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You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> O'Hare & Ors v Coutts & Co [2016] EWHC 2224 (QB) (09 September 2016) URL: https://www.bailii.org/ew/cases/EWHC/QB/2016/2224.html Cite as: [2016] EWHC 2224 (QB) |
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
Mr Les  O'Hare & Mrs Janet O'Hare | Claimants |
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| - and - |
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| Coutts & Co. |
Defendant |
____________________
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:
Introduction
O'Hare, or the O'Hares) on the advice of the defendant (Coutts) in 2007, 2008 and 2010. The O'Hares also claim £250,000 under an alleged agreement between them and Coutts to settle a complaint by Mr O'Hare about the manner in which another Coutts product was sold to them.
O'Hares' accounts, as a gesture of goodwill.
O'Hares with certain sums by way of discounts, to which the O'Hares were not otherwise entitled (the settlement agreement issues).
O'Hares as a goodwill gesture. The O'Hares said the amounts shown in the table were not good evidence of performance of obligations under the settlement agreement.
O'Hares accept that alleged breaches of contract prior to 28 November 2007 did indeed pre-date the claim by more than six years, but says this makes no practical difference, since the corresponding claims in tort were brought in time.
O'Hares did not suggest it adds anything material to the other causes of action, and I need say no more about it.
O'Hares said in oral evidence that he no longer supported it.
O'Hares "failed to mitigate their losses, inter alia, by terminating the Autopilot investment 2 years before the end of its term", resulting in a loss of £52,000 of the £8 million invested, which would otherwise have been avoided. This contention was not abandoned but was not developed in submissions or put to the O'Hares.
Facts: Narrative
O'Hare is an experienced businessman with a background in cable-jointing and, subsequently, chemical engineering. He lives in Warrington with Mrs O'Hare, his wife of many years, and they live for part of each year in Florida, USA where they own a substantial property. He built up a successful chemical engineering business which he has since sold.
O'Hare's background is in business administration. He consults her on any major financial decision such as whether to make a substantial investment. She acts as a sounding board. Their investment decisions are taken jointly and their investments are made jointly, after Mr O'Hare has found a proposition and put it to Mrs O'Hare, and she has approved it. Their aggregate overall wealth has been estimated at various times in a range from about £25 million to about £38 million.
O'Hare Engineering Ltd Directors Retirement Benefits Scheme (the pension scheme). Until 2006, they also held shares in O'Hare Engineering Limited, their trading company, through a different retirement benefit scheme, a Funded Unapproved Retirement Benefit Scheme (FURB).
O'Hares have invested in cash and bonds, property and (aided by a stockbroker from 1999) some equities. At that time and later, they invested in some corporate business ventures, on a relatively modest scale, with investments often of less than £100,000, or little more. They also engaged in two US property deals, with varying success. When exchanging sterling for dollars, Mr O'Hare tries to get the best rate he can, sometimes by forward transactions based on a future rate.
O'Hares. Their relationship with Coutts began in 2001, after Mr O'Hare heard about their private banking services through a business acquaintance on a golf course in Scotland. Mr O'Hare was soon introduced to Mr Kevin Shone, a private banker at Coutts' Liverpool office, who became their main contact and relationship manager from 2001 until he left Coutts in 2008.
O'Hares opened accounts with Coutts in August 2001. Straight away, Mr Shone recommended a product called Orbita Capital Return (OCR). The O'Hares invested $3 million into it, of which $1 million was cash and $2 million borrowed from Coutts. This later led to a complaint of mis-selling, which is indirectly relevant to the settlement agreement issues. Mr Shone reported to his credit committee that Mr O'Hare was "very keen" to make this investment and "keen" to consider "leveraging the [pension scheme]".
O'Hare's sophistication and experience as a substantial investor, and owed little or nothing to Mr Shone's salesmanship and powers of persuasion. The O'Hares submitted that Mr Shone was a persuasive salesman who described the O'Hares as "keen" to denote his success in persuading them to accept his recommendations to invest in more high risk products than they would otherwise have favoured.
O'Hare to make investments which he, Mr Shone, recommended as suitable, but without mentioning any impetus from himself in engendering Mr O'Hare's keenness.
Mr Shone's Absence
O'Hare took the lead in asking for particular types of investment, showing his experience and sophistication as an investor and his appetite for gambling and high risk, or whether Mr O'Hare was led and persuaded by Mr Shone to make higher risk investments than was consistent with Mr O'Hare's unconditioned risk appetite.
O'Hare was. Coutts did not dispute that Mr Shone was a material witness and that its solicitors had identified him as such, though before contacting him. The only explanation for his absence was in a late witness statement, which I allowed, from Mr Dylan Williams (of Coutts) saying that Mr Shone told Mr Williams in 2016 that he was too preoccupied with other business responsibilities, following the death of his business partner, to devote time to these proceedings.
O'Hare and not Mr Shone drove the content of the investments the latter said were suitable.
O'Hare's evidence given in writing and at trial. In support of that, her main points were to the following effect:
(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 [2013] 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
(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 [2016] EWHC 405 (Comm) per Flaux J at paras 55-56; Prest v. Petrodel Resources Ltd [2013] 2 AC 415).
(7) This was a case in which, to borrow Lord Lowry's words in R. v. Inland Revenue Commissioners and another [1991] 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 [1998] PIQR 324, at 340). I note that these four propositions were cited and applied in Jaffray v. Society of Lloyds [2002] EWCA Civ 1101; (2002) 146 S.J.L.B. 214, per Waller LJ (judgment of the court) at paragraph 407.
(9) Mr
O'Hares, made the following main points in answer to those submissions:
(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
(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
(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
(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 [2015] 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.
O'Hare's decision-making; and that they exaggerate his appetite for risk in its initial and natural state, when unconditioned by salesmanship. In the absence of evidence from Mr Shone to the contrary, I have to assess that issue mainly by reference to the notes themselves, which are contemporary, the surrounding circumstances, and my assessment of other witnesses, particularly Mr O'Hare.
O'Hare simply by referring to the former's notes, which were implicitly adopted as true and accurate.
O'Hares to apply, if they chose, under rule 33.4 to call Mr Shone for the purpose of cross-examining him on his notes of the various meetings and telephone calls, and his notes of his submissions to the credit committee of Coutts. They did not do so, relying instead on the fact that Mr O'Hare's account of the relevant discussions is, in many but not all cases, uncontradicted by any other person present.
"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."
O'Hare, but he was a witness and thus could be asked about them, enabling me to assess their content as part of my assessment of his credibility.
O'Hares submit - but Coutts strongly disagrees - that Mr Shone had an interest in creating a paper trail in order to conceal manipulation of Mr O'Hare's risk appetite, and to make his consent to investments appear more fully informed than it was; coupled with a motive to sell Coutts' products, to make money for Coutts and, indirectly, himself.
O'Hares could be expected to call Mr Shone as a witness just as much as Coutts. Coutts' hearsay evidence from Mr Shone is primarily relevant to a defence against the negligence claim. He is the person alleged to have given negligent advice in 2007 and 2008. I would expect evidence from him in rebuttal of that proposition to come from Coutts, rather than evidence in support of it to come from the O'Hares.
O'Hares were able to call Mr Eugeni, does not alter the reasonable expectation that a witness would be called by the party against whom there is a case for the witness to answer. He is still working in the financial services industry in this country. He has a reputation to protect. There is no evidence that he is medically unfit. I would expect him to answer the charge of negligence by giving evidence for the party facing that charge.
O'Hare which, Coutts says, were properly documented by Mr Shone and have been misrepresented by Mr O'Hare. The soundness of the documentary record was put to Mr O'Hare in tough cross-examination, and relied on in submissions. Yet Mr Shone did not vouch for the accuracy of his documents, nor attest to Mr O'Hare's account being misleading.
O'Hare complained that Mr Shone had mis-sold him the OCR product; and Coutts was, on its own case, prepared (though on what basis is disputed) to part with money to address that complaint. Coutts denied that the OCR product was mis-sold. The issue was part of the background to the claims arising from the 2007-8 investments. Mr Shone's evidence about OCR would have been relevant.
O'Hares are the main victims of that submission, since it is Coutts and not the O'Hares that needs his testimony to assist its defence. Without him, significant parts of Mr O'Hare's account remain uncontradicted except by notes that are disputed and not defended by their maker.
O'Hare's oral and written evidence that they are materially incorrect and misleading. This has to be considered on a point by point basis but, as a general proposition, I am not prepared to accept that the notes are always to be preferred and that Mr O'Hare's evidence contradicting them must invariably be rejected. This is for two further reasons, beyond what I have said above.
O'Hare to be an honest and truthful witness, although his recollection was not always accurate, as he was the first to admit whether or not against his interest. I do not accept that his evidence was profoundly unsatisfactory, as Ms Oppenheimer submitted. He was cheerfully candid about admitting mistakes and being corrected. And, unlike two of Coutts' witnesses, Mr Thomas and Mr Williams, he did not answer questions after considering what type of answer would best (in the witness's judgment) assist his cause.
O'Hare disputing the content of Mr Shone's communications tells greatly against his credibility. He trusted Mr Shone at first, and had no reason to engage in guarded and cagey written exchanges with him. He is a man of few emails, of few words in writing but many said orally.
O'Hare's basic proposition that Mr Shone used persuasion on him. I interject that this is not necessarily a criticism of Mr Shone or Coutts; provided the products sold are suitable, there may be nothing wrong with using selling techniques. That is part of Coutts' raison d'être and that of any bank. But Mr Shone's notes repeatedly describe Mr O'Hare as "keen" to buy the products, without mentioning the exertion of persuasion or influence by Mr Shone or anyone else at Coutts.
O'Hares. That is obviously right. The contract governing the parties' relations (with the O'Hares in their personal capacity) required as much, if Coutts was to profit from its dealings with them.
O'Hares invested in 2007 and 2008. The sales drive is not mentioned in any of the typed notes. In a document dated 29 January 2008 (I do not accept the date is an error and should be 2009, in view of Mr Shone's letter sent the same day) someone unidentified, probably from Coutts, has written "Novus Funds pushed heavily". The typed notes do not reflect this evidence of persuasive techniques being used.
Facts: Narrative (Reprise)
O'Hares as trustees of the pension scheme entered into a written "Investment Management Service Agreement" with Coutts. This, as the title suggests, required Coutts to manage the scheme's investments. The agreed investment profile was 25 per cent fixed income investments, and 75 per cent equity investments.
O'Hares were promising and potentially profitable new clients. He described Mr O'Hare as "not in need of borrowing but wishes to leverage his investments and is clearly comfortal [sic] with the concepts". He is a very sophisticated investor and 4 meetings of 2 hours plus each time hs [sic] been necessary to reach this stage of agreement".
O'Hare about whether he was a sophisticated investor or, as it was sometimes put, an experienced investor. I find that he was to only a very limited extent. He was a private individual, not a professional investor representing, for example, an institution such as a pension fund or a hedge fund. He had dabbled in share dealing. He knew what markets were and that they go and down, and that currency exchange rates fluctuate. He had done property deals in the USA, for which he had raised mortgage finance. He had lent money to his company.
O'Hare was willing to take risk with part of his wealth, but not too much of it, and provided he was properly informed about how much risk he was taking. He had worked for many years to build up his business, and would not recklessly expose its fruits. He did not know, until he met Mr Shone, that banks in this country lend money to customers to enable the customer to invest more, or leverage the investment. That had not been his experience in the USA, as he explained.
O'Hare did not attempt to keep abreast of market developments. Her background was in business administration. She attended meetings with Coutts sometimes, in particular when it was necessary for her to sign documents; but took her cue from her husband after hearing from him about a proposal. She understood his explanations and their decisions on how to invest were joint, and thus agreed by her. But she was not aware of any detail and was not able to name the five investment products in issue in this case.
O'Hares' contract) was concluded between the O'Hares in their personal capacity and Coutts, on 21 September 2001. At that time their estimated total wealth was about £26 million, of which about £7 million was in liquid form and available for investment. The rest comprised mainly the value of the trading engineering business (about £15 million) and the O'Hares' residential properties in the UK and the USA (about £4 million).
O'Hares' contract was called an "Agreement to Provide Investment Advice". It required Coutts to provide, free of charge, "advice about the investment services we offer and the kinds of investment that would in our view be most appropriate for you". The O'Hares were not required to accept advice given. Thus, as I have said, Coutts could only profit from the O'Hares' contract if the O'Hares contracted separately for recommended products.
O'Hares' contract was terminable by them at will on written notice. The material part of it read as follows:
"…. 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."
O'Hare wanted only a 5 per cent return on investments. The figure of 5 per cent appears in various documents as a sort of benchmark. The O'Hares' case was that they were cautious investors and that this was their target rate of return. It was, after all, the interest rate at which he chose to lend to his engineering company. But if that was all he wanted, Ms Oppenheimer put to him, why not invest in bonds with a guaranteed 5 per cent return, and nothing else?
O'Hares' relationship with Mr Shone and Coutts developed over the following years. They made various investments both through the pension scheme and in a personal capacity. Only the most important, involving the largest sums, need be mentioned. In April 2002, they borrowed $1 million from Coutts to invest into a bespoke "Coutts Private Equity Limited Partnership". This was classified as an investment involving a "speculative attitude to risk" with a timescale of at least 10 years. A return of over 20 per cent a year was hoped for.
O'Hares as trustees of the FURB in March 2005, describing them as having "[a]n overall moderate attitude to risk". Following the abortive sale, the O'Hares acquired about £6 million from sales of shares in O'Hare Engineering Limited. This sum became available for investment. They wished to invest it in a tax efficient manner. On 6 May 2005, Coutts' financial planning specialist, Mr Glyn Thomas (who had joined Coutts in January 2004) discussed the matter with Mr Shone.
O'Hares did not meet Mr Thomas at this stage, but agreed with Mr Shone that the £6 million would be invested in an offshore bond with Clerical Medical International (the CMI bond), for at least five years. Five per cent of the amount invested could be withdrawn each year without incurring any UK tax liability, apart from basic rate income tax.
O'Hare's attitude to risk for this investment was described by Mr Thomas in a note of the meeting as "moderate". The proposed profile was to be 60 per cent equities and 40 per cent bonds. I accept Mr O'Hare's evidence that Mr Shone advised this split. Mr Thomas prepared a written proposal dated 18 May 2005, which included confirmation that "for this part of your overall investment strategy you have cautious attitude to risk". The fund would be managed by Coutts using its Discretionary Investment Management Service (DIMA).
O'Hare wanted the investment to be 100 per cent in bonds, as Mr O'Hare was nervous about equity markets. The draft suitability letter from Mr Thomas had to be amended accordingly. In June 2005, the final profile decided upon was 75 per cent fixed income investments and 25 per cent equities. I accept Mr O'Hare's evidence that he accepted this split on advice from Mr Shone.
O'Hares' main residence was taken as security by Coutts, which the O'Hares wanted released. Mr Shone's note of 13 June 2005 shows that the O'Hares preferred the investment to be based on 100 per cent fixed income, if this would enable Coutts to release that security. Mr and Mrs O'Hare were not comfortable with their main residence being mortgaged to secure investments, but agreed to it.
O'Hare in the direction of accepting a higher proportion of equity investments, and thereby a higher level of risk, than that with which Mr O'Hare, with his overall "cautious" attitude to risk, was comfortable. The result was a compromise between Mr O'Hare's caution and Mr Shone's bullishness.
O'Hare] would like to increase the alternative exposure and risk profile of the portfolio and so we are recommendig [sic] switching £1m out of fixed income into Orbita Asian Growth" (OAG), a relatively high risk fund investing in Asian markets.
O'Hare, not attended by Ms Barlow, on 25 May 2006. Mr Shone's note was to the same effect as Ms Barlow's. It stated that Mr O'Hare was "keen on Asia and also sees recent equity dip as a buying opportunity" and that the split in the DIMA would be altered to a 50/50 split between fixed income investments and equities.
O'Hare's evidence that he had no prior knowledge of Asian markets and that the idea of increasing the risk profile of the DIMA came from Mr Shone, who advocated Mr O'Hare investing £1 million in OAG.
O'Hare referred to "your view that Asian markets offer good value over the medium to long term". This does not, in my judgment, refer to a view of Mr O'Hare – still less of Mrs O'Hare – untutored by Mr Shone's recommendation. The linguistic practice is again to describe acceptance of a recommendation as the formation of a view, as if the view were not informed by the recommendation. The investment was then made, in dollars, in June 2006.
O'Hares in March 2007, after Mr Shone met Mr and Mrs O'Hare at the Dorchester Hotel in London. This was invested in the Coutts Private Equity Limited Partnership. The written proposal (which I accept from Mr O'Hare, arrived after they had signed the proposal form) warned that the risk was higher than under Coutts' guidelines, but Mr Shone was happy to recommend it since the O'Hares were "a sophisticated investor" and would soon be selling the engineering company.
O'Hare on 23 May 2007 to discuss what they should do with the £13 million. As a holding (and low risk) measure, it was agreed that it should be placed in a Coutts liquidity fund. This significantly reduced the overall risk profile of the O'Hares' total investments.
O'Hare denied in cross-examination that receipt of that sum increased his appetite for risky investments and reduced his desire to exercise caution and moderation in the running of risk. Broadly speaking, I accept his evidence to that effect. However, having an additional £13 million made him more amenable to advice to go for higher returns, running higher risks, than he would otherwise have been. He intended to invest about £10 million of it.
O'Hares at their new home (the move enabling release of their mortgage). An overview discussion took place, at which various options were touched upon. Ms Barlow produced the emailed note of the meeting, mentioning a new hedge fund launch and ways of altering the investments held within the CMI bond. Mr O'Hare said he needed to understand the fixed income market, about which Ms Barlow sought to obtain information from Coutts' London office.
O'Hares (or to Mr O'Hare) by Mr Shone. They included a table which was controversial at trial, comparing the expected annualised performance and volatility of the new Novus funds with the existing Orbita funds, using (as the table stated) "simulated returns" for the former, based on how they would have performed had they existed in the past, presumably over the period beginning with the inception of the Orbita funds.
O'Hare discussed his concerns about the performance of OCR with Mr Shone. It had lost value. The latter emailed him on 14 September 2007 "following our chats". He referred to volatility in markets, "a marked lack of global liquidity" and concerns about "whether the worst is over".
O'Hare in the email to weather the storm and stick with OCR, and hoped that his assessment gave him "the comfort that you are looking for". Evidently, it did not. I accept Mr O'Hare's evidence that he (not Mr Shone, as Mr Thomas's note indicates) called the meeting that then took place on 20 September 2007, because he wished to withdraw from the OCR investment. Mr Shone took Mr Thomas with him for the meeting at the O'Hares' home.
O'Hare complained that the value of his investment in OCR appeared to have fallen by 2.2 per cent in August 2007. Mr Shone's note is a tribute to his own view of his powers of persuasion: he managed to soothe Mr O'Hare by spending "a long-time [sic] going through recent and historic performance of all existing investments and at end of this Les was happy that everything performing as expected".
O'Hare's complaint as "a little moan regarding the recent draw down on [OCR]" but recorded that, after Mr Shone's "detailed discussion", Mr O'Hare "still very much likes the investment profile of [OCR] and would like to significantly increase exposure in the next quarter to this investment". It is clear that Mr Shone sought to persuade Mr O'Hare to regard the fall in value in August 2007 as a temporary phenomenon or blip.
O'Hare and Mr Shone when Mr Thomas was not present. He was less concerned with recalling events than with portraying Mr O'Hare as a man who could not be influenced (especially at paragraph 28 of this witness statement).
O'Hare's enthusiasm for the new Novus products, to which he was "exceedingly attracted" according to Mr Thomas, "particularly again because of his knowledge and experience of OCR".
O'Hare's evidence, which I accept, that Mr Shone drew parallels between the Orbita products and the new Novus products, and commended them on the basis of their similarity with OCR products. I accept Mr O'Hare's evidence, not contradicted by Mr Shone, that Mr Shone advised that NGCO was similar to OCR in terms of risk and return and was subject to 2-3 per cent maximum volatility; and that Mr O'Hare agreed to the investment on the basis that it was in line with their overall moderate attitude to risk, which had not changed.
O'Hare's evidence that he remained unhappy about OCR, contrary to Mr Shone's note and Mr Thomas's account of the meeting in his witness statement (paragraph 28ff) and in cross-examination. Mr O'Hare was persuaded at the meeting of 20 September 2007 not to withdraw his investment from OCR at that stage (as he was to do the following year; he had just missed a cut-off date on 19 September), but he regarded the product as having been mis-sold to him as lower risk than it actually was, which is why he subsequently sought compensation for that.
O'Hares on 30 October 2007, attaching a "report" and "product summaries". The attachments may have included an updated version of the presentation documents, dated November 2007. The proposals were as follows.
O'Hares then returned from the USA and a further meeting was held on 22 November 2007, with Mr Shone, Mr Thomas and Ms Barlow present. I accept Mr O'Hare's evidence that Mr Shone recommended that the O'Hares should withdraw from the fixed income investments in the DIMA and invest the dollar equivalent of £2 million in Novus Global Emerging Markets (NGEM). They accepted that advice.
O'Hares' total estimated wealth (including their two residences) was then about £38 million, of which about £9 million was invested in Coutts wealth generation products. The £9 million was soon to rise by a further £2 million to be invested in NNRS.
(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.
O'Hares were fully and properly informed and were happy with the increased risk; they were sophisticated and experienced investors who had cash to spare from the sale of the business, could afford to hazard the money in the hope of high returns, and preferred to do so rather than leave it earning lower returns in the CMI bond or in fixed income investments.
O'Hares' case is that Mr Shone and Coutts were recommending unsuitable investments with no capital protection; that Mr Shone unjustifiably played down the substantial increase in risk involved; that the investments meant that an unjustifiably high proportion of the O'Hares' wealth was exposed to losses; that they were not sophisticated investors; and that agreeing to make the investments meant only being persuaded to accept the advice that they were suitable; that the advice was accepted did not mean it was correct.
O'Hare asked Ms Barlow to liquidate the NNRS, OAG and NGEM investments. They had lost value. He did not want to be exposed to hedge funds given the state of the market.
O'Hares. He had joined Coutts in February 2007. He first met them when he visited their home with his assistant, Ms Charlotte Johnson, on 11 September 2008. This was at a time of turmoil in the markets; the Lehman Brothers bank filed for bankruptcy in the USA four days later.
O'Hare. Coutts intimated that his evidence was influenced by a desire to harm Coutts by helping the O'Hares, and even described his second witness statement as seeking to "settle a score" with Coutts. This is odd, because his evidence is quite favourable to Coutts.
O'Hare]" certain products. I have already observed that Mr Shone did not in his notes acknowledge having used persuasive techniques on Mr O'Hare, though he undoubtedly did so. Nor did Mr Eugeni habitually describe Mr O'Hare as "keen", as Mr Shone had done (Mr Thomas continuing the practice in a note of his dated 30 March 2009).
O'Hare had a general discussion on 11 September 2008 about his investments and appetite for risk. Mr Eugeni noted that Mr O'Hare "does not mind, in his words, taking a punt on something, but he wants it to be something that he knows is a punt …".
O'Hare as a "natural risk taker and gambler" who "would welcome a more hands on approach". He agreed that "an advisory approach" would suit him. They discussed "low risk ways of taking bets on certain things" and this led to a discussion about structured products. They kept in touch and Mr Eugeni liaised internally with Mr Thomas about potential future investments.
O'Hare's acknowledgment that he had invested in NGCO and OGO "with his eyes wide open", knowing they were risky, and that he took their poor performance "on the chin". He also recorded Mr O'Hare's complaint about "how OCR was pitched to him". On 24 November, he advised Mr O'Hare to sell some holdings.
O'Hare referred to lodging a complaint and seeking some sort of fee refund, arising from the Orbita investment and that "the risk profile of the fund was not fully explained to him". He asked if there was an informal route and Mr Eugeni said there was not and that he would have to "raise a cedar", which is the jargon for registering the matter as a formal complaint.
O'Hare "feels that the [OCR] fund was pitched to him as a cash alternative and that it's [sic] performance should have little or no correlation to the wider markets". The Novus products, by contrast, he "has had no gripe with … because he knew what he was getting into"; though he also "tried to drag NGCO into the discussion feeling that it was sold along the same lines as OCR". Mr Eugeni tried to "nip this in the bud".
O'Hare sought a refund of some "upfront fees"; pressed by Mr Eugeni, he said that "$100k would be too little and $500k would probably be too generous". Mr Eugeni recorded those words in quotation marks. I accept his note as accurate. The reference to dollars makes sense, in that the investment in OCR (and therefore the fees) had been made in dollars. I accept that Mr Eugeni's note is correct and that he refers to dollars not pounds correctly, without error. I prefer that evidence to Mr O'Hare's mistaken (as I find) recollection that the agreed currency was pounds.
O'Hare.
O'Hares' business and cause bad publicity for Coutts, unless Mr O'Hare were appeased. He proposed: "if we offered him something in the region of $200-$250k and as opposed to writing him a cheque we agreed to discount future business until this sum was achieved, that this would placate him. We could agree to disagree about the advice given and assume no blame but simply put it as a goodwill gesture given that he is such a valued client".
O'Hares on 3 March 2009, saying their complaint was formally rejected, after Coutts had investigated it. The letter stated at length reasons why Coutts said the product had not been mis-sold, and explained its poor performance by reference to the instability and upheavals in world markets. The letter ended by saying the complaint would be considered closed after eight weeks, unless the O'Hares responded before that.
O'Hares.
O'Hare in Florida on 19 March 2009. Over the following months they discussed structured products and Mr O'Hare invested (through the pension scheme) £1 million in one such product provided by Barclays (i.e. a non-Coutts product), which was not fully capital protected, though the contingency in which part of the capital would be lost was remote: a 50 per cent fall in the FTSE 100 index.
O'Hare then returned after nearly two months in Florida and visited Mr Eugeni at Coutts' Liverpool offices on 5 May 2009. They discussed various things, including his complaint. Mr Eugeni's note, which I accept as an accurate statement of the position, records:
"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. …."
O'Hare's suggestion, to see whether they were amenable to it. A week later on 12 May 2009, having done so, Mr Eugeni visited Mr O'Hare at his home. In his note, he recapped that the complaint about OCR had been "resolved by us saying that we would refund him $250k in one form or another".
O'Hare's proposed way of doing this would be "difficult, given that centrally his complaint had been turned down …". He told Mr O'Hare, as his note records, that Mr Williams and Mr Pitigala had turned down Mr O'Hare's suggested method of refunding him $250,000. Mr O'Hare, the note records, was "not too pleased", but "realised there was nothing we could really do about it".
O'Hares. At the meeting on 12 May, Mr O'Hare accepted that his proposed method was not acceptable to Coutts. It therefore became the common position of the parties at the meeting that it was for Coutts to bestow the benefit over a period, in such manner as it chose.
O'Hare at Coutts' Liverpool office, with Mr Colin McKenzie present. Mr McKenzie, of whom Mr O'Hare had and still has a high opinion, was to manage the TPMS, into which funds were to be invested. Mr Eugeni's note of the meeting is, once again, reliable and accurate.
O'Hare was not happy with returns on cash (the base rate had by then dropped to 0.5 per cent) and "wants to be in the markets".
O'Hare's appetite for risk as "medium to high". He recorded Mr O'Hare as being someone who "could be considered an experienced investor". He said (not correctly for once) that Mr O'Hare had "invested in markets for over 30 years" and (correctly, with reference to wealth available for investment) that he had "up to recently had as much as 60% of his wealth tied up in hedge funds".
O'Hares proposing that they invest £9.7 million into the TPMS, on terms they had discussed. Their current total wealth was stated as being about £35.5 million. The basic annual management charge was stated to be 0.5 per cent (plus VAT); the pricing policy having been "discussed with you".
O'Hares signed the necessary documents and departed for Florida. On his return, Mr Eugeni met Mr O'Hare on 18 August 2009 at a restaurant at Chester Racecourse. Delays had ensued in making the investments, and Mr McKenzie was off work for medical reasons. An assistant of Mr McKenzie, Mr Daniel Shea, attempted to stand in for McKenzie during his absence, but was not very successful at making contact with Mr O'Hare who, evidently, preferred to deal with Mr McKenzie and Mr Eugeni or Ms Johnson.
O'Hare was content. He queried the fees and Mr Eugeni provided him with a fee tariff. His note, which I accept, recorded that "[w]e had agreed a reduced fee of 0.50%". Mr O'Hare was unaware of the commission charges. Mr Eugeni made him aware of them and Mr O'Hare made no objection.
O'Hare was coming to the view that the worst of the financial crisis was over and that he would be willing to consider investing in hedge funds again, including by leveraging. He had $4 million to invest, raised by mortgaging his US property, taking advantage of low interest rates. He discussed this at a further meeting with Mr Eugeni on 13 November 2009.
O'Hare had also been discussing with Mr Shone at Goldman Sachs. Mr Shone had come up with a proposal. Mr Eugeni sensed competition but Mr O'Hare said he wanted advice on Mr Shone's proposal since he "had had a number of complaints with Kevin". It was for Mr Eugeni, his note records, to come up with an alternative, which he undertook to do.
"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.
O'Hares to the tune of $250,000. I infer that he equates $82,000 with £56,000, the latter figure being the difference between his sterling figure of "£96k" and the total of £40,000 in sterling ("£30k" plus "£10k").
O'Hares to the tune of $250,000. That would leave a further $110,000, approximately.
O'Hares through continued application of discounts, including on the annual management charge (0.5 per cent reduced from 1 per cent) for the TPMS. The O'Hares' case, by contrast, is that the discounts in question were separately negotiated and were not applied in satisfaction of Coutts' obligation to benefit the O'Hares to the tune of £250,000 (or $250,000).
O'Hare considered the reduction in the annual charge for the TPMS from 1 per cent to 0.5 per cent to be separate and distinct from Coutts' obligation to pay to the O'Hares £250,000. He said he had separately negotiated this discount and that it did not form part of Coutts' agreement to benefit him by £250,000 by way of addressing his complaint that OCR had been mis-sold to him. He said the same logic applied to other discounts negotiated by him in respect of other instruments, and that Coutts had yet to perform its obligation to credit him with £250,000.
O'Hare informed Mr Eugeni that he was going back into business, wished to buy various businesses and needed cash to do so. Mr Eugeni wrote to Mr McKenzie that Mr O'Hare wished to borrow money and the "loanable values" (i.e. the amounts available as security for borrowing) would not suffice to cover this. Mr O'Hare instructed that the TPMS portfolio be liquidated immediately. Mr Eugeni added that this "[b]ad news" did not reflect on Coutts' management of the TPMS portfolio, but was "simply a case of the credit tail wagging the dog".
O'Hare went through the latter's updated "requirements for both interest and capital over the next couple of years". Mr O'Hare had around £12.5 million available from the liquidation of the TPMS and another portfolio. He took Mr O'Hare through presentations prepared by Mr Andy Savill, who could not make the meeting.
O'Hare was happy with those funds and said he would like to invest £8 million in Autopilot and £4 million in Navigator. Mr Eugeni "highlighted the fact that both Autopilot and Navigator had only been running for short periods and that performance prior to this had been illustrated as simulated".
O'Hare's attention. I accept the latter's evidence that he did not take it in, and later became indignant – with some justification – that RBSI could publish such a description of its products. Mr O'Hare agreed to invest in the two products provided they were, as Mr Eugeni's note shows, "capital protected, provided a risk adjusted return, allowed for the 5% per annum distribution and had a loanable value in excess of the 65% that TPMS did …".
O'Hares had 22 per cent (of their investable wealth) in wealth enhancement products, and that they wanted to be more conservative than previously as Mr O'Hare "has gone back into business" and they were "generally derisking". He described the nature of the two products thus:
"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…. ."
O'Hare, Mr Savill and (possibly later) Mr Richard Carney, in May 2010. Mr Carney set out the details of the products in a suitability letters dated 10 June and 16 June 2010. He estimated the O'Hares' total wealth at about £38.825 million. He recommended the investments in Autopilot and Navigator. They were both 100 per cent capital protected, unless terminated earlier than the five year term. In his letter, Mr Carney set out the details of the products.
O'Hare in the first letter as a "very experienced investor" and, in the second letter, referred to Mr O'Hare's "discussions with myself, Ray Eugeni … and Andy Savill … regarding investing in RBS International Autopilot and RBS International Navigator structures on a bespoke basis". The amount to be invested in Navigator (the fund seen as more "aggressive") was reduced to £2 million, which was more conservative than the £4 million originally envisaged. The amount to be invested in Autopilot remained £8 million. Both products were classified as wealth preservation.
O'Hares were "happy with the counterparty [RBSI] and financial strength of the chosen strategies and are willing to proceed with the outlined split of the funds". RBS, the parent of the "counterparty", was mainly owned by the government at this time, which made it unlikely, in Mr O'Hare's view, that it would be allowed to fail. This prediction has proved correct, as RBS is still trading.
O'Hares pursuant to its agreement (whether or not legally binding) to do so, discussed above, by way of resolving the complaint about the alleged mis-selling of OCR to Mr O'Hare by Mr Shone. There is no evidence of any notification by Coutts to the O'Hares that this amount was being applied towards the $250,000 figure.
O'Hares that the Autopilot product in fact invested in Exchange-Traded Funds (ETFs), emerging markets and developed property sectors rather than directly in indices, and that Coutts did not inform the O'Hares of this.
O'Hares.
O'Hares; and "trail commission" debited by CMI from the CMI bond and paid to Coutts of £23,594 per annum, representing 0.2 per cent of the total sum invested (which later rose to 0.44 per cent in 2011).
O'Hare had specifically endorsed because RBS was state owned.
O'Hares submitted that the 2010 investments were unsuitable: too much money was placed with one institution, and Coutts should have advised against that, and should have looked beyond itself and its parent, RBS, for suitable investments spread across the whole market, as envisaged in the O'Hares' contract. They submitted that the charges were not properly disclosed, and that it was not properly disclosed that the Autopilot product included investment in ETFs and emerging markets, not just indices.
"I felt that the [
O'Hare was discussing further structured products with Mr Eugeni. In a note from Mr Eugeni dated 24 September 2010, Mr O'Hare is described, reliably in my judgment, as having said that "given RBS' government ownership he was more than happy with them from a counterparty standpoint". Mr Eugeni let him know that if he wanted to put more money into structured products he would have to agree to be considered an "insistent client". He was happy with that and invested a smaller sum (£0.5 million) into a wealth generation product.
O'Hare that day that Mr Eugeni had given his notice to leave Coutts. During the conversation, Mr O'Hare mentioned that he was not happy with the Autopilot and Navigator investments within the CMI bond which, he felt (in the words of Mr Price's note) "in his opinion … were misrepresented to him when the initial advice was provided".
O'Hare complained that he did not accept the reporting information and why it had declined 12-15 per cent in value against the run of the markets, in his view. Assisted by Mr Eugeni and contrary to his normal practice, he put his complaints in writing by letter of 10 December 2012.
O'Hares decided to "encash", i.e. liquidate the Autopilot and Navigator investments early, before the end of the five year term, which would not expire until June 2015. Mr Price of Coutts advised against this, as it meant that the capital invested was not protected. The O'Hares insisted. About £50,000 of the capital invested in the Autopilot product was lost.
O'Hares to the tune of $250,000, were undisclosed until mid-trial, unsatisfactory, and said by Mr Williams to have been prepared by Mr Eugeni or his team; yet Mr Eugeni was not asked about the then undisclosed records. They were not provided to the O'Hares contemporaneously; indeed, not until part way through the trial. Neither party asked for Mr Eugeni to be recalled.
O'Hare received effective discounts with respect to fees as follows". She then set out various figures which she said were fee credits to the O'Hares, well exceeding $250,000, though without any exchange rate calculation.
O'Hares, asserted: that it had performed any obligation it had.
O'Hares' US property, and for a loan that was never drawn, formed part of its discharge of its undertaking. Mr Eugeni was not asked about that note at the trial. Mr Williams' late evidence produced the new revelation that for six months from 17 July 2009, Coutts applied a 100 per cent discount (i.e. to zero) on its charge for monies belonging to the O'Hares and held in its liquidity fund.
O'Hares' active relationship with Coutts.
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 that the two had any conversations about when and how particular discounts or reductions in fees or waivers of fees would count or not count towards the $250,000. This is surprising given the rejection of Mr O'Hare's proposal for a cleaner solution whereby the sum would simply be credited to him.
O'Hare's attention particular instances of Coutts applying discounts or credits towards the $250,000 figure. I find no evidence of that.
O'Hares in the period from May 2009 onwards. Whether that was done in performance of Coutts' obligation, if any, under the settlement agreement, or whether it was done in pursuance of separately negotiated arrangements is a different question, to which I will return below.
O'Hares.
O'Hares had instructed and obtained a report from Mr Ian Barton, a director of Mazars Financial Planning Limited (MFP). Ms Oppenheimer criticised that procedure, saying the expert must have prejudged the issues by opining before seeing Coutts' response to the claim. I think this is a merely forensic point. Had the claim been unsupported by expert evidence, Coutts might have complained that there was no expert evidence to support negligence under the Bolam test.
O'Hares, as Mr Croft thought.
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.
O'Hares' contract, under which Coutts undertook to advise them in their personal capacity. The O'Hares' contract was not like that concluded for the pension scheme, requiring Coutts to manage the scheme's investments in accordance with an agreed investment profile.
O'Hares' contract required Coutts to "work with" the O'Hares "to understand your circumstances, objectives and requirements to enable us to develop an investment strategy for [them]". It was not limited to any portion of the O'Hares' wealth, whether available for investment or otherwise. But there was no obligation to provide a constant stream of advice and recommendations. The obligation was to "provide you with our advice and recommendations in writing at such time or times as we consider appropriate or as agreed between us".
O'Hares' wealth that was available for investment, excluding wealth that was not, such as the value of their two residential properties and, until May 2007, the engineering business. That, said Mr O'Doherty, included an obligation to research and recommend non-Coutts products as well as Coutts products.
O'Hares and recommend products as and when agreed or as and when Coutts considered it appropriate to recommend a particular product, which could be a Coutts product or someone else's product. The advice and recommendations had to be put "in writing", but obviously that did not preclude prior verbal discussions, such as those that took place.
O'Hares. Nor was it a breach of contract as such that Mr Shone and Mr Thomas did not recommend non-Coutts products, although Mr Eugeni did. The commercial basis of the O'Hares' contract, from Coutts' perspective, was that it was a platform enabling it to sell its products to the O'Hares, as well as the opportunity to earn commission from third party products sold to them.
O'Hares to develop an investment strategy and advise from time to time on investments to implement that strategy. That is what happened. Mr Shone and later Mr Eugeni held frequent discussions with Mr O'Hare about what the strategy should be and what investments should be made. Subject to the question whether the five investments at issue here were suitable or negligently recommended, Coutts performed its contractual obligation.
O'Hares' objectives, wealth and willingness to take risk and, in the light of those things, advise whether and to what extent they should choose to invest in cash, bonds, structured products, equities, and so forth. Again, that is what happened.
"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."
O'Hares' contract and imposed by the common law of negligence, to ascertain the clients' requirements and objectives and to advise on, and explain and inform them, about investments that are suitable. The factual history spanned more than a decade and there were countless discussions between Coutts' private bankers and Mr O'Hare about their investments.
O'Hares over the years. The first and third issues therefore turn on whether the 2007-8 investments and the 2010 investments were objectively suitable and not on any failure to inform the O'Hares fully about them.
Were the 2007-8 investments suitable, or was it negligent to recommend them?
O'Hares were wealthy and intelligent, but not particularly sophisticated or experienced investors. Mr O'Hare was astute in business and willing to take risk, but would always balance risk against caution. For example, he did not favour cash investments in 2010 when interest rates stood at only 0.5 per cent. On the other hand, their investments were relatively conservative before Mr O'Hare's dealings with Mr Shone.
O'Hare in the direction of taking considerably higher risk than hitherto. This is not surprising. The terms of the O'Hares' contract meant that Coutts had to sell products to them (or earn commission from third party sales to them) for the relationship to be commercially viable for Coutts. Mr Shone succeeded in making the relationship profitable for Coutts.
O'Hares would receive about £13 million net from the sale of the business in mid-2007. The sub-prime crisis and the subsequent banking crisis was not yet in full swing. The O'Hares were ready to invest about £10 million. Although that was a large proportion of their investable wealth, they would remain wealthy beyond the dreams of most ordinary mortals even if they were to lose a substantial portion of it.
O'Hares might well have made significant gains from investing in the Novus products, as other investors in hedge funds had done. The products were spread across numerous hedge funds, which alleviated the extent to which the "eggs were all in one basket".
O'Hare and Mr Shone (and to a lesser extent, from 2007, Mr Thomas), were very extensive and full. Although I accept Mr O'Hare's proposition that Mr Shone played down the risks of the Novus products by likening them to OCR, the presentations in September and November 2007 left no room for any suggestion that Mr O'Hare did not fully understand the Novus products.
O'Hare was willing to accept that the risk was worth taking. It is significant that Mr O'Hare did not complain at the time that the Novus products had been mis-sold to him, unlike in the earlier case of OCR. He did consider doing so, but Mr Eugeni was able (in his phrase) to nip that idea in the bud.
O'Hare was given meant it was impossible to complain that the products were mis-sold to him. That explains why he later told Mr Eugeni that unlike in the case of OCR, he was willing to take the performance of the Novus products "on the chin", having gone into them with "eyes wide open". That is consistent with the view that the O'Hares cannot be considered as ignorant investors who needed saving from themselves and their own ignorance.
O'Hares, with their wealth and investment objectives. I conclude that this was a case where responsibility for the investment decision, even though taken under the influence of Mr Shone's salesmanship, could fairly be taken by the investors and that the Novus investments were not objectively unsuitable.
The settlement agreement issues: did Coutts undertake a binding legal obligation, and if so what was it, and was it fully or partly performed?
O'Hare's grievance about the manner in which OCR had been sold to him by Mr Shone. Coutts wished to preserve its commercial relationship with the O'Hares, and was prepared to part with money to do so.
O'Hares' forbearance to sue, and Coutts' willingness to pay them for it and thereby help preserve ongoing commercial relations. Apart from the use of the words "gesture of goodwill", the facts could not be much more different from those in Clarke v. Nationwide Building Society.
O'Hares adding up to an amount not less than $250,000 during the period of their future contractual relations, by applying credits or discounts against amounts otherwise chargeable. I have already found that the agreed currency was dollars not pounds and that Mr O'Hare's genuine but contrary recollection is mistaken.
O'Hare, during the negotiations, in vain sought clarity about the transfer of $250,000 from Coutts to him. He wanted it in a lump sum. Good banking practice should have led to clarity about what sums were, or were not, to count towards the $250,000. But Coutts did not want that and did not offer it. Evidently, it preferred the opaque position presented at trial, which was the antithesis of the transparency Mr O'Hare had sought.
O'Hare's proposition that the discounts he negotiated in respect of various investments, including the TPMS, were separate and distinct from Coutts' obligation to bestow $250,000 worth of benefit on him and Mrs O'Hare. I am sure that he genuinely believed they were separate and distinct but, objectively, he was not entitled so to conclude as a matter of contractual relations. The obligation was to discount future business. That was done.
O'Hares because the deal was a poor one for them: in return for dropping the complaint about OCR, Coutts offered only discounts it might very well have been prepared to offer anyway. But I recognise that Mr O'Hare agreed to the terms and did not press further his alternative suggestion that he be credited with a lump sum of $250,000. In the absence of separate agreement for subsequently negotiated discounts to be excluded from the sum, he cannot assert that they were excluded from it. I must therefore dismiss the claim under the settlement agreement. It has been performed.
Were the 2010 investments suitable, or was it negligent to recommend them?
O'Hares do not succeed in showing that the 2010 investments in the RBSI Autopilot and Navigator products were objectively unsuitable, even though they involved placing a large amount of money, £10 million, with a single banking institution, RBSI. The O'Hares' fundamental difficulty is that the 2010 investments created a significant reduction in the proportion of their investable wealth that was exposed to the risk associated with products classified as wealth generation.
O'Hares to borrow more than previously, for the purpose of financing new business transactions Mr O'Hare wished to undertake. This was the reason for the liquidation of the TPMS, as communicated by Mr O'Hare to Mr Eugeni, and dubbed by the latter "the credit tail wagging the dog". There is nothing wrong with the logic.
O'Hare, who cannot complain that he was misled by the product information, given that the simulation of the data was explained to him by Mr Eugeni, even though he did not properly absorb and digest the explanation and later became aggrieved about the simulation of the data and the misleading product information.
O'Hare discussed this point fully. The latter was fully aware that the capital would be at risk if RBSI should become insolvent but was happy to run that risk because, he reasoned, RBS was effectively state owned. I do not think it was negligent of Coutts not to "save him from himself" by talking him out of this confident attitude.
O'Hare's relations with Mr Eugeni were fruitful and their discussions constructive. Mr Eugeni's notes show full consideration by him of Mr O'Hare's requirements, and full and adequate disclosure about the products recommended in order to meet them.
O'Hares of this. If this complaint were proved, it might have been better framed as a claim for an operational breach of contract, i.e. the breaching of an obligation to invest in indices rather than ETFs, emerging markets and developed property sectors, rather than as a complaint of unsuitability of the investment.
O'Hares can succeed in proving that the product was misrepresented as alleged. Mr Carney's two suitability letters in June 2010 were supplemented by the "key features" document, which included, under the heading "Description of the Index or Asset", against four market sectors, two of which were described as "Emerging Equity Markets" and "Developed Property Markets", words which do describe the investments made in those markets.
O'Hares to call Mr Eugeni to give evidence of what was effectively a cogent defence of his own advice to them.
The measure of damages and the quantum of damage suffered
O'Hares' cause of action in contract is statute-barred, because the cause of action arises on the date of the breach and not when loss is suffered. If the claim had succeeded, the successful cause of action would be negligence or breach of statutory duty or both.
O'Hares than under the statute-barred cause of action in contract, I would not have allowed them to benefit from the more favourable measure of damages in tort, since that would mean they would be benefitting from their failure to bring the contract claim less than six years before the cause of action in contract arose.
O'Hares if those actually made had been found negligently advised.
O'Hares wanted. The premise of the contention that the MFP portfolio could legitimately be adopted as a starting point for calculating loss must be the proposition that the investments actually advised were (contrary to my decision) too risky.
O'Hares were taking before they started investing through Coutts. However, I would not have computed the actual damages only using Mr Barton's modelled calculations. The exercise would have to be more nuanced and I would probably have applied a discount to reflect ordinary market and other contingencies. I do not attempt to perform any of the calculations here, since it would be disproportionate to do so.
Conclusion
O'Hares, be dismissed in its entirety.