Caveat Emptor For Sophisticated Investors

Springwell Navigation Corp v JPMorgan Chase Bank and Others [2010] EWCA Civ 1221

Springwell was an investment vehicle for a group of companies owned by the Polemis shipping family. It was a sophisticated investor. It invested in notes issued by Chase, but referenced to underlying Russian bonds. As a result of the Russian financial crisis in 1998, the bonds became far less valuable. Springwell claimed over US$700m in damages from Chase, based on misrepresentation and other grounds. Its claim failed at first instance (Gloster J). Springwell appealed the decision on misrepresentation.

The Court of Appeal dismissed the appeal. It rejected Springwell's arguments as follows:

No misrepresentations were made. The context was key. Although a Chase employee had referred to the risk profile of the notes as being conservative, that remark should be considered in the context of a particular investor and market. Springwell was a sophisticated investor who understood the significant risks attached to the notes. Similarly, comments that the notes were liquid had to be seen in their context and Springwell would have understood that the notes could not be regarded as liquid in the same way as US treasury bonds. Even if misrepresentations had been made, they were not actionable. Chase's employee was merely giving his opinions rather than any statement of fact. The nature of the relationship between Chase and Springwell meant that there was no implied statement of fact that the employee had reasonable grounds for holding his opinion. The contractual...