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 documents in any event prevented Springwell from denying the acknowledgement in the entire agreement clause that no representation or warranty had been made by Chase in relation to the purchase of the notes. It was therefore contractually estopped from asserting that any action or representation had been made.
- The non-reliance clause did satisfy the test of reasonableness under UCTA. Some provisions described the terms on which Springwell was contracting with Chase and therefore fell outside the scope of UCTA. As regards the other terms, they were reasonable bearing in mind that Springwell was a sophisticated investor who was aware of the risks involved.
A clean sweep to Chase, therefore, on the question of negligence. This will give comfort to banks. Sophisticated investors, on the other hand, may start asking more questions and ensuring that contractually they can rely on specific assertions. This decision would probably have been different if the investor had not been sophisticated.
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