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Clarke Willmott has emerged victorious in the Court of Appeal (CoA) on behalf of a client who lost nearly £200,000 after HSBC advised him to invest in a product which was later closed after the collapse of Lehman Brothers.
Adrian Rubenstein, who was represented by the firm, invested £1.25m in a bond managed by AIG Life after selling his Highgate house in 2005, hoping to find a safe place to keep the money while he and his wife searched for a new home. The investment was made after advice from HSBC financial advisor Matthew Marsden, who told Rubenstein that his investment was as safe as putting the money in a cash deposit.
Originally Rubenstein hoped that the investment would be for a short period of around a year, but he and his wife were unable to find a new home.
However when Lehman Brothers collapsed in September 2008, sparking the global financial crisis, AIG closed the bond and Rubenstein lost around £180,000. He complained to the bank that he had been missold the investment, and brought a claim for breach of statutory duty.
Clarke Willmott partner Robert Morfee instructed Guildhall Chambers’ Adrian Palmer QC to lead the claim. DG Solicitors Mike Weygang
Mike Weygang of DG Solicitors, HSBC’s corporate debt recovery arm, instructed Quadrant Chambers’ Stephen Cogley QC for the bank.
At first instance His Honour Judge Havelock-Allan QC, sitting as a high court judge in the mercantile court of the Bristol District Registry, found that HSBC was negligent and in breach of statutory duty, and that Rubenstein had relied on its advice. However he said that the losses sustained by Rubenstein were not due to these factors but instead were caused by unforeseeable market factors. Rubenstein was awarded nominal damages.
In the CoA, Lords Justice Rix, Lloyd and Moore-Bick reversed the ruling. Giving the leading judgment, Rix LJ said that Rubenstein had been misled as to the risk he was taking in investing in the bond.
Rix LJ referred to a Financial Services Ombudsman (FSO) case decided after the Rubenstein first instance judgment, where the ombudsman disagreed with Havelock-Allan HHJ.
”He was pressed with the decision of the judge in this case and with the submission that the losses were unforeseeable, but he commented that investment is inherently unforeseeable and that extreme market conditions, including the irrational behaviour of other investors, are an established risk of all investments.,” Rix LJ said.
The FSA had also come to the same conclusion in a Final Notice issued against Coutts & Co in November 2011.
”It is of some comfort to observe that the FOS and FSA, with all their experience in this field, have for their part come to these conclusions,” added Rix LJ.
Morfee, who led the case for Rubenstein, said: “This case puts law back to where we all thought it was before. The first instance decision really threw a spanner in the works as far as claimants were concerned.”
The legal lineup:
For the appellant, Adrian Rubenstein: Clarke Willmott partner Robert Morfee, instructing Guildhall Chambers’ Adrian Palmer QC (appeal only) and John Virgo
For the respondent, HSBC: Mike Weygang of DG Solicitors, instructing Quadrant Chambers’ Stephen Cogley QC and Claudia Wilmot-Smith