date is approaching, we consider that the disclosure given or to be given by both parties in relation to the existing issues regarding the Lehman Brothers Note mean that it is doubtful that either side would have to provide any further disclosure occasioned by this amendment. Similarly we do not believe that the amendment will give rise to any further witness evidence”. It seems to me that this is implicit recognition that the existing issues in the first action would necessarily involve exploration at trial of matters such as Mr Ventouris’ financial sophistication and experience, his investment objectives and the circumstances in which the Lehman Brothers Note came to be purchased, as indeed proved to be the case at the trial before Andrew Smith J, as discussed below.

Although in its witness evidence in support of the present application and in Mr Beltrami QC’s submissions before me, Credit Suisse has contended that the draft amendment enclosed with that letter was limited to an allegation about issuer risk and did not make any wider complaint about suitability, that is a false point. I am quite satisfied that, albeit in general and under-particularised terms, the draft did include an allegation that the Lehman Brothers Note was not suitable because Camerata was an extremely risk-averse client.

In response to that letter, on 14 December 2010, Allen & Overy set out detailed grounds as to why there was objection to the late amendment and said that, if Camerata wished to pursue the proposed amendment, an appropriate application to the court should be made as soon as possible. No such application was in fact made. Although Camerata made an application dated 17 December 2010 in relation to expert evidence, which was heard by HHJ Mackie QC, no application was made to include this proposed amendment in the forthcoming trial.

Instead of applying for permission to amend, on 31 December 2010, Thomas Cooper wrote to Allen & Overy referring to the fact that Credit Suisse had resisted consolidation of the unsuitability claims with the claim in the first action on the grounds that those claims should be brought in separate proceedings. They enclosed with that letter so-called “unissued particulars of claim” in a proposed new action, making mis-selling allegations in relation to all four Notes. Matters were not progressed at that stage and no further proceedings were issued.

The trial of the first action took place over five days between 18 and 25 January 2011. Mr Beltrami referred the judge to the letter of 31 December 2010 and the draft pleading enclosed with it and asked him to refrain from exploring in his judgment matters which might be in issue in any later proceedings. Andrew Smith J dealt with this at the outset of his judgment at [3]:

“Although there is no complaint in these proceedings about the circumstances in which Camerata acquired the Note, by a letter of 31 December 2010 Messrs Thomas Cooper, Camerata's solicitors, sent Messrs Allen & Overy, CSSE's solicitors, a draft pleading with a view to bringing new claims in which, as I understand it, Camerata allege that the Note and other investments made through CSSE were unsuitable for them. Mr Adrian Beltrami QC, who represented CSSE, invited me to refrain from exploring in this judgment matters which might be in issue in such proceedings, and I have sought to avoid doing so unnecessarily. However, it is necessary to set the background to the present claim, and to examine, in particular, Camerata's financial knowledge and experience and their attitude, and expressed attitude, towards adventurous investments: indeed, CSSE themselves rely upon these matters.”

By his judgment dated 9 March 2011, Andrew Smith J dismissed Camerata’s claim in the first action. A number of his findings are critical for the purposes of this application and it is necessary to set those out in some detail.

In a section of the judgment headed “Mr Ventouris’ knowledge and experience”, the learned judge made the following findings at [111] to [114]:

“111.

There is no evidence that Mr Ventouris, either himself or through some vehicle entity, bought any structured products or other relevant investments from any of these banks, and, whatever the explanation for what Messrs Thomas Cooper wrote, I accept his evidence that he did not have discussions with them which provided him with any significant information or understanding about such products.

112.

None of this persuades me that, when he dealt with CSSE, Mr Ventouris in fact had any relevant previous experience or that he had any technical understanding about how the market in structured products operated. However, the important question is what impression he gave Mr Siakotos-Konstantinidis and whether that impression was a reasonable one. As Mance J said in Bankers Trust International plc v PT Dharmala Sakti Sejahtera (No 2), [1996] CLC 518 at 531E-F: "A recipient holding himself out as able to understand and evaluate complicated proposals would be expected to be able to do so, whatever his actual abilities".

113.

I conclude that Mr. Ventouris had no experience of structured products before he met Mr Siakotos-Konstantinidis. Mr. Siakotos-Konstantinidis had no reason to think otherwise, and this should have been clear to him if he had read CSG's account opening document or the completed Acceptance Booklet. Mr. Ventouris showed that he had limited technical knowledge about investments of the kind in which he and Camerata were investing and about investments generally.

114.

That said, Mr Ventouris is clearly intelligent and financially astute, and Mr. Siakotos-Konstantinidis must have recognised this. He took a lively interest in investment, and showed himself willing and eager to ask about and to discuss products suggested to him by CSSE and others. He asked that CSSE provide him with graphs and other research information. He engaged in discussion with Mr Siakotos-Konstantinidis about market developments and the opportunities that they presented for investments. Mr. Siakotos-Konstantinidis could reasonably suppose that he understood the risks involved in the investments that he and Camerata made and other products that he discussed, including the risk that the investment would be lost if a counterparty defaulted, and that he would ask about any concerns that he had. He could also reasonably suppose that Mr. Ventouris understood that the enhanced returns that could be earned from structured products broadly reflected the risks associated with them.”

The next section of the judgment is headed “Mr Ventouris’ attitude to risky investments”. Andrew Smith J records Mr Ventouris’ evidence that his “overriding concern was that any investment should be extremely low risk” and that this was consistent with the account opening documents.

However, the learned judge then went on to make findings about the attitude of Mr Ventouris to risk at [125] which involved rejecting Mr Ventouris’ evidence that he was only interested in low risk investments:

“My conclusions about Mr Ventouris' attitude to risk are these: when he started to deal with Mr Siakotos-Konstantinidis, he had no experience of risky investments, but, in the hope of higher returns, was willing to make investments which he knew might result in some limited loss to capital. To that extent he never limited himself to investments that were "absolutely secure". In the course of his dealings with Mr. Siakotos-Konstantinidis increasingly he became interested in, and attracted and excited by, more adventurous investments. This understandably and reasonably led Mr Siakotos-Konstantinidis to believe that he would contemplate running rather greater risks with his capital (and Camerata's funds) than the documentation completed by Camerata indicated. In fact, he never put any money into the most adventurous ideas that they discussed, and he would never seriously have contemplated any investment if he thought that there was any realistic chance that he would lose the whole or the greater part of his investment. He understood and accepted risks by way of market movements, but would not willingly have run the risk that any of the banks or institutions that he was dealing might default if he had thought this seriously possible.”

In his assessment of the witnesses, the learned judge found at [140] that the questions Mr Ventouris asked during 2008 were general ones about market conditions. He found:

“[Mr Ventouris] was interested to hear Mr Siakotos-Konstantinidis' opinion about the markets and what would result from the market turbulence, and in that context that he asked how Mr Siakotos-Konstantinidis thought that his investments (and Camerata's investments) would fare. I do not accept that he presented his questions as enquiries made with a view to planning or making decisions about buying or selling investments in light of the answers. Further, Mr. Ventouris was acute enough and sufficiently well informed to know that counterparty default could jeopardise an investment, and, if he had been concerned about that, he would, as I conclude, have asked about the position expressly and specifically.”

Andrew Smith J found at [142] that, in general terms, Mr Siakotos-Konstantinidis had expressed optimistic views in the summer of 2008 and given his own view that Camerata’s investments would be “safe”, but had not given any firmer or more specific assurances.

In a later section of the judgment from [190] to [197], the learned judge dealt with Camerata’s complaint that, before answering the general questions Mr Ventouris had raised, Mr Siakotos-Konstantinidis had negligently failed to remind himself who was the issuer of the Lehman Brothers Note. In rejecting that complaint, the learned judge found (at [195]) that Mr Ventouris did not at any time indicate that he had any particular concern about counterparty risk and that Mr Siakotos-Konstantinidis reasonably understood the thrust of the enquiries to be about what determined the return on the investment in the Lehman Brothers Note, namely the dollar/Euro exchange rate.

The learned judge found at [196]:

“Further, the criticism of Mr Siakotos-Konstantinidis is to be assessed against his evidence that between March and September 2008, while he recognised that investors holding equity in institutions such as Lehman might have reason for concern, he did not think that any such institution would default or that those who held investments such as the Note were at risk of counterparty default. As I shall explain, I do not consider that Mr Siakotos-Konstantinidis has been shown to have been negligent, still less to have been grossly negligent, in taking that view about Lehman in particular or about institutions of their standing more generally. He fairly pointed out that Bear Stearns had not defaulted when they were sold to J P Morgan Chase. Again, the adviser might be at fault if he did not have in mind who issued the investment if the circumstances of the enquiry make it clear that the client is looking for an exhaustive assessment of all the risks involved in holding it. These were not the circumstances here.”

In the next section of the judgment, Andrew Smith J dealt with the question whether the advice Mr Siakotos-Konstantinidis gave could properly have been given. I have already referred to his findings about the conversation at the 3 December 2008 meeting. At [231] he set out the pleaded allegations about the advice which Mr Siakotos-Konstantinidis ought to have given to Mr Ventouris:

“i)

That there were real grounds for doubting the creditworthiness of the Issuer.

ii)

That, because there were real grounds for doubting the creditworthiness of the Issuer, Credit Suisse had themselves ceased to use the Issuer as a counterparty.

iii)

That, having regard to the extreme risk aversion of Camerata and Mr Ventouris, they ought to consider liquidating the investment in the Note and putting the proceeds somewhere more secure, such as government bonds or in deposit with CSSE or with another bank whose creditworthiness was not in doubt.

Andrew Smith J found at [232]-[235] that none of those complaints had been established and that Mr Siakotos-Konstantinidis was not negligent, let alone grossly negligent:

“232.

None of these complaints is established. I have considered separately the various strands of argument presented by the parties, but, of course, the position is to be assessed taking them all into account. When this is done, in my judgment, Camerata have not shown that there were real grounds for doubting the creditworthiness of Lehman, still less that Mr Siakotos-Konstantinidis should have appreciated that there were and advised Mr Ventouris that there were. Camerata have not shown that Credit Suisse had stopped using Lehman as a counterparty because of real doubts about their creditworthiness, still less that Mr Siakotos-Konstantinidis should have known this. Camerata have not established that there were grounds to think that they should liquidate their investment in the Note.

233.

The question, essentially, comes down to this: Mr Siakotos-Konstantinidis did not pass on to Mr Ventouris either reports that he had read suggesting that Lehman might follow the way of Bear Stearns or the other information upon which Camerata rely. If Mr Ventouris had asked specifically about counterparty risk in relation to the Note, Mr Siakotos-Konstantinidis would, I think, have been at fault, and negligent, unless he either told Mr Ventouris about press reports and other information that he had come across or told Mr Ventouris that he was not in a position to offer advice upon a more specialist question of that kind; but Mr Ventouris did not ask such questions. Even if he had done so, I would not have concluded that Mr Siakotos-Konstantinidis was grossly negligent.

234.

Nor am I able to accept that, when he sought Mr Siakotos-Konstantinidis' views in the general terms that he did, Mr Ventouris was to be understood to be enquiring about risk of counterparty default. After all, Mr Ventouris had shown himself to be alert and perceptive of financial matters and actively interested in his investments, and Mr Siakotos-Konstantinidis could properly have expected him to ask specific questions if he was concerned about this. The nature of the questions, especially given the circumstances and context in which they were given, were, in my judgment, to be understood as an invitation for Mr Siakotos-Konstantinidis to give his opinion, or really just to give his impression, about whether the investments were "safe", and, although of course upon analysis, the "safety" of an investment of this kind depends in part upon counter-party risk, the enquiry did not call for a response that involved analysis of this kind. I would have reached the same conclusion even if Mr Ventouris had asked questions of the kind that he described in his oral evidence. I do not consider that Mr Siakotos-Konstantinidis was negligent, still less grossly negligent, because he did not assess counterparty risk when responding to questions of the kind that Mr Ventouris was asking, or because he did not pass on to Mr Ventouris reports that he had read or other information or speculation about Lehman, or because these matters were not reflected in the views that he expressed.

235.

I therefore conclude that CSSE were not in breach of duty. Mr Siakotos-Konstantinidis' response to Mr Ventouris was one that a relationship manager in his position could properly give consistently with exercising the reasonable skill and care to be expected of him.”

In the section of the judgment dealing with whether any breach of duty had caused loss, the learned judge rejected any suggestion that Mr Siakotos-Konstantinidis should have given more pessimistic advice than he in fact gave. At [239], he made the following findings which also bear on the issue as to Mr Ventouris’ attitude to risk and which have considerable significance in relation to the case Camerata seeks to run in the present proceedings:

“Whatever Mr Siakotos-Konstantinidis was asked by Mr Ventouris, Camerata have not shown that he should have said more than that (i) the credit rating agencies had reduced Lehman's ratings, but that they still gave Lehman "A" ratings and considered them to deserve Investment Grade ratings; (ii) that there had some increase in the CDS spreads of Lehman following the collapse of Bear Stearns; and (iii) that there was some speculation in the financial press, and that some analysts thought, that Lehman might lose their independence as Bear Stearns had done. There is no credible evidence, and I am not persuaded, that, had he been given such advice, Mr Ventouris would have arranged for the Note to be sold. Nor am I persuaded, if it be alleged, that, given advice or warnings of this kind, Mr Ventouris would have investigated the position further or sought further advice that would then have led to a sale of the Note. Specifically, I reject Mr Ventouris' evidence that he would have sold the investment in the Note had he been told that it "contained warnings about significant risks including … interest rate, price risk, liquidity risk, redemption risk and credit risk". That would, in my judgment, have come as no surprise to him.”

The Particulars of Claim in the present action were served on 4 August 2011. As I have said, by the present application Credit Suisse does not seek to impugn the case relating to the other three Notes, but only that relating to the Lehman Brothers Note. The pleaded case in relation to the Lehman Brothers Note is as follows.

The Particulars of Claim at [21] contend that, on 24 July 2007, in reliance on the advice of Mr Siakotos-Konstantinidis, Camerata invested in the Lehman Brothers Note. The Particulars of Advice set out first the 3 July 2007 email and allege that Mr Siakotos-Konstantinidis “thereby impliedly represented that the risk to capital of the Lehman Brothers Note was limited to, at most, a catastrophic scenario.” The Particulars then refer to the subsequent emails, including that on 18 July 2007 which sent the warning notice, and to the fact that Mr Siakotos-Konstantinidis said these were standard form documents and that the real risk for the Lehman Brothers Note was negligible. Finally, it is pleaded that, during meetings and telephone calls prior to the decision to invest, Mr Siakotos-Konstantinidis presented the Lehman Brothers Note as being ultra-safe with a level of risk equivalent to a triple A rated bond, alternatively safe and/or low risk. At least up to this point, the pleading reflects, to some extent, the findings which Andrew Smith J made.

Then Credit Suisse is alleged to have owed Camerata duties of care both in tort and in contract. It is also alleged at [31] of the pleading that Credit Suisse was subject, prior to 1 November 2007, to the FSA’s conduct of business rules (“COB”), specifically the obligation under COB 5.3.5(1) to take reasonable steps to ensure that the advice on investments was suitable for the client, and subsequent to 1 November 2007 to the Conduct of Business Sourcebook (“COBS”) with similar obligations to those under COB.

Credit Suisse is alleged to have been in breach of each of these contractual, common law and statutory duties, because the Lehman Brothers Note carried at least a medium level of risk and was therefore not a safe investment ([37]). Further or alternatively, Credit Suisse is said to have been grossly negligent in not taking account of the fact that Camerata was extremely risk-averse and/or had a low risk profile and, therefore, in not warning Mr Ventouris that the Note carried at least a medium risk and that there was a realistic chance of loss of the whole or greater part of the investment ([40]).

In addition, Camerata claims damages for breach of statutory duty owed by Credit Suisse pursuant to section 150 of the Financial Services and Markets Act 2000 (“FSMA”) i.e. breaches of COB and COBS, in that the Note was wholly unsuitable for Camerata given its attitude to risk expressed to and known by Credit Suisse ([41]).

Camerata contends that, if it had been advised that the Lehman Brothers Note carried at least a medium risk and that there was a realistic chance of loss of the whole or greater part of the investment or if it had been asked to alter its risk profile to permit such investment, it would not have seriously contemplated the investment, but would have placed the relevant funds in government bonds or on deposit with Credit Suisse or another bank whose creditworthiness was not in doubt. Accordingly, the damages claim is to put Camerata in the position it would have been in had it not invested in the Lehman Brothers Note ([42] to [44]). It is then pleaded that as a consequence of the insolvency of Lehman Brothers, the Note became valueless, or nearly so ([45]).

The basis for Credit Suisse’s application can be summarised as follows:

I propose to deal with these two aspects of the application and the submissions in relation to them in turn.

The doctrine of issue estoppel can be shortly stated for present purposes as that a decision will create an issue estoppel, if it determined an issue in a cause of action as an essential step in its reasoning: Spencer Bower on Res Judicata at paragraphs 8.01-8.04, Thoday v Thoday[1964] P 181, 197-8 per Diplock LJ.

The correct approach to be adopted by the court in applications by a defendant for summary judgment under CPR Part 24 to dismiss a claim was summarised by Lewison J as he then was in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) as follows:

“The correct approach on applications by defendants is, in my judgment, as follows:

i)

The court must consider whether the claimant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman[2001] 1 All ER 91 ;

ii)

A "realistic" claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel[2003] EWCA Civ 472 at [8]

iii)

In reaching its conclusion the court must not conduct a "mini-trial": Swain v Hillman

iv)

This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10]

v)

However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5)[2001] EWCA Civ 550;

vi)

Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63;

vii)

On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725.”

It is fair to say that Mr Beltrami did not press his argument on issue estoppel too hard in his submissions before me, perhaps recognising, in the light of what Andrew Smith J had said at [3] and [59] of the judgment about avoiding trespassing on any subsequent proceedings, that it would be difficult to contend that Andrew Smith J was determining issues which were for a second trial so that there was an issue estoppel.

The thrust of Mr Beltrami’s submissions is that whilst the findings Andrew Smith J made may not give rise to an issue estoppel, it is difficult to see on what basis Camerata and Mr Ventouris would be able to persuade another court to make different findings and those findings are either fatal to the current claim or make its pursuit difficult to the point where there is no real prospect of success. He submits that particularly difficult for Camerata are the findings in [125] and [239] about Mr Ventouris’ attitude to risk (which involved the learned judge rejecting Mr Ventouris’ own evidence) and the rejection of any suggestion that Mr Ventouris would have sold the Lehman Brothers Note in 2008 if he had been told about warnings in the Note concerning significant risks.

Accordingly, although Mr Beltrami recognises that, for the reasons Lewison J gave, the court should be cautious not to dismiss a claim at an interlocutory stage, he submits that this is a case where either those findings mean the court can be sure that the claim will fail, or at the very least, that it has no real prospect of success.

Mr Beltrami submits that the difficulties for this claim do not end with the findings of Andrew Smith J. He relies on the well-known principles explained by Lord Hoffmann in South Australia Asset Management v York Montague (“SAAMCO”) [1997] AC 191 and also on the judgment of Otton LJ in Portman Building Society v Bevan Ashford [2000] 1 EGLR 81 in support of his submission that, even if the court accepted that Credit Suisse was negligent, in that the advice given to Camerata to invest in the Lehman Brothers Note was wrong, the loss was not suffered as a consequence of that advice being wrong, but because of issuer default. But for issuer default, Camerata would have been rewarded handsomely on the Lehman Brothers Note.

So far as issuer default was concerned, given Andrew Smith J’s finding at [239] that, even if Mr Siakotos-Konstantinidis had given the most pessimistic advice about issuer risk in 2008 for which Camerata could contend, it would have made no difference to the approach of Mr Ventouris to his investment, Mr Beltrami submitted that it is inconceivable that, had different advice been given about this in 2007, it would have led to a different outcome.

Mr Beltrami also submitted that, even if Camerata could establish its general wrong advice case and even if it could show that it would not have invested in the Note had it been given the right advice, the claim for damages would still fail because the actual cause of the loss was issuer default as a consequence of the collapse of Lehman Brothers, which was wholly unexpected and unforeseeable. In the light of Andrew Smith J’s finding in [232] that there were no real grounds for doubting the creditworthiness of Lehman Brothers in 2008, a conclusion that there were such grounds in 2007 would be impossible.

As for the case of breach of statutory duty, Mr Beltrami submits that that case is parallel to the case of breach of a common law duty of care or breach of contract and cannot succeed if that case fails. Furthermore, he submits that a claim under section 150 of FSMA is not open to Camerata as an investment company as it is not a “private person” within the meaning of the section and the regulations under FSMA. He relies upon the decision of David Steel J in Titan Steel Wheels v RBS [2010] 2 Lloyd’s Rep 92 that the definition of “private person” excludes corporate entities which carry on business of any kind.

The main point which Mr Tregear QC emphasised in his oral submissions was that the claim in the present proceedings was quite a different claim from that with which Andrew Smith J was concerned. That claim was underpinned by events between March and September 2008, Mr Ventouris’ concerns at that time and what Mr Siakotos-Konstantinidis had said at the meeting on 3 December 2008. He submitted that nothing could be further from the questions raised in the present proceedings, which concern how Mr Ventouris presented himself in 2007 as a new customer in the account opening documentation.

Mr Tregear placed particular emphasis on the fact that the court should hesitate before drawing a conclusion at this interlocutory stage as to how the evidence about mis-selling of the Lehman Brothers Note might emerge at trial. He submitted that the court should certainly not strike out the claim at this stage unless certain that the claim was bound to fail and that given that each wave of mis-selling cases threw up different points, the court should not in effect close off this claim without allowing it to go to trial.

In that context he relied upon a passage at [22] of the judgment of Peter Gibson LJ in Hughes v Richards [2004] EWCA Civ 266; [2004] PNLR 35:

“I start by considering what is the correct approach on a summary application of the nature of Mr. Richards's application at this early stage in the action when the pleadings show significant disputes of fact between the parties going to the existence and scope of the alleged duty of care. The correct approach is not in doubt: the court must be certain that the claim is bound to fail. Unless it is certain, the case is inappropriate for striking out (see Barrett v Enfield London Borough Council[2001] 2 AC 550 at p. 557 per Lord Browne-Wilkinson). Lord Browne-Wilkinson went on to add:

“[I]n an area of the law which was uncertain and developing (such as the circumstances in which a person can be held liable in negligence for the exercise of a statutory duty or power) it is not normally appropriate to strike out. In my judgment it is of great importance that such development should be on the basis of actual facts found at trial not on hypothetical facts assumed (possibly wrongly) to be true for the purpose of the strike out.””

He also emphasised in his oral submissions the claim by Camerata that Credit Suisse was in breach of COB and COBS. If Credit Suisse had properly observed its advisory relationship with Camerata and Mr Siakotos-Konstantinidis had actually read the risk profile and account opening information, it would have realised that Camerata should not enter this investment without being advised of the need to change its risk profile, which it would not have done. Titan Steel Wheels was either distinguishable or wrongly decided and the court should conclude that Camerata had an arguable case for damages for breach of statutory duty under section 150 of FSMA.

It is important to have in mind that the present application is not only to strike out the claim in respect of the Lehman Brothers Note but, in the alternative, for summary judgment dismissing that claim under CPR Part 24 on the basis that it has no real prospect of success. Having said that, of course I am mindful of the fact that, on a summary judgment application against a claimant, the court must consider not only the evidence before it, but the evidence that could reasonably be expected to be available at trial and that the court should be reluctant to decide a case against a claimant without a full trial and a fuller investigation into the facts than is possible on a summary Part 24 application (points v) and vi) in Lewison J’s analysis in Easyair).

Nonetheless, whilst it might be difficult to conclude at this interlocutory stage that the claim in respect of the Lehman Brothers Note was bound to fail, the obvious difficulty which Camerata’s claim faces, is that critical aspects of its pleaded case and thus any evidence called to support that pleaded case would be met by the answer that that case and evidence were inconsistent with the findings already made by Andrew Smith J after a full investigation at trial.

Thus, the pleaded case is that if Credit Suisse, as it should have done, had advised Camerata that the Lehman Brothers Note carried at least a medium level of risk and that there was a realistic chance of loss of the whole or greater part of the investment, so that it was not safe, Camerata would not have made the investment. However, that case immediately runs into the difficulty of the findings Andrew Smith J has made about Mr Ventouris’ attitude to risk and about what happened in 2008. For example, any attempt by Mr Ventouris to say in evidence at a second trial that the investment would not have been made if he had known that it was at least medium risk, flies in the face of the findings in [125] about his attitude to risk, which are not limited to 2008, but describe his attitude from the outset of the relationship with Credit Suisse.

Of particular significance in the present context are the findings: “when he started to deal with Mr Siakotos-Konstantinidis, he had no experience of risky investments, but, in the hope of higher returns, was willing to make investments which he knew might result in some limited loss to capital. To that extent he never limited himself to investments that were ‘absolutely secure’” and “This understandably and reasonably led Siakotos-Konstantinidis to believe that he would contemplate running rather greater risks with his capital (and Camerata's funds) than the documentation completed by Camerata indicated.”

That last finding echoed the earlier finding at [114] that: “Mr. Siakotos-Konstantinidis could reasonably suppose that [Mr Ventouris] understood the risks involved in the investments that he and Camerata made and other products that he discussed, including the risk that the investment would be lost if a counterparty defaulted, and that he would ask about any concerns that he had. He could also reasonably suppose that Mr. Ventouris understood that the enhanced returns that could be earned from structured products broadly reflected the risks associated with them.” Any attempt by Mr Ventouris to contend at a second trial that he would not have invested in the Lehman Brothers Note, if he had known or had explained to him the risks it involved, would be contrary to that finding.

Similarly, if Mr Ventouris sought to say in evidence at any second trial that, had he been advised about the risks inherent in the Lehman Brothers Note such as liquidity risk, price risk and credit risk, he would not have invested in the Note, that evidence would fly in the face of the finding by Andrew Smith J in [239] that if he had been given that warning in 2008, none of it would have come as any surprise to him and it would not have led to his selling the Note.

Any attempt in Mr Ventouris’ evidence at a second trial to contend that his attitude to risk had changed between the date of the investment in August 2007 and the period in 2008 with which the first trial was primarily concerned, and that, by that later date, he had been lured into making more risky investments than he would have made in 2007, would face a number of difficulties. To begin with, no such case is pleaded and, even if it were, it would be contrary to the findings at [114] and [125] of the judgment to which I have just referred, which are describing Mr Ventouris’ attitude to risk and what Mr Siakotos-Konstantinidis was reasonably entitled to assume about that attitude, not just in 2008, but throughout the relationship. Furthermore, any attempt to suggest that his attitude to risk changed and he became more prone to risky investments as he was lured into them, would be belied by the fact that he only invested in the four structured products the subject of these proceedings and there were other such products in which Mr Siakotos-Konstantinidis sought to interest Mr Ventouris to no avail.

The plea about not investing if Camerata had thought that there was a realistic chance of loss of the whole or greater part of the investment is presumably designed to fit in with the finding by Andrew Smith J at [125] that Mr Ventouris “would never seriously have contemplated any investment if he thought that there was any realistic chance that he would lose the whole or the greater part of his investment”. However, the difficulty with any attempt in the present proceedings to contend that there was any such realistic chance of total or almost total loss by investing in the Lehman Brothers Note in 2007 is that it is flatly contrary to the findings made by Andrew Smith J, particularly at [239] of the judgment about the position in 2008.

As I have already indicated, the judgment encompasses findings both as regards the risks associated with the Note and that, even on the most pessimistic advice Camerata was entitled to receive about Lehman Brothers and market conditions, Mr Ventouris would not have sold the Note. If he would not have sold the Note in 2008, it seems to me the position is an a fortiori one in 2007. Market conditions were more favourable then and the problems which Lehman Brothers would face in 2008 were not foreseeable. Any suggestion that Mr Ventouris would not have invested in the Note if given the warnings in 2007 which he said he should have been given in 2008 (but which the learned judge found would not have led him to sell in 2008) is unsustainable.

The only situation in which there would be loss of the whole or greater part of the investment (apart from a catastrophic fall in the value of the dollar which would not be ‘realistic’) was issuer default. So far as that is concerned, the judge’s findings, particularly that at [140] that “Mr Ventouris was acute enough and sufficiently well informed to know that counterparty default could jeopardise an investment, and, if he had been concerned about that, he would, as I conclude, have asked about the position expressly and specifically”, are fatal to any suggestion that Mr Ventouris would have been concerned about issuer default, even if warned of the risk of it before investing in 2007.

Furthermore, the judge’s conclusion at [232], in the context of the position in 2008, that: “Camerata have not shown that there were real grounds for doubting the creditworthiness of Lehman, still less that Mr Siakotos-Konstantinidis should have appreciated that there were and advised Mr Ventouris that there were” seems to me fatal to any suggestion that there was a realistic risk of issuer default by the Lehman Brothers subsidiary, of which Mr Siakotos-Konstantinidis should have warned Mr Ventouris, prior to the investment in August 2007.

I agree with Mr Beltrami that, even if Camerata could bring a claim for damages for breach of statutory duty (which it cannot for the reasons set out below), the claim on the basis of statutory duties under COB and COBS is essentially parallel to the claims in negligence and contract and does not widen the scope of Credit Suisse’s obligations to a significant extent. Furthermore, even if it did, the allegations face the same difficulty as a consequence of the findings of Andrew Smith J as the claims in contract or tort.

For example, the submission by Mr Tregear that Credit Suisse was in breach of COB 5.3.5(1) because it ignored Camerata’s risk profile at the time that it became a customer, by recommending the Lehman Brothers Note which was an unsuitable investment, runs into the difficulty of the findings of Andrew Smith J to which I have referred, particularly the findings at [114] and [125] of the judgment.

Similarly, to the extent that it is being suggested that it was a breach of statutory duty not to tell Camerata that it would have to change its risk profile from low to medium before investing in the Lehman Brothers Note, whilst that may be technically correct, in the light of the findings of Andrew Smith J at [114], [125] and [239] of the judgment, it is difficult to see how, even if Mr Ventouris gave evidence that, if he had been told to change his risk profile, he would have declined to invest in the Lehman Brothers Note, any court at a second trial could ever accept that evidence.

The reality is that, however Camerata’s case on failure by Credit Suisse to advise it properly before the investment is formulated, it would involve Mr Ventouris seeking to give evidence that was contrary to the findings made after a full trial about his knowledge, experience and attitude to risk. I cannot see any court being prepared to accept such evidence at a second trial and Camerata has not advanced any coherent reason why the court should do so. Accordingly, quite apart from the fact that seeking to go behind those findings and contend that they were wrong would be a collateral attack on Andrew Smith J’s judgment and an abuse of process (a matter to which I return below), it does not seem to me that the claim in respect of the Lehman Brothers Note has any real prospect of success.

In addition, the claim for damages for breach of statutory duty under section 150 of FSMA is hopeless because Camerata is not a “private person” within the meaning of the Regulations. Section 150 provides as follows:

“Actions for damages

(1)

A contravention by an authorised person of a rule is actionable at the suit of a private person who suffers loss as a result of the contravention, subject to the defences and other incidents applying to actions for breach of statutory duty.

….

(5)

‘Private person’ has such meaning as may be prescribed.”

The Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001 define ‘private person’ as follows:

“Private person

3.

- (1) In these Regulations, ‘private person’ means -

(a)

any individual, unless he suffers the loss in question in the course of carrying on -

(i)

any regulated activity; or

(ii)

any activity which would be a regulated activity apart from any exclusion made by article 72 of the Regulated Activities Order (overseas persons); and

(b)

any person who is not an individual, unless he suffers the loss in question in the course of carrying on business of any kind;

but does not include a government, a local authority (in the United Kingdom or elsewhere) or an international organisation.”

The meaning of these provisions was considered by David Steel J in Titan Steel Wheels Ltd v Royal Bank of Scotland Plc [2010] EWHC 211 (Comm); [2010] 2 Lloyd’s Rep 92. In that case, the claimant was a manufacturer of steel wheels for the “off-highway” vehicle industry. Its income was predominantly in Euros, whereas much of its expenditure was in sterling, so that it needed to sell Euros and purchase sterling regularly. It entered into a series of foreign exchange and currency transactions with the bank, including structured products such as swap transactions, on which it made losses. It claimed damages against the bank for mis-selling two particular derivative products, relying on section 150 of FSMA.

One of the issues before the court was whether Titan was a ‘private person’. David Steel J set out the rival contentions of the parties at paragraphs 48 and 49 of his judgment:

“48.

The Bank submits that Titan manifestly sustained the loss in the course of carrying out its business. The fact that Titan's business was not confined to or focused on investment business is not to the point. The regulations expressly refer to the carrying on of business of any kind. This expression should be, on the Bank's case, given a wide interpretation.

49.

As regards the question of construction, Titan submits that, in the light of its legislative history, a much narrower interpretation of the regulation is appropriate. In further support of this submission, Titan relies on decisions with regard to different but allegedly analogous legislation and upon matters emerging from Hansard and other travaux preparatoires.”

The learned judge decided that Titan did not satisfy the conditions laid down by the House of Lords in R v Secretary of State for the Environment ex parte Spath Holme Ltd [2001] 2 AC 349, as to when reference to Hansard was permissible. He went on to consider the authorities upon which Titan relied, under what it contended was analogous legislation in which the words “in the course of business” had been given a narrow interpretation. These included R&B Customs Brokers v United Dominions Trust [1988] 1 WLR 321, a decision of the Court of Appeal concerning section 12(1) of the Unfair Contract Terms Act 1977 (“UCTA”). In that case, a freight forwarding business had purchased a car through the defendant finance company and the issue was whether the finance company could exclude an implied term as to fitness for purpose. The Court of Appeal concluded that the claimant had not acted “in the course of business” but had traded as a consumer within the meaning of UCTA.

Having considered those authorities, David Steel J was able to distinguish them and conclude that the phrase “in the course of carrying on business of any kind” was to be given the wide meaning for which the bank contended:

“68.

The overarching difficulty with treating those authorities as determining the meaning of "in the course of carrying on business of any kind" is that the phrase in the FSMA regulations is different from the phrase under consideration in these cases, namely "in the course of a business". It renders the additional words "of any kind" redundant.

69.

There are various additional factors which contradict the submission made by Titan:

i)

The context is very different. The regulations seek to draw a distinction between natural and corporate persons and between regulated activity and other business.

ii)

The authorities cited above are concerned with consumer protection. The protective purpose of the regulations in contrast is to stem "strategic" claims against those conducting regulated activity (all the while preserving recourse to claims in tort or contract).

iii)

The phrase "in the course of business" has been held in a different context to justify construction "at their wide face value": Stevenson v Rogers[1999] QB 1028.

70.

I recognise that corporate entities who sustain losses as a result of the purchase of financial products will usually be in business of some kind. As the 1990 consultation paper states, charities and similar bodies are the more obvious exceptions. It follows that a wide interpretation of Regulation 3(1)(b) would exclude little in terms of liability of a regulated body. But I prefer the view that the words can properly be construed as having their wide meaning as contended for by the Bank.”

In the light of that conclusion that the phrase in the FSMA Regulations had a different and wider meaning than “in the course of business” under UCTA and other statutes, Mr Tregear’s submission in the present case that Camerata should be regarded as a ‘private person’ because it had been common ground before Andrew Smith J that it was a ‘consumer’ for the purposes of UCTA, is a completely false point.

I was equally unimpressed with the other bases upon which Mr Tregear sought to distinguish Titan. Thus, the suggestion that that case was different because investment in foreign exchange was a necessary concomitant of Titan’s trading activity introduces a gloss that is not to be found anywhere in David Steel J’s judgment. It is also an argument which does not assist Camerata on the facts of the present case, since, unlike Titan whose foreign exchange transactions were incidental to its main business, the business of Camerata is investment. Accordingly, even on Titan’s narrow interpretation of the statutory provisions which the learned judge rejected, Camerata would have been excluded from the definition of ‘private person’.

Mr Tregear sought to rely upon the fact that Camerata was owned by a trust which held assets for a single beneficiary, Mr Ventouris. I do not see how that could conceivably affect the fact that Camerata is carrying on business as an investment company. As I pointed out during the course of argument, if the trust owned the shipowning or ship management companies which operate and manage the fleet, it would not mean that those companies were no longer carrying on business as shipowners or managers. The position of Camerata as an investment company is no different.

There are no grounds for distinguishing Titan from the present case or for any suggestion that it is wrongly decided. It follows that Camerata is not a ‘private person’ and cannot maintain a cause of action under section 150 of FSMA.

For these reasons I do not consider that Camerata’s case that, if given the right advice about the Lehman Brothers Note it would not have entered the transaction, is sustainable. Whether put forward in contract, tort or statutory duty, I do not consider that the claim in respect of the Lehman Brothers Note has any real prospect of success.

In those circumstances, it is not strictly necessary to consider Credit Suisse’s contentions based upon SAAMCO, but since the point was argued I will deal with it briefly. I agree with Mr Tregear that the pleaded case here is not simply of a duty to supply information, limiting any damages recoverable to the consequences of the information being wrong. Rather, the pleaded case is that Credit Suisse gave negligent advice and that, had the right advice been given, Camerata would not have entered the transaction. In those circumstances, Camerata contends that it is entitled to recover the whole amount of the investment.

Mr Beltrami submits that, even if Camerata could run a case that it would not have entered the transaction if given the right advice, it is clear from Lord Hoffmann’s speech in SAAMCO that Camerata can still only recover its foreseeable loss. He relies on this passage in the speech at [1997] AC 191, 214E-F:

“The principle thus stated distinguishes between a duty to provide information for the purpose of enabling someone else to decide upon a course of action and a duty to advise someone as to what course of action he should take. If the duty is to advise whether or not a course of action should be taken, the adviser must take reasonable care to consider all the potential consequences of that course of action. If he is negligent, he will therefore be responsible for all the foreseeable loss which is a consequence of that course of action having been taken. If his duty is only to supply information, he must take reasonable care to ensure that the information is correct and, if he is negligent, will be responsible for all the foreseeable consequences of the information being wrong.”

He submits that the loss here was in fact caused by the bankruptcy of Lehman Brothers and the consequent issuer default which, at the time the relevant advice was given in July 2007, was completely unforeseeable, whereas, but for that issuer default, Camerata would have made a handsome profit on autoredemption at the next observation date in January 2009. It seems to me that, in principle, this argument is correct. Were it not for the unforeseeable bankruptcy of Lehman Brothers, Credit Suisse would have had a complete answer to Camerata’s case that, but for wrong advice, it would not have entered the transaction. That answer would have been that the transaction had in fact been profitable, so that any negligence or breach of contract had not in fact caused Camerata any loss. In other words, the only reason why Camerata has suffered any loss at all, as opposed to making a substantial profit, is because of the collapse of Lehman Brothers, which was unforeseeable.

In those circumstances, it seems to me that Credit Suisse is right that that is another reason why Camerata’s claim in this action has no real prospect of success. I can see nothing in the decision of the Court of Appeal in Portman Building Society v Bevan Ashford [2000] 1 EGLR 81, upon which Mr Tregear sought to rely, which could lead to a different conclusion. That case was not concerned at all with whether the particular loss was foreseeable. Accordingly, Credit Suisse is entitled to summary judgment dismissing Camerata’s claim in respect of the Lehman Brothers Note.

Since I have decided that Camerata’s claim in respect of the Lehman Brothers Note falls to be dismissed because it has no real prospect of success, it is not strictly necessary to consider the other limb of Credit Suisse’s application, that this claim is an abuse of process. However, since the point was fully argued, I will deal with it.

The so-called rule in Henderson v Henderson (1843) 3 Hare 100 received its modern exposition in the decision of the House of Lords in Johnson v Gore Wood [2002] 2 AC 1. The leading speech was that of Lord Bingham of Cornhill. Having analysed the earlier authorities, he set out the principles at 30H-31F:

“It may very well be, as has been convincingly argued (Watt, "The Danger and Deceit of the Rule in Henderson v. Henderson: A new approach to successive civil actions arising from the same factual matter," 19 Civil Justice Quarterly, (July 2000), page 287), that what is now taken to be the rule in Henderson v. Henderson, has diverged from the ruling which Wigram V.-C. made, which was addressed to res judicata. But Henderson v. Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in early proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not. Thus while I would accept that lack of funds would not ordinarily excuse a failure to raise in earlier proceedings an issue which could and should have been raised then, I would not regard it as necessarily irrelevant, particularly if it appears that the lack of funds has been caused by the party against whom it is sought to claim. While the result may often be the same, it is in my view preferable to ask whether in all the circumstances a party's conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask whether the abuse is excused or justified by special circumstances. Properly applied, and whatever the legitimacy of its descent, the rule has in my view a valuable part to play in protecting the interests of justice.”

Lord Millett summarised the Henderson v Henderson principle as follows at 58C-59E:

“As the passages which I have emphasised indicate, Sir James Wigram did not consider that he was laying down a new principle, but rather that he was explaining the true extent of the existing plea of res judicata. Thus he was careful to limit what he was saying to cases which had proceeded to judgment, and not, as in the present case, to an out of court settlement. Later decisions have doubted the correctness of treating the principle as an application of the doctrine of res judicata, while describing it as an extension of the doctrine or analogous to it. In Barrow v. Bankside Members Agency Ltd. [1996] 1 W.L.R. 257, Sir Thomas Bingham M.R. explained that it is not based on the doctrine in a narrow sense, nor on the strict doctrines of issue or cause of action estoppel. As May L.J. observed in Manson v. Vooght[1999] B.P.I.R. 376 at p. 387, it is not concerned with cases where a court has decided the matter, but rather cases where the court has not decided the matter. But these various defences are all designed to serve the same purpose: to bring finality to litigation and avoid the oppression of subjecting a defendant unnecessarily to successive actions. While the exact relationship between the principle expounded by Sir James Wigram and the defences of res judicata and cause of action and issue estoppelmay be obscure, I am inclined to regard it as primarily an ancillary and salutary principle necessary to protect the integrity of those defences and prevent them from being deliberately or inadvertently circumvented.”

Mr Beltrami also relied upon the summary of the principles to be derived from Johnson v Gore Wood in the judgment of Clarke LJ (as he then was) in Dexter v Vieland-Boddy [2003] EWCA Civ 14 at [49] (cited with approval by a subsequent Court of Appeal in Aldi Stores Ltd v WSP Group plc [2007] EWCA Civ 1260; [2008] 1 WLR 748):

“i)

Where A has brought an action against B, a later action against B or C may be struck out where the second action is an abuse of process.

ii)

A later action against B is much more likely to be held to be an abuse of process than a later action against C.

iii)

The burden of establishing abuse of process is on B or C or as the case may be.

iv)

It is wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive.

v)

The question in every case is whether, applying a broad merits based approach, A's conduct is in all the circumstances an abuse of process.

vi)

The court will rarely find that the later action is an abuse of process unless the later action involves unjust harassment or oppression of B or C.”

The main thrust of Mr Beltrami’s submissions as to why the claim in relation to the Lehman Brothers Note was an abuse of process was that this was a claim which could and should have been brought in the first action. He submitted that, in the absence of special circumstances (of which there were none in the present case), a party cannot bring in a second action a claim against the same defendant which he could and should have brought in the first action. In support of that proposition, he relied upon a passage in the judgment of Sir Thomas Bingham MR in Barrow v Bankside [1996] 1 WLR 257 at 260A-C:

“The rule in Henderson v. Henderson (1843) 3 Hare 100 is very well known. It requires the parties, when a matter becomes the subject of litigation between them in a court of competent jurisdiction, to bring their whole case before the court so that all aspects of it may be finally decided (subject, of course, to any appeal) once and for all. In the absence of special circumstances, the parties cannot return to the court to advance arguments, claims or defences which they could have put forward for decision on the first occasion but failed to raise. The rule is not based on the doctrine of res judicata in a narrow sense, nor even on any strict doctrine of issue or cause of action estoppel. It is a rule of public policy based on the desirability, in the general interest as well as that of the parties themselves, that litigation should not drag on for ever and that a defendant should not be oppressed by successive suits when one would do. That is the abuse at which the rule is directed.”

Lord Bingham cited this passage with apparent approval in his own speech in Johnson v Gore Wood at 27D-H and then added:

“At page 263, the rule was described as a salutary one, and the court suggested that its application should not be circumscribed by unnecessarily restrictive rules.”

In the light of that statement, coupled with the later passage in his speech in Johnson v Gore Wood at 31A-F which I have already cited above, I agree with Mr Tregear that it would be wrong to place too much reliance on that passage from Barrow v Bankside as establishing some sort of rule or principle that, if a claim could have been brought in the first action, special circumstances must be shown, otherwise bringing the claim in a second action will be an abuse of process. As Clarke LJ said in Dexter: “the question in every case is whether, applying a broad, merits based approach, [the claimant’s] conduct is in all the circumstances an abuse of process”.

Mr Beltrami made the perfectly valid point that, in the pre-action correspondence in January 2009, the allegation of unsuitability of the Lehman Brothers Note as an investment was limited to the risk of investment with Lehman Brothers (i.e. the risk of issuer default). As Mr Beltrami also pointed out, by the time of the letter of 17 August 2009, Camerata (or at least its solicitors) appeared to have recognised that this was not a sustainable argument, because it was common ground that, but for the bankruptcy in September 2008, there would have been autoredemption at a handsome profit in January 2009, albeit that the letter phrased the point in terms of the suitability of the investment in the Lehman Brothers Note on the advice of Credit Suisse not being “relevant”.

The only reservation made was as to the suitability of the other three structured products and it was a proposed amendment to allege the unsuitability of those three products which was the subject of the unsuccessful application to amend heard by HHJ Mackie QC in October 2010. There was no intimation at the time of that application of any intention of raising, either in those proceedings or subsequent proceedings, any allegation about the suitability of the Lehman Brothers Note at the time of the investment.

That allegation was not made until the proposed draft Re-amended Particulars of Claim were sent to Allen & Overy under cover of the letter from Thomas Cooper of 8 December 2010. I agree with Mr Beltrami that Camerata has not put forward any explanation (either in Mr Green’s witness statement in opposition to this application or otherwise) either as to what precipitated the apparent change of mind between August 2009 and December 2010 or as to why the proposed re-amendment was sent so late, only six weeks before trial. Having said all that, there was nothing in any sense abusive in Camerata seeking to raise that allegation, albeit very late, in the first action.

However, it seems to me that Camerata is open to criticism for not pursuing an application for permission to amend after receipt of Allen & Overy’s letter of 14 December 2010 opposing the proposed amendment. Had there been such an application, the merits of the claim now brought in respect of the Lehman Brothers Note would have been debated at a hearing either in advance of or at the beginning of the trial before Andrew Smith J. In my judgment, the court might well have concluded that the claim was unsustainable because the loss suffered was unforeseeable (a point to which Allen & Overy seem to have been alive from [1.3] of their letter) and refused the amendment on that basis.

If, contrary to that view, the court had concluded that the claim in respect of the Lehman Brothers Note was arguable, it seems to me likely that, since there was an obvious overlap between the issues raised by that proposed amendment and the issues for determination in the first action (such as, for example, the whole question of Mr Ventouris’ attitude to risk), there would have been some reasoned debate at any hearing to deal with the proposed amendment about that overlap. Any such debate would have included whether, despite Credit Suisse’s protests to the contrary, the proposed amendment should be allowed, on terms that there should be an adjournment of the trial at Camerata’s expense. Accordingly, if Camerata had pursued an application for permission to amend, as it should have done, I suspect that the present difficulties would have been avoided.

Camerata did not seek permission to amend. Instead on 31 December 2010, it sent Credit Suisse the “unissued” Particulars of Claim which were essentially a forerunner of the pleading in the present action, thereby indicating an intention to pursue the suitability claim in respect of the Lehman Brothers Note with the suitability claims in respect of the other products in a second action. However, it does not follow that the election not to apply for leave to amend, but to pursue the suitability claim in respect of the Lehman Brothers Note in a second action, inevitably makes the bringing of that claim in the second action an abuse of process.

This is not a case of a claimant holding back a second claim against a defendant unbeknownst to that defendant and then commencing the second action after the conclusion of the first one. Credit Suisse was aware from the end of December 2010 that Camerata intended to bring suitability claims in a separate action, whatever Credit Suisse’s opinion of the merits of that claim in respect of the Lehman Brothers Note. Mr Beltrami raised that issue specifically with Andrew Smith J, in requesting him not to trespass more than necessary on territory which might be for a second action.

However, if Credit Suisse had been concerned that a claim in respect of the Lehman Brothers Note might cause it oppression or vexation, it could and should have brought the matter before the court to make a case management decision as to whether the claim about the suitability of the Lehman Brothers Note was determined in the first action. Credit Suisse did not do so, no doubt because it did not want an adjournment of the trial, but not having done so, it is difficult for Credit Suisse to demonstrate any oppression or vexation merely by the bringing of the claim in the second action.

The position is analogous to that with which the Court of Appeal was concerned in Aldi Stores v WSP Group plc [2007] EWCA Civ 1260; [2008] 1 WLR 748. As Thomas LJ made clear at [21], [25] and [29]-[31], the correct approach in such circumstances is to bring the matter before the court for an appropriate case management decision; see also per Longmore LJ at [42]. Accordingly, it seems to me on balance that the bringing of the suitability claim in respect of the Lehman Brothers Note in the second action is not in itself an abuse of process.

More problematic for Camerata is the effect of the findings made by Andrew Smith J in the first action. I have already set out in detail earlier in the judgment those findings which present major obstacles to the claim in respect of the Lehman Brothers Note. If, in the present proceedings, Camerata were to seek to go behind those findings, for example by calling evidence which contradicted them, it seems to me that would amount to a collateral attack on those findings which would be an abuse of process.

However, it is precisely because Camerata cannot go behind those findings that the claim in respect of the Lehman Brothers Note has no real prospect of success. Accordingly, on analysis, any potential abuse of process does not provide Credit Suisse with a distinct ground for impugning the claim, separate from its case on the summary judgment application, on which I have already held Credit Suisse succeeds.

For the reasons set out above, the claim in respect of the Lehman Brothers Note has no real prospect of success and Credit Suisse is entitled to summary judgment against Camerata dismissing that claim.