Court of Appeal rules on Springwell v JP Morgan case

In Springwell Navigation Corporation v JP Morgan Chase Bank & Others [2010] EWCA CIV 1221 the Court of Appeal confirmed that JP Morgan Chase Bank (JP Morgan) did not owe Springwell Navigation Corporation (Springwell), an experienced and sophisticated commercial counterparty, a general advisory duty as a result of entering into a relationship for the lending and the sale of investment products.

The decision relies heavily on the facts but gives financial institutions reassurance that they can rely on contractual terms, either

in their own standard terms or
in standardised documentation, to negate assertions of an advisory duty and exclude liability for misrepresentation and negligent misstatement.

Following the collapse of the value of its investment portfolio, Springwell made various claims against JP Morgan, alleging that JP Morgan had assumed an advisory role regarding the appropriateness of its investments and the structure of its portfolio and this role gave rise to a range of contractual, tortious and fiduciary duties which Springwell alleged that JP Morgan had breached. At first instance it was held that the nature of the relationship was such that JP Morgan owed no contractual or tortious duties of care to Springwell and Springwell’s claims for breach of fiduciary duty and misrepresentation also failed.

The Court of Appeal unanimously dismissed the appeal. A few key points from the judgment are summarised below.

• A distinction was made between actionable representations and statements of opinion without an implied representation that there was reasonable grounds for them. Any representations that were made fell into the latter category so were not actionable misrepresentations.
• There is no binding authority to prevent commercial parties from acknowledging that there are no representations or warranties given in the course of a transaction even if, in fact, this does not reflect the position. Springwell was bound by the terms of the notes purchased and the dealing terms, which contained acknowledgements of this kind. On the facts, the Court of Appeal confirmed that there were no actionable representations but contractual estoppel would have prevented Springwell from relying on any representations that were made.
• To the extent that the contractual terms excluded liability for misrepresentation, they were reasonable exclusions in the context of a sophisticated and experienced commercial counterparty with significant negotiating power contracting with a financial institution.
• The forward foreign exchange contracts were deliverable. Therefore, the moratorium following the Russian crisis prevented performance of the contract by delivery of roubles and the force majeure notice served in this situation was valid.

Copies of the Court of Appeal’s judgment