“Salesman's Opinion” Does Not Create Duty: JP Morgan Chase V Springwell Navigation Corp

Following the Court of Appeal's ruling last year in

IFE v Goldman Sachs, Gloster J's detailed

recent judgment in JP Morgan Chase Bank v Springwell

Navigation Corporation [2008] EWHC 1186

(Comm) has affirmed the principle of caveat

emptor in the capital markets. The ruling indicates that

"experienced investors" in the bond markets will face

an uphill battle if they wish to argue that banks - via their

salesmen - owe them any advisory duty or responsibility for

investment decisions, where this would be inconsistent with the

disclaimers and other terms expressly set out in the deal

documentation.

Background

Springwell Navigation Corporation was the investment vehicle

of the Polemis family, the owner of a large Greek shipping

fleet. During the 1990s, Springwell invested heavily in

emerging markets bonds and related instruments. The

investments, whose face value exceeded US$700 million, were

acquired through JP Morgan Chase ("Chase").

Much of the portfolio was invested in Russia and other CIS

states and, following the 1998 Russian default, heavy losses

were incurred. Proceedings seeking a declaration of no

liability were commenced by Chase in 2001, with Springwell

counterclaiming damages soon after - and hence becoming the

effective claimant.

Springwell made a wide range of claims against Chase. Its

primary claims, based on either breach of contract or negligent

misstatement, were based on the contention that Chase owed

Springwell a duty of care to advise on the overall balance of

Springwell's portfolio and the suitability of new

investments. This alleged advisory relationship was said to

have arisen out of the regular discussions about potential

investments which had taken place in 1990- 1998 between

Adamandios Polemis ("AP"), who was responsible for

investment decisions at Springwell, and Justin Atkinson

("JA"), a debt security trader at Chase. In the

alternative, Springwell also claimed against Chase for

misrepresentation and breach of fiduciary duty.

In its defence Chase relied, amongst other things, on the

numerous disclaimers and limitations of liability contained in

the contractual documentation relating to the transactions,

including: a Master Forward Agreement, a Global Master

Repurchase Agreement, two letters setting out terms for

"Dealings in Developing Countries Securities", and

also the terms of many of the instruments themselves, along

with various associated term sheets and confirms.

Breach of contract/negligent misstatement

Springwell claimed that Chase owed contractual and tortious

duties to advise it as to the appropriateness of investments

and the overall composition of its portfolio. Springwell

claimed that the opinions and recommendations expressed by JA

to AP between 1990 and 1998 constituted ongoing financial

advice from Chase, giving rise to a duty of care in contract or

tort. Chase denied this, saying that any of Mr Atkinson's

"recommendations" merely constituted marketing, which

did not therefore give rise to any such duty.

It was clear on the evidence that the relationship between

Chase and Springwell extended beyond a simple "execution

only" relationship. JA and AP had had regular discussions

about the merits of various investment products, and JA had

clearly had an influence on Springwell's general overall

investment strategy.

Mrs Justice Gloster accepted that JA was going beyond simple

"execution only" transactions, and that this may have

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