Losses From Market Turmoil Were The Result Of Bank's Negligence

Rubenstein v HSBC Bank plc [2012] EWCA Civ 1184

The High Court decision was reported in Bulletin 79 of September 2011 and mainly concerned the finding of negligence. Mr Rubenstein had sold his house and was looking to place his money somewhere safe until he could find a new house, which he thought would take about 12 months. HSBC advised him to invest in an insurance bond with AIG Life which it told Mr Rubenstein was as safe as cash. Mr Rubenstein did not succeed in finding a house quickly and the money stayed there for three years. When turmoil hit the financial markets, Mr Rubenstein sought to withdraw his money and suffered a loss. He sued HSBC for negligence.

The judge held that HSBC was guilty of negligence, but that it was not liable for damages because the market turmoil was unforeseeable and too remote. Mr Rubenstein appealed on the question of damages. HSBC cross-appealed on the finding of negligence (appeal dismissed) and also argued that its duty to advise a suitable investment extended only for a year, so Mr Rubenstein's loss after three years fell outside that duty.

The Court of Appeal allowed Mr Rubenstein's appeal and dismissed the cross-appeal. The judge had been wrong in selecting market turmoil as the essential cause of Mr Rubenstein's loss. What connected the erroneous advice and the loss was the combination of advising Mr Rubenstein to invest in a fund which was subject to market losses, while at the same...