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England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> O'Hare & Ors v Coutts & Co  EWHC 2224 (QB) (09 September 2016)
Cite as:  EWHC 2224 (QB)
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| Mr Les O'Hare & Mrs Janet O'Hare
|- and -
|Coutts & Co.
for the Claimant
Tamara Oppenheimer & Giles Robertson (instructed by Dentons LLP)
for the Defendant
Hearing dates: 13-15, 18-22, 25-26 July 2016
Crown Copyright ©
Mr Justice Kerr:
Mr Shone's Absence
(1) A party cannot be expected to call a material witness who is not willing and co-operative, by using a witness summons. The court cannot assume that Coutts is aware what Mr Shone would have said, if he had been called by Coutts.
(2) The court cannot assume that the witness's reason for non-cooperation is that his evidence is unreliable. The only evidence before the court is that Mr Shone has given a reason for not giving evidence, which is not that his evidence is unreliable.
(3) In a commercial context, contemporary written evidence should normally be treated as more reliable than self-serving oral testimony, as Leggatt J pointed out in Gestmin v. Crédit Suisse  EWHC 3560 (Comm), at paragraph 22.
(4) "[I]f the witness is an unknown quantity, because he does not wish to assist voluntarily and would require to be summonsed, ex hypothesi nothing can be concluded from that about the evidence he would have given had he been called" (Coutts' closing skeleton).
(5) If Mr Shone were to be called under compulsion of law, it is no more incumbent on Coutts to call him than the O'Hares. Indeed, they did call his counterpart and successor during the period from 2008 onwards, Mr Raymond Eugeni who like Mr Shone is a former Coutts private banker.
(6) Although privilege was not waived and Coutts was aware Mr Shone was a material witness, this is not a case like other leading cases where the absent witness is co-operating with or even controlling the party choosing not to call him (cf. Djibouti v. Boreh  EWHC 405 (Comm) per Flaux J at paras 55-56; Prest v. Petrodel Resources Ltd  2 AC 415).
(7) This was a case in which, to borrow Lord Lowry's words in R. v. Inland Revenue Commissioners and another  2 AC 283, at 300: "the silent party's failure to give evidence (or to give the necessary evidence) can be credibly explained …. [thus] the effect of his silence in favour of the other party, may be either reduced or nullified".
(8) The most that can be said is that court can enquire whether a party can reasonably be expected to call the absent witness who might be expected to have material evidence to give on an issue in an action: cf. the first of Brooke LJ's four propositions in Wisniewski v Central Manchester Health Authority  PIQR 324, at 340). I note that these four propositions were cited and applied in Jaffray v. Society of Lloyds  EWCA Civ 1101; (2002) 146 S.J.L.B. 214, per Waller LJ (judgment of the court) at paragraph 407.
(9) Mr O'Hare's evidence was unreliable and at times evasive. It was not (in Ms Oppenheimer's words) "open, honest, credible and consistent", virtues claimed for his evidence by Mr O'Doherty, for the O'Hares. She said he had been caught out in mistakes, had to retract certain statements and sought to downplay his appetite for investment risk; and that his evidence was "not always candid", for example about recent contact with Mr Shone which he said he rejected.
(1) Mr Shone's absence was particularly telling because Coutts' witnesses lacked any first hand knowledge of his involvement and produced documents prepared by him with which they were often not familiar, about meetings they had not attended, while Mr Shone had.
(2) Mr Shone met Mr O'Hare and spoke to him by telephone many times, often without documenting these discussions; no other Coutts witness was able to contradict Mr O'Hare's account which, moreover, was honest, frank and reliable in its essential content.
(3) It was not established that Coutts had been unable to obtain a written statement from Mr Shone; their advisers had not denied contacting him. And Coutts had evidently decided not to prepare a witness summary or a hearsay notice stating, for example, that his notes of meetings and conversations (such as they were) were full, accurate and reliable.
(4) It was reasonable and practicable for Coutts to have called him; he was a UK resident still working in the financial services industry. Coutts' unspoken objective must have been to frustrate an application for permission to cross-examine him, and to prevent a proper evaluation of his documentary evidence.
(5) It was unreal to expect the O'Hares to call him as a witness; they had made allegations of serious professional negligence against him. The party reasonably expected to call him was the party with an interest in defending his exercise of professional skill and care. The O'Hares had no need to call him, since without him their account was uncontradicted on crucial points in the history.
(6) The position of Mr Eugeni was different and the comparison was not of like with like: he is, unusually, working with and for Mr O'Hare in current business ventures; while Mr Shone had left Coutts, without any falling out, to join another financial services provider, Goldman Sachs.
(7) Coutts has had no difficulty calling as witnesses Ms Amy Barlow, Mr Andrew Savill and Mr Richard Carney, all like Mr Shone ex-employees of Coutts or its parent, Royal Bank of Scotland (RBS). It has clearly chosen not to exercise its right (if he was unwilling to attend voluntarily) to require Mr Shone to do so.
(8) The words of HHJ Saffman (sitting as a judge of the High Court) in Webb v. Liverpool Womens' NHS Foundation Trust  EWHC 133 (QB), at paragraph 102, are apt here, says Mr O'Doherty:"The fact that a witness no longer works for a party does not in itself strike me as being a particularly good reason for failure to produce evidence from such a witness. It may of course make it more difficult to trace such a witness and/or to secure their cooperation but I have no evidence that either of those issues was a problem."
(9) The reason Mr Shone gave Mr Williams for not giving evidence was neither credible nor first hand; the court has evidence that he gave that reason to Mr Williams, but not that it was the true or only reason why he has chosen not to defend his professional reputation in these proceedings.
"All documents contained in bundles which have been agreed for use at the hearing shall be admissible at that hearing as evidence of their contents, unless (a) the court orders otherwise, or (b) a party gives written notice of objection to the admissibility of particular documents."
Facts: Narrative (Reprise)
"…. we will work with you to understand your circumstances, objectives and requirements to enable us to develop an investment strategy for you. We will provide you with our advice and recommendations in writing at such time or times as we consider appropriate or as agreed between us. There will be no restriction on the types of investment about which we can advise you (including unregulated collective investment schemes, whether or not operated by members of the Coutts Group), except that these will not include derivatives or warrants. In the case of some investments, these will not be readily realisable, so that there may not be a recognised market for them, and it may therefore be difficult to deal in them or to obtain reliable information about their value or the extent of the risks to which they are exposed."
(1) £4 million invested in NGCO, purchased on 18 December 2007;
(2) £2.125 million invested in Novus Natural Resources Strategy (NNRS) purchased on 18 December 2007 and 26 March 2008; and
(3) £2 million invested in NGEM, purchased on 18 December 2007.
"Another item was just in regard to his complaint about [OCR]. We had agreed to provide him with a refund of $250,000. This was not to be paid as a refund but simply be recouped by way of a reduction in fees over a certain period of time until the amount was paid off. While Les had accepted this initially, he offered an alternate plan whereby he would invest the £11 million that he currently holds in [the CMI bond] into a TPMS with Colin McKenzie [of Coutts] and instead of us charging him the agreed ½% we would charge him a full 1% but in return we would credit his account immediately with $250,000 as opposed to clawing it back over a two to three year period initially. …."
"We had discounted the AMC [annual management charge] for TPMS to 0.50% per annum which would address $82k of this per annum. At this rate it would take 3 years to realise this sum though. We had therefore agreed to reduce the upfront charge on credit facilities. I have intimated to Les that the usual commission on these facilities would be 1% and therefore a further circa £30k is being allocated towards the deficit we are to make up. This along with the waived fee for the US Mortgage, TPMS discount and fee for the Everton Developments Loan that was never drawn (£10k) means that total discounts in 2009 have totalled £96k."
Mr Eugeni does not say there that he communicated to Mr O'Hare the attribution of those amounts towards the bestowing of the $250,000 benefit, as analysed in that passage.
"Autopilot reverts to cash when indicators are bearish whereas Navigator takes a directional bet [i.e. on the direction of market movement]. This is deemed as being more aggressive…. ."
"I felt that the [O'Hares'] investments were properly balanced and in the right place in terms of where they wanted to be. They were capital protected, locked in only in the medium term and had a moderate rate of return."
Q. But I think what you said this morning, just a moment ago, is that this 100 per cent discount was linked to the 250,000 goodwill gesture. Is that right or is that wrong?
A. I believe it is. However, you can see later in the statement some of the comments that I make around it. It's not normal practice to have discounted at this level and this aggressively, but again, that was a conversation between Les and Ray, and Ray was very much in charge of working with this to make sure that those refunds were given.
Q. Well, let's not shovel all the blame on to Ray. We see clearly from your email that you are involved in the negotiation of the compromise, the goodwill gesture. You must have known whether or not this 100 per cent discount was linked to the goodwill gesture or not?
A. So as I said yesterday, this was about rebuilding the relationship with Mr O'Hare from Mr Eugeni, we've given him the licence to look at discounting fees up to USD 250,000, he has taken that forward and, looking at this, this seems out of kilter with what we would normally have done and relates to the overall TPMS portfolio, which was the starting point of those discounts, and that's shown there from the narrative in the paragraph 6.
The Issues: Reasoning and Conclusions
(1) whether the 2007-8 investments were suitable, or whether it was negligent to recommend them;
(2) whether Coutts undertook a binding legal obligation to resolve the complaint about OCR, and if so what it was and whether it was fully or partly performed;
(3) whether the 2010 investments were suitable, or whether it was negligent to recommend them; and
(4) if the issue arises, the measure of damages and the quantum of damage suffered, if any.
"in accordance with a practice accepted as proper by a responsible body of … men skilled in that particular art."
(McNair J's address to the jury in Bolam at 587, omitting the word "medical").
"to take reasonable care to ensure that the patient is aware of any material risks involved in any recommended treatment, and of any reasonable alternative or variant treatments" (ibid. at paragraph 82).
The test of materiality is:
"whether, in the circumstances of the particular case, a reasonable person in the patient's position would be likely to attach significance to the risk, or the doctor is or should be aware that the particular patient would be likely to attach significance to it" (ibid.).
"… the statutory purpose of the COB regime pursuant to FSMA is to afford a measure of carefully balanced consumer protection to the 'private person'. That purpose is elucidated not only by the content of the COB rules themselves, but also by s.2 of FSMA, which speaks of 'the protection of consumers', i.e. 'securing the appropriate degree of protection for consumers' (s.2(2)(c) and s.5(1)) as among the regulatory objectives. The rules to be created by the regulatory authority are to be informed by a proper regard for 'the differing degrees of risk involved in different kinds of investment … the need that consumers may have for advice and accurate information … the general principle that consumers should take responsibility for their decisions' (see s.5(2)). …. These basic principles and purposes are reflected in the imposition under the COB rules of onerous duties (albeit in a well conducted operation these should not be difficult to achieve and they are couched for the most part in terms of 'reasonable care') designed to ensure that the investment adviser understands his client and his client understands risk.
"Those were cases in the common law of negligence. I would accept that where as here the issue arises in the context of statutory duty, it is possible that the statutory requirements may to a greater or lesser extent mould their own solutions, so as to give greater weight to requirements of process. Nevertheless, what is aimed at is the provision of suitable advice (COB 5.3.5) or suitable lending arrangements (COB 7.9.3), and not merely suitable advice or lending arrangements in the abstract, but suitable advice or arrangements for the client and his proposed investments. The complex rules are an attempt to hold the balance between the parties fairly, giving weight both for the need to protect investors from ignorance or even from themselves and for the need to permit ultimate autonomy to the properly informed investor to make and take responsibility for his own mistakes (see FSMA section 5(2)). Where it is ultimately to be found, giving all due weight to the statutory requirements, both of form and substance, that personal recommendations or lending arrangements are suitable, they cannot be rendered unsuitable by some incidental and essentially immaterial failure of mere form."
Were the 2007-8 investments suitable, or was it negligent to recommend them?
The settlement agreement issues: did Coutts undertake a binding legal obligation, and if so what was it, and was it fully or partly performed?
Were the 2010 investments suitable, or was it negligent to recommend them?
The measure of damages and the quantum of damage suffered