IG Markets Limited vs. Tommy and Declan


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Claim No. 1BM40042


BAILII

Citation Number:
[2012] EWHC B4

(Mercantile)

IN THE HIGH COURT OF JUSTICE

QUEEN’S BENCH DIVISION

BIRMINGHAM DISTRICT REGISTRY

MERCANTILE COURT

Date: 3 April 2012


Before:

HIS HONOUR JUDGE SIMON BROWN QC


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B E T W E E N:




Claimant

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and
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TOMMY CRINION

Defendant


AND
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Claim No. 1BM40043



Claimant

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and
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DECLAN CRINION

Defendan
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St
ewart

Chirnside, counsel, instructed by Wragg
e & Co LLP

for the Claimant.

James Stuart, counsel, instructed by
Macleish Littlestone Cowan for Tommy Crinion.

Declan Crinion, self represented.

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JUDGMENT

2

Introduction

1.

The Claimant is a company regulated by the FSA provid
i
ng

(inter alia)
on
-
line
services for trading
in financial
known as
Contracts for Differences (CFDs).


2.


The Defendants are father (Tommy) and son (Declan)
who held CFD
accounts between 2004 and 2007 with a competitor compan
y, Cantor
Fitzgerald.


3.

There is no dispute that in August 2007, these accounts were closed and
that CFD accounts in the names of Tommy and Declan were opened with
the Claimant. These accounts ran into difficulties in mid 2008 and were
closed in heavy debt

in February 2009
.


4.

It is the Claimant’s case that
its
claims
against both Defendants
are
essentially straightforward claims in debt.
T
he Claimant claims the
following sums against each Defendant:


a.

In claim no. 1BM40042 the Claimant claims €824,074
.18

(
plus
interest and costs) against Tommy Crinion in respect of account
CB805

(“the Tommy Crinion Claim”);


b.

In claim no. 1BM40043 the Claimant claims €1,386,045
.03

(
plus
interest and costs) against Declan

Crinion in respect of accounts
CB804

and
CB988

(“the Declan Crinion Claim”).


5.

There is no dispute about the figures. The essential issue between the
parties is whether the debt claims are enforceable against the named
Defendants.


6.

During the course of
the trial, the
List of Issues

between the parties
was
n
arrowed substantially as a result of
sensible
concessions made by both
Defendants. As a result
,

it
was

agreed that
the issues which remain for
by the Court
are as follows:


3


a.

There are
fou
r

issues specific to the Tommy Crinion
C
laim:


i.

(a)
form in respect of account CB805?

(b)
If so, did he do so with
his father’s authority and if not did Tommy subsequently ratify
Declan’s actions?


ii.

Is
Tommy Crinion bound by the Power of Attorney signed by
Declan on his behalf and if so what is the effect of this?


iii.

Was account CB805 opened initially as a limited risk account
and if so was it validly upgraded to a standard, non
-
limited
risk account?


iv.

Did
the Claimant act in breach of contract as alleged at
paragraph 6 of
Tommy’s Amended
Defence?


b.

There are
three
issues specific to the Declan Crinion Claim:


i.

Did Declan inform the Claimant that account CB988 was held
by him as agent or nominee for TJC Ltd?


ii.

Is Declan personally liable in respect of account CB988?


iii.

Did the Claimant represent to Declan that he would not be
personally liable in respect of account CB988?


c.

There are 7 issues common to both claims in relation to alleged
breaches of the FSA Rules:


i.

Did the Claimant provide the Defendants with its terms of
business in good time (within the meaning of COB Rule 4.2.5)
and/or take reasonable care to provide them with a proper

4

opportunity to consider them before allowing any trading to
take place on the
accounts?


ii.

Did the Claimant’s terms of business include the Power of
Attorney for the purposes of COB Rule 4.2.5?


iii.

Did the Claimant correctly classify the Defendants as
Intermediate Customers or take reasonable steps to do so
under COB
the
Rule
s

and/or C
OBS?


iv.

Did the Claimant breach COB Rule 8.1 and/or COBS 16.2 or
16.3 by failing to provide records to Tommy Crinion in relation
to account CB805? However, it is accepted
on behalf of
Tommy
that regular statements were sent to Declan so
this
point falls awa
y if the Court finds that Declan was validly
appointed as agent or attorney to receive statements of account
on behalf of his father.


v.

Did the Claimant fail to act in the Defendants’ best interests in
breach of COBS 2.1.1?


vi.

Was the Claimant in breach of
COBS 10.2 or 10.3 by failing to
request sufficient information about the Defendants’
knowledge and experience?


vii.

Is the Claimant liable to either Defendant on the
Counterclaims?



Background Facts

7.

The relevant history of the accounts has helpfully been set
out by Mr
Chirnside, Counsel for the Claimant, in his closing written submissions.
The following is uncontroversial, or relatively so, as it is culled from
contemporaneous electronic records
,

e
-
mails, written documents
,

telephone
transcripts and accepted w
itness evidence.


5


8.

were opened
by Declan Crinion
with Cantor Fitzgerald. One of these accounts was
opened in the name of Tommy Crinion, the other three were
opened
in
the names of Declan
Crinion
and
two comp
anies, TJC Ltd and Crinvest
Ltd.



9.

It is common ground that t
he account with Cantor Fitzgerald in Tommy
Crinion’s name
(account DVY253)
was opened on 1 August 2007
.

It is
also accepted that in around July 2007, prior to opening the account,
Decla
n told Tommy that
(i)
the account would be
in his name;

and
(ii)
it
would be for Tommy’s benefit
.

It appears that
the
arrangement was that
Declan would operate the account on behalf of his father and Tommy
would receive the profits in order to repay him f
or his support to Declan
over the years
.


10.

However, shortly after this account was opened, Cantor Fitzgerald raised
its margin rates

significantly and as a result

Declan decided to move
all
four
accounts to another CFD provider
.


11.

On 9 August 2007 there was
a
recorded
telephone discussion between
Declan and Ramy Soliman
,

an Institutional Sales Manager
of the
Claimant
,

during which Declan enquired about moving
all four of
the
Cantor Fitzgerald
accounts to the Claimant
.

Declan
explained that
the
reason
he want
ed

to transfer the accounts
to the Claimant
was
because
Cantor Fitzgerald had recently raised its margin rates for equity CFDs.
During the course of the conversation Declan stated that he currently
held
around €6m of stock and
added that
at any one time he usually held
at least €5m.
discussion
with Mr Soliman about margin rates and commission levels

on CFDs
. As
a result, t
he Claimant
alleges that

it was c
lear from the conversation that
Declan was a sophisticated trader with extensive experience of CFDs.



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12.

During th
is

conversation Declan also stated that he sometimes traded
under the name “TJC”
.

However, a
t no point during the conversation
is
it recorded

that
TJC was a company or

that
he held any of the four
accounts as agent for or on behalf of any company
; nor was there any
suggestion by Mr Soliman that a company account could be opened in
Declan’s name and then transferred into the

company’s name at a l
ater
date.

Mr Soliman
did
,

however
,

explain

that

in order to op
en an account
with the Claimant

Declan could go to the Claimant’s website and either
marked for his attention or he coul
online.


13.

The is no dispute that
Declan chose the latter option and
shortly after
6pm on 9 August 2007 two online application forms were submitted to
the Claimant on behalf of the Defendants.

The first application form in
re
spect of account CB804 was submitted at
18
.13

and the second in
respect of account CB805 was submitted at
18.24
.



14.

It is common ground that
the first application (in respect of CB804) was
submitted by Declan Crinion on his own behalf. However,
there is a

dispute in relation to
the circumstances in
which the second application
(in respect of CB805) was submitted
.
In his original Defence dated
28
August 2009,
Tommy stated
that Declan had
the application form

on his behalf
” (see D
ef
ence para 3a(iii)
)
. However,
on 7 October 2011 (over 2 years later and only one month before trial)
Tommy served a response to
a
Request for Further Information
from the
Claimant
stating
that Declan
had
submitted the application without his
instructions a
nd “
on his own initiative and for his own purposes”

(see
Response 1.1
).
As a result
,

on 24 October 2011 Tommy Crinion served an
Amended Defence stating that the application had been submitted “
in his
name”

rather than “
on his behalf”

(see Amended Defence
para 3(a)(iii)
)
.

In cross
-
examination Tommy accepted that this represented a
fundamental change to his case but was unable to provide any

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explanation as to why he had only sought to amend his Defence one
month be
fore trial
.


15.

The
Claimant’s
online a
pplicat
ion form had fields that
required the
following information:
(i)
the Defendants’
(ii)
their
(iii)
their
approximate annual income and the estimated value of their savings and
inv
estments; and
(iv)
their knowledge and experience of CFDs. The
application form also required the Defendants to chose between a
standard account and a limited risk account and to tick a box confirming
that they had read and understood the following

docume
nts
:
(i)
the

CFD
Risk Disclosure Notice
(ii)

the CFD Customer Agreement (“the Initial
Customer Agreement”)
and agreed to be bound by its terms
(iii)

the
Interm
ediate Customer Notice
.


16.

The information submitted
indicated that b
oth Defendants
had
significan
t assets (€10m each) and extensive knowledge and experience
of CFDs. Both accounts were requested to be limited risk accounts. The
box indicating that they had read and understood the Risk Disclosure
Notice, the Initial Customer Agreement and the Intermed
iate Customer
Notice and agreed to be bound by them was also ticked on both
application forms.
Both
application form
s

specified the
same
email
address “[email protected]
which belonged to Declan Crinion
.


17.

Mr Soliman and Mr Russell
, the Treasurer of
IG Group Hold
ings Plc
the
Claimant
’s parent company
,
explained th
at the
process
for classifying
customers and opening CFD trading accounts
is
a
highly automated

and
proven
one which is reliant on information provided by the client
.

In the
majority of cases applications

can be approved without any
human
involvement on the part of the Claimant’s employees. Such involvement
is only required in exceptional cases.
In this case
,

the
only reason the
Defendants’ applications did not automatically pass the account opening
check
s
was
because they were not resident in the UK

but in Ireland.




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18.

As a result, on
10 August 2007 Mr Soliman
sent an email to Declan timed
at
09.28

requesting proof of identity

in the form of a copy

of
(i)
his
passport

and
(ii)
an original utility bill sho
wing
his name and address

as
set out in
his application form
. By an email timed at 12.43 Declan replied
attaching copies of both his and Tommy’s passports and copies of utility
bills and bank/credit c
ard statements for each of them.

On receipt of
these do
cuments the Claimant carried out URU authentication check
s

on
the Defendants’ passports

which they passed.




19.

At 12.58 on 10 August 2007 (before either of the accounts was opened)
Declan faxed a
signed
copy of a Power of Attorney allowing him to open
and o
perate his father’s account (CB805).
I
n his original Defence
dated
28 August 2009
Tommy appeared to accept that he had signed
the Power
of Attorney
(see Defence para 3a(v)
)
.

However, in his witness statement
dated 7 October 2011
Tommy Crinion denied
(for

the first time)
that he
h
ad signed it (see Tommy para 20
). In light of
this
very
late
change in
Tommy’s case, both parties obtained
expert evidence
from handwriting
experts. The agreed statement from the experts confirms that Tommy
did
not

sign the Powe
r of Attorney, although
the experts agree that
the
signature was sufficiently similar that a
n unsuspecting person

may not
have realised that it was not
a
genuine
signature
.


Accordingly,
the
Claimant accepts that
Tommy
did not
sign the Power of Attorney
pe
rsonally
,

but
den
ies
that
it
must have known that this was the case as
suggested at para 21 of Tommy’s witness statement
.



20.

Significantly, however,
Tommy
confirmed in cross
-
examination what he
had said at paragraph 20 of his witness statement, namely that

Declan
had
told him that a Power of Attorney was required

in order to carry out
trading on the account and that he expressly authorised Declan to sign
the Power of Attorne
y on his behalf
on that basis
.

Declan also confirmed
in cross
-
examination that he h
ad explained to his father that the Power
of Attorney was required to o
pen the account in Tommy’s name.



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21.

At 1
3
.19 on 10 August 2007 Mr Soliman sent an email acknowledging
receipt of the Power of Attorney and stating that he was waiting for the
accounts to
be “signed off”
.

The accounts were subsequently opened and
b
y emails timed at 15.27
and 15.28
the Defendants
, per
Declan
,

were
notified that both accounts had been opened as limited risk accounts
(as
requested in both application forms)
and that on the ba
sis of the
information provided in the application forms they had been classified as
intermediate customers under the FSA Rules. Both accounts were
initially opened under the terms of the Initial Customer Agreement
which was in force at that time.


22.

At aro
und 15.30 on 10 A
ugust 2007 there was a further recorded
t
elephone conversation between Declan and Ramy Soliman to discuss the
transfer of the Defendants’ CFD positions from the four accounts at
Cantor Fitzgerald to the Claimant
.

During this conversation
Declan
stated
that all four
of the
accounts with Cantor Fitzgerald were non
-
limited risk accounts

(i.e. they were not operated with a guaranteed stop
loss)
.

This was confirmed by Declan in cro
ss
-
examination
.


As a result
,

Mr Soliman pointed out that
in or
der to trade in the same way with the
Claimant
both
accounts
would need
to be upgraded to standard accounts.
The conversation concluded with Declan stating that he would send an
email to Mr Soliman confirming that he wanted to upgrade his account
and that

.

Again, t
here was no
mention during this telephone call that any of the Cantor Fitzgerald
accounts
were

held by
a company (

TJC Ltd
specifically)
or that a
company account could be opened in Declan’s name i
nitially and then
transferred into TJC Ltd’s name at a later date.


23.

At 15.41 Declan Crinion sent an email
as promised
requesting that his
account (CB804) be upgraded to a standard account from
a limited risk
account
. At 15.45 a further email was sent from

Tommy Crinion’s email
account ([email protected]) making a similar request and confirming
that “
As per my power of attorney, you will be dealing with Declan for
all trades”
. On 7 October 2011 Tommy Crinion
stated
for the first time
in

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his witness statem
ent
that he had
not in fact
sent this email
and asserted
instead that it had been sent by Declan who had access to his email
account. However, he accepted during cross
-
examination (in answer to a
question from the Court) that he recalled
having seen the e
mail at the
time
:


Q.

So at some stage you’d have seen this email wouldn’t you?

A.

Yes I’ve got a recollection of seeing it. Yes.



24.

In light of the evidence, the Claimant accepts that this email was sent by
Declan’s personal assistant Sharon Sheehan on

Declan’s instructions:
it
appears that Declan gave her a
hand
-
wr
itten note of what to say in

the
e
mail
. However, i
t is the Claimant’s case that
the
email was expressly
authorised under the Power of Attorney. It is
common ground
that the
email was sent a
fter
the Claimant had received the Power of Attorney
authorising
Declan
to deal with the Claimant on
Tommy’s
behalf
. Thus,
the Claimant allege
s
, that
if the email was sent by Declan
(or on his
instructions)
it was
expressly

authorised under the Power of A
ttorney. At
the very least, the Claimant says Tommy
impliedly

authorised Declan to
send the email on his behalf. In this regard,
it points to the fact
that
nowhere in
his
written or oral
evidence
d
oes

Tommy suggest
that Declan
did not have his authority t
o use his email account or to send the email
on his behalf.


25.

By
dated 10 August 2007
sent to both Defendants
the Claimant
notified
them
in respect of account CB805 was sent
by post
to T
ommy Crinion at his
home address of 17 Sutton Castle, Sutton, Dublin 13, Ireland
.

This

made clear that
the Defendants
had been classified as Intermediate
Customer
s

under the FSA Rules and attached a copy of the Intermediate
Customer Notice

explaini
ng what that meant
.


26.

both
Defendants
confirming that both accounts had been upgraded to standard accounts
as requested

with a total deposit limit of €50,000

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respect of CB805 was sent
by post
to Tommy Crinion’s home addre
ss of
17 Sutton Castle
that the account was “
no longer restricted to cont
rolled risk bets”
and
the Defendants
would be required to pay additional margin if
their
positions were running at losses. It also included the express
salutary
warning: “
Please be very careful not to risk more than you can afford to
lose”
.



27.

At paragra
ph 23 of his witness statement Tommy denied ever having
received either of the
se

.

However,
there was no evidence that
Tommy

admit
ted

t
hat the Claimant
sent
to him
by post
at
his home address in January 2009
.

I
n cross
-
examination he was unable to offer any explanation at all as to why this
was the case and accepted that it would be a very odd coincidence
if both
ugust 2007 had been lost
.

Declan suggests that
he would have intercepted these
when

looking

after his

father’s post whilst he was away in South Africa
and filed them at his
office
. However, such suggestion

is inconsistent with
the fact that
th
e
only other
posted to Tommy by the Claimant
in
January 2009 remained untouched in Tommy’s letter box until April
2009 and leaves unexplained why they were not included in De
clan’s
disclosure list
.


28.

The reference to a “total deposit
limit” (TDL) of €50,000
dated 13 August 2007
was explained by both Mr Soliman and
Mr Russell
.
When a customer opens a standard risk account, the Claimant also
imposes an automatic limit on the maximum
deposit/
margin permitted
in respect of
a
ll open trades on the account
(in this case €50,000). The
effect of this is to cap the maximum size of
open
trade
s on the account

(to
limit the risk to both the customer and the Claimant)
but it does not
necessarily restrict the amount which can be lost:

the account is still an
unlimited risk account. The TDL can however be increased if the

12

larger scale. As Mr Soliman explained, in this case the size of the
Defendants’ positions on
the Cantor Fitzgerald accounts was such that it
would not have been possible to transfer those positions into a limit
ed

risk account or even a standard risk account
unless the
TDL
was raised
above
€50,000
.


29.

accountants, Deacy & Associates, in order to enable the TDL
on both
accounts
to be increased. Accordingly, o
n 14 August 2007 a Mr Quinn of
Deacy & Associates sent current sta
tements of the Defendants’ asse
ts
direct to the Claimant
. These documents showed Declan’s net assets to
be €13.2m and Tommy’s net assets to be approximately €14.8m.

F
ollowing receipt of these statements of assets, the TDL on Tommy’s
account CB805 was incr
eased to €
2
00,000 and the TDL on Declan’s
account CB804 was increased to €500,000.


30.

Also on 14 August 2007 the
positions from the Cantor Fitzgerald
accounts
were transferred to accounts
CB804 a
nd CB805.


31.

On 30 August 2007 Declan Crinion sent a further emai
l to Mr Soliman
asking him to “
arrange a duplicate account/another account to be
opened under my name


so effectively I would be left with two account
numbers for me personally”

.

As a result, the Claimant opened
a further
account
(
CB988
)

in Declan Crini
on’s name and confirmed this

by email
the same day
. The first transaction on account CB988 was on 5
September 2007.


32.

On 9 October 2007 the Claimant sent an automated email to all of its
customers advising them of changes to its terms of business as a re
sult of
the entry in to force of the Markets in Financial Instruments Directive
(“MiFID”) on 1 November

2007
. This email contained a link to the
Claimant’s new
MiFID compliant
terms and conditions
(“the COBS
Customer Agreement”)
and notified customers tha
t the new customer
agreement would come into force on 1 November 2007
.

The email also

13

confirmed that both Defendants would be classified as Professional
Clients under the new post
-
MiFID

COBS

regime, although they had the
right to request classification as

Retail Clients.



33.

On 30 October 2007 the Claimant sent a further automated email to all
its
customers
,

including the Defendants
,

in advance of the introduction
of MiFID
on 1 November 2007
.
Again this email contained a link to the
Claimant’s new terms an
d conditions
as set out
in the COBS Customer
Agreement.


34.

From 1 November 2007 the FSA Conduct of Business Sourcebook
(“COBS”) came into force
1

COBS Customer Agreement
.
Accordingly, from 1 November 2007 all three accounts were governed
by
the terms of the COBS Customer Agreement.


35.

margin calls in respect of the various accounts, all of which were covered
promptly
by transfers made

or arranged

by Declan Crinion.
It is the
C
laimant’s case that Declan was expressly authorised to pay margin in
respect of his father’s account under clause 2(c) of

the Power of Attorney
.
However, from around
January
2008 onwards the Defendants began
n the accounts and
subsequently defaulted on the margin obligations in relation to all three
accounts.


36.

The first indication of such problems came
on 16 January 2008 when
Declan informed the Claimant that he was in discussions with Bank of
Ireland to arr
ange a loan to cover the margin requi
rements on the
accounts.

Two loans of €250,000 were provided by Bank of I
reland on
17 January 2008 and 11 February 2008
. However, these loans
proved
insufficient and on 19 February 2008 Declan sent an email stating that
he needed further time to organise additional funds to mee
t the margin



1

Prior to 1 November 2007
the relevant FSA Rules had been contained in the Conduct of Business
Rules (“COB Rules”).


14

obl
igations on the accounts
. It was around this time that margin calls
started not to be met

promptly or at all
.


37.

Under clauses 14(1) and 15(1) the COBS
Customer Agreement
all margin
payments requested by the Claimant
were
due immediately on
demand,
failing which under clause 16(2) the Claimant was entitled to close out all
or any of the Defendants’ positions at its absolute discretion w
ithout
further notice.


38.

March 2008
and January 2009 the Claimant and
Declan Crinion entered i
nto discussions as to how the
outstanding
margin obligations would be met. During these discussions, Declan
repeatedly assured the Claimant that he was in the process of selling

and

the Claimant refrained from closing out the accounts on
that basis
.
However, despite Declan’s repeated reassurances, no payments were
forthcoming.
Moreover, at no point during these protracted discussions
did Declan suggest that he was not personally li
able in respect of account
CB988: he accepted in cross
-
examination that the first time he
suggested that this was
the case
was in his Defence date
d January 2010
.


39.

On or around 18 March 2008 a Notice of

Acceptance of Transfer
was sent
to the Claimant appar
ently signed by Tommy allowing funds to be
transferred from Declan’s account CB988 to cover margin calls on
Tommy’s account CB805. Although Tommy did not suggest in his
witness statement that the signature on this document was not genuine,
the handwriting

experts appear to agree that this was probably not his
signature (and therefore it is to be inferred that it was signed by Declan
on Tommy’s behalf in the same way as
the Power of Attorney
)
.


40.

On 14 April 2008 Declan emailed the Claimant stating that he wa
s
working with his bank on “a finance restructuring package” and they
next 7 days and which would release funds to cover

the margin payments

15

due
. On 15 May 2008 Declan emailed the Cl
aimant again to say that the
closing had been delayed and that he was awaiting a new closing date
and in the meantime he thanked the C
laimant for its patience
.


41.

On 28 May 2008 Declan sent a further update on the “pending asset
sa
le”
. He followed this up
o
n 12 June 2008 with an email stating that he
to be able to raise €1m from this and the sa
le of another investment
. On
27 June 2008 the Claimant received a letter from Patrick F O’R
eilly
Solicitors stating that they were acting for both Declan and Tommy in
connection with a property sale which was expected to release €400,000.


42.

On 30 June 2008 Declan sent a further email to the Claimant explaining
that the closing had still not taken

place but that they were pressing the
purchaser and stating that they were owed in excess of €1.1m from this
investment and expected to receive €500,000 by the end of July 2008.


43.

On 17 July 2008
there was a slight change in
the
tone
of the
correspondence
in that
Declan sent a further email suggesting that the
reason he had not yet paid anything towards the outstanding amounts
due
was
because he
wa
s concerned that if he did so the Claimant would
simply close out the positions and crystallis
e losses on the a
ccounts
.


44.

The Claimant’s position during these protracted negotiations is neatly
encapsulated by
an

email sent on 23 October 2008 stating:


… we have been maintaining open positions across the three accounts
for quite some time on the understanding that
funds are being sent,
economic climate you have found it more difficult than expected to
liquefy the necessary assets, and you have informed us of at least one
asset sale that is being stall
ed from the purchaser’s side. I feel that it
is in the best interests of both parties to come to an agreement over a
plan of action going forward…”


45.

By November 2008, however, the Claimant was starting to run out of
patience. On 7 November 2008 Mr Russe
ll on behalf of the Claimant
wrote to Declan stating that given the repeated failure
s

by Declan to

16

honour commitments
,

the Claimant was left with no other option but to
close out all positions on all of the accounts unless a concrete proposal
for payment w
as receiv
ed by 10 November 2008
. On 10 November 2008
Declan replied repeating that assets sales were “in progress” and stating
that he was “

.


46.

On 13 November 2008 Declan sent an email attaching current
statements

, his father and TJC Ltd
. According to
the
attached spreadsheets
, Tommy’s net ass
ets were just over €10m

and
Declan’s were just o
ver €8m at that time
which suggested that they had
margin due on the
accounts.
It was accepted during cross
-
examination that these

were accurate
.


47.

Thereafter nothing much appears to have happened until January 2009.
On 20 January 2009 the Claimant

Howev
er, it appears that no response was received

and as
a result the
by post and email
to both
Defendants pointing out that they were in defau
lt and demanding
payment of €250,000 in respect of a
ccounts CB804 and CB988
and
€150,
000 in respect of CB805
by 4pm on 30 January 2009 or it would
commence closing out the accounts.


48.

Abbi

(a
solicitor working in
the
Claimant’s legal department)
and Declan
Crinion at which Declan confirmed that the Defendants were unable to
fund the
ir

margin obligations
. On that basis the Claimant stated that it
would most likely close out the positions on

all three accounts.
During
cross
-
examination Declan confirmed that the
Claimant’s
note of the
e was accurate
.



17

49.

On 30 January 2009 the Claimant wrote to both Defendants
again
by
email and post
2

confirming that it would commence closi
ng out the
accounts from 4pm on 30 January 2009. The Claimant commenced
closing out the accounts on 2 February 2009 and the process was


50.

I
t is the Claimant’s case that the amounts due on the closing out
of
the
accounts are:
(
i)

€824,074.18 or £701,204.75 in relation to CB805;
(ii)

€498,784.55 or £424,515.65 in relation to CB804;
(iii)
€887,260.48 or
£755,147.44 in relation to CB988. The Claimant now claims these sums
as debts against Tommy Crinion in relation to CB805 and again
st Declan
Crinion in relation to CB804 and CB988.


51.

Declan was unrepresented at trial but he presented his case clearly and
well, if I may say so. His case is that all these accounts were operated by
him alone
but only CB
804 was his personal
but
limited ris
k
responsibility; CB988 was a company account. Furthermore, the
Claimant
was
responsible for all or part of the losses on the account
s

because they did not close
them

down sooner

when it was obvious there
sitions were
unsustainable
. As he put it with a humour evocative of WC Fields “they
should not open the bar and give an alcoholic the opportunity to drink
more than was good for him”.


52.

Tommy was represented at trial by Mr Stuart of Counsel and new
solic
i
to
rs instructing him. The essence of his case is
quite simply
that he
did not authorise Declan to operate CB805 in his name and there is no
personal liability on his

part for it;
nor one without limited risk.


53.

Both of them criticise the way that on
-
line ac
counts are set up without
adequate human scrutiny or proper procedures to protect consumers
against the risks of significant personal loss and impecuniosity:
which
are said to amount to
breaches of FSA rules.




2



18


54.

Their defences necessitate a

judicial
evaluat
ion of the witness evidence
agains
t
the background
facts rehearsed above
.



55.

T
he guidance given

in the extra
-
judicial writing of the late Lord Bingham
of Cornhill approved by the courts is apposite.

In
“The Judge as Juror:
The Judi
cial Determination of Factual Issues”

published in “The
Business of Judging”, Oxford 2000, reprinted from Current Legal
Problems, vol 38, 1985 p 1
-
27, he wrote:


“. . . Faced with a conflict of evidence on an issue substantially effecting
the outcome of a
n action, often knowing that a decision this way or that
will have momentous consequences on the parties' lives or fortunes,
how can and should the judge set about his task of resolving it ? How is
he to resolve which witness is honest and which dishonest,

which
reliable and which unreliable? . . .

The normal first step in resolving issues of primary fact is, I feel sure, to
pleadings in the action should have identified, but often do not) such
fac
the parties may throw a very clear light on their knowledge and
intentions at a particular time. In other cases, evidence
of tyre marks,
debris or where vehicles ended up may be crucial. To attach importance
to matters such as these, which are independent of human recollection,
is so obvious and standard a practice, and in some cases so inevitable,
that no prolonged discussio
bearing in mind, when vexatious conflicts of oral testimony arise, that
these fall to be judged against the background not only of what the
parties agree to have happened but also of what plainly did happen,
even th
ough the parties do not agree.

The most compendious statement known to me of the judicial process
involved in assessing the credibility of an oral witness is to be found in
the dissenting speech of Lord Pearce in the House of Lords in
Onassis

19

v Vergottis

[
1968] 2 Lloyds Rep 403 at p 431. In this he touches on so
many of the matters which I wish to mention that I may perhaps be
forgiven for citing the relevant passage in full:

''Credibility' involves wider problems than mere 'demeanour' which is mostly
conce
believes it to be. Credibility covers the following problems. First, is the witness
a truthful or untruthful person? Secondly, is he, though a truthful person
telling something less th
an the truth on this issue, or though an untruthful
person, telling the truth on this issue? Thirdly, though he is a truthful person
telling the truth as he sees it, did he register the intentions of the conversation
correctly and, if so has his memory cor
rectly retained them? Also, has his
recollection been subsequently altered by unconscious bias or wishful thinking
or by over much discussion of it with others? Witnesses, especially those who
are emotional, who think that they are morally in the right, te
nd very easily
and unconsciously to conjure up a legal right that did not exist. It is a truism,
often used in accident cases, that with every day that passes the memory
becomes fainter and the imagination becomes more active. For that reason a
witness, ho
wever honest, rarely persuades a Judge that his present
recollection is preferable to that which was taken down in writing
immediately after the accident occurred. Therefore, contemporary documents
are always of the utmost importance. And lastly, although
the honest witness
believes he heard or saw this or that, is it so improbable that it is on balance
more likely that he was mistaken? On this point it is essential that the balance
of probability is put correctly into the scales in weighing the credibility

of a
witness. And motive is one aspect of probability. All these problems
compendiously are entailed when a Judge assesses the credibility of a witness;
they are all part of one judicial process. And in the process contemporary
documents and admitted or i
ncontrovertible facts and probabilities must play
their proper part
.”


accounts of different witnesses is so gross as to be inexplicable save on
the basis that one or some of the witnesse
s are deliberately giving
evidence which they know to be untrue . . . . more often dishonest
evidence is likely to be prompted by the hope of gain, the desire to avert
blame or criticism, or misplaced loyalty to one or other of the parties.
The main tests
are, I think, the following, although their relative importance will vary
widely form case to case:

(1) the consistency

of the witness's evidence with what is agreed,
or clearly shown by other evidence,

to have occurred;

(2) the internal consistency of the witness's evidence;


20

(3) consistency with what the witness has said or deposed on
other occasions;

(4) the credit of the witness in relation to matters not germane to
the litigation;

(5) the demeanour o
f the witness.

The first three of these tests may in general be regarded as
giving a useful pointer to where the truth lies. If a witness's
evidence conflicts with what is clearly shown to have occurred,
or is internally self
-
contradictory, or conflicts wi
th what the
witness has previously said, it may usually be regarded as
suspect. It may only be unreliable, and not dishonest, but the
nature of the case may effectively rule out that possibility.

The fourth test is perhaps more arguable. . . .”


56.

The follow
ing guidance of Lord Goff in
Grace Shipping v. Sharp & Co

[1987] 1 Lloyd’s Law Rep. 207 at 215
-
6 is also helpful:.

“And it is not to be forgotten that, in the present case, the Judge was faced with
the task of assessing the evidence of witnesses about tele
phone conversations
which had taken place over five years before. In such a case, memories may
very well be unreliable; and it is of crucial importance for the Judge to have
regard to the contemporary documents and to the overall probabilities. In this
con
nection, their Lordships wish to endorse a passage from a judgment of one of
their number in
Armagas Ltd v. Mundogas S.A
. (
The Ocean Frost
), [1985] 1
Lloyd’s Rep. 1, when he said at p. 57:−


Speaking from my own experience, I have found it essential in cases of fraud,
when considering the credibility of witnesses, always to test their veracity by
reference to the objective facts proved indep
endently of their testimony, in
particular by reference to the documents in the case, and also to pay particular
regard to their motives and to the overall probabilities. It is frequently very
; and where there is a
conflict of evidence such as there was in the present case, reference to the
objective facts and documents
, to the
witnesses’ motives
, and to the
overall
probabilities
, can be of very great assistance to a Judge in ascertaining the
t
ruth.”

[emphases added].

That observation is, in their Lordships’ opinion, equally apposite in a case
where the evidence of the witnesses is likely to be unreliable; and it is to be

21

remembered that in commercial cases, such as the present, there is usually

a
substantial body of contemporary documentary evidence.”

In that context he was impressed by a witness described in the following
terms.

“Although like the other main witnesses his evidence was a mixture of
reconstruction and original recollection, he to
ok considerable trouble to
distinguish precisely between the two, to an extent which I found convincing
and reliable.”


That is so important, and so infrequently done.



57.

This approach to fact finding was amplified recently by Lady Justice
Arden in the Cour
t of Appeal in
Properties) v. Ahmed and others
[2011] EWCA Civ. 610, in paragraphs 11,
12 & 14:

11. By the end of the judgment, it is clear that what has impressed the
judge most in his task of fact
-
finding was the

absence
,
rather than the
presence, of contemporary documentation or other independent oral
evidence to confirm the oral evidence of the respondents to the
proceedings.

12. There are many situations in which the court is asked to assess the
credibility of witnesses
from their oral evidence, that is to say, to
an essential part of the function of a trial judge and he or she has to
decide whose evidence, and how much evidence, to accept. This task

is
not to be carried out merely by reference to the impression that a
witness made giving evidence in the witness box. It is not solely a
matter of body language or the tone of voice or other factors that
might generally be called the 'demeanour' of a wit
ness. The judge
should consider what other independent evidence would be available
to support the witness. Such evidence would generally be
documentary but it could be other oral evidence, for example, if the
the judge would
such as evidence in texts or e
-
mails, in which the defendant seeks or is
given instructions as to how he should carry out work. This may be
particularly important in cases
where the witness is from a culture or
way of life with which the judge may not be familiar. These situations
can present particular dangers and difficulties to a judge.

14. In my judgment, contemporaneous written documentation is of the
very greatest impo
rtance in assessing credibility. Moreover, it can be
significant not only where it is present and the oral evidence can then
be checked against it. It can also be significant if written
documentation is absent. For instance, if the judge is satisfied that

22

certain contemporaneous documentation is likely to have existed were
the oral evidence correct, and that the party adducing oral evidence is
responsible for its non
-
production, then the documentation may be
conspicuous by its absence and the judge may be a
ble to draw
inferences from its absence.


58.

This judgment will follow all this guidance in the relevant fact finding
concerning witness testimony relating to the issues in dispute


Mr Soliman

59.

Mr Soliman is a former employee of the Claimant who left the Claim
ant
in April 2010.
In August 2007 he was employed as a “Liaison Dealer”
ting and CFDs.
H
e was the Claimant’s primary point of contact with Declan Crinion in
relation to setting up the accounts in

August 2007. He
gave his evidence
robust
ly

but also made concessions where appropriate.
H
e stood his
ground when questioned repeatedly over whether there
was
anything
odd about the similarities between the two application forms submitted
on 9 August 2007

or that
should have put the Claimant on notice that
Tommy had not filled in his application form
yet

he
was prepared to
concede that it was unusual to see the same mobile telephone number in
both appl
ication forms
. Equally, he was at pains to
distinguish

where he
was relying on his actual recollection and where he was reconstr
ucting
events
.
His evidence had the important hallmarks of consistency,
probability and disinterest. He was an impressive witness and I accept
his evidence.


Mr Russell

60.

Mr Russell
is
qualified accountant and
the Treasurer of IG Group
Holdings Plc, the Claimant’s parent company. He
was
involved with the
Defendants’ accounts principally after

they went into default in respect of
their margin obligations.

He gave two witness statement
s on behalf of the
Claimant, although his first statement was largely overtaken by the late
changes in Tommy Crinion’s case. He gave his evidence clearly, honestly
and confidently. He was
consistent in his answers in the face of repeated

23

questioning

abou
t
the Claimant’s classification procedures and why the
Claimant did not contact Tommy Crinion directly but dealt only with
Declan
:

Mr R
ussell never wa
vered in his evidence that the Claimant dealt
with Declan in reliance on the Power of Attorney
.

Equally,
however,
he
was ready to make concessions in relation to certain matters

where
appropriate.

F
or example he accepted that the Claimant could
have done more to ensure that Tommy Crinion had signed
the Power of Attorney
e.g. by having it notari
s
ed or witnessed by a
solicitor but it is the case that
such measures were
un
necessary or
in
appropriate in the circumstances

arising in my judgment. His evidence
had the hallmarks of consistency, probability, common sense and
probity. He was a very impressi
ve witness and I accept his evidence.


Mr Miah

61.

Mr Miah is an employee of Wragge & Co LLP, the Claimant’s solicitors.
He gave
a witness statement

confirming that
the Claimant

had disclosed
all
inion in
relation to the Defendants’ accounts

that it had been able to locate
. H
is
evidence (as s

was accepted by both
Tommy and Declan Crinion.


Declan Crinion

62.

Declan’s “demeanour” both as a self represented advocate and as

a
witness were exemplary but „demeanour’ is a poor guide as to
truthfulness or reliability. Whilst

Declan appeared to be doing his best to
assist the Court and to answer questions honestly



he was charmingly
frank about his addictive gambling nature and
of his sad financial demise

-

there are several
indicia that his evidence was
unreliable and
self
interested:


a.

First
,

a number of matters in his pleaded Defence were clearly
inaccurate, despite the fact that
Declan
acknowledged
in cross
-
examination
that th
e importance of
his Defence

24

accurate was explained to him before he signed the stat
ement of
truth
.

For example
:


i.

He accepted that the reference to transferring
only
two
accounts
(
rather than four
)

from Cantor Fitzgerald to the
Claimant

at para 5.1 of his Defence was wrong
.


ii.

At para 5.11(c)(II) of his Defence it was alleged that the
Claimant only gave him 4 hours


notice that it would
commence closing out the positions on the accounts at 4pm on
30 January 2009. However, this
assertion i
s
clearly
contradicted by the
contemporaneous documents.
T
he
Claimant first put him on notice that it would close out the
accounts in November 2008 unless a concrete proposal for
payment w
as received
. Secondly, on 27 January 2009 the
Claimant expressly w
rote to both Defendants stating that it
would close out all positions on the accounts without further
notice unless it received payment b
y 4pm on 30 January 2009
.
Thirdly,
the note of the
(
made by
a solicitor and
which he accept
ed was accurate) showed that he
that it was likely that the
acco
unts would be closed out
.


iii.

At para 16.2 of his Defence it was alleged that on or about 9
August 2007 the Claimant
expressly told
him that
(i)
it would
be possible
for him to open an account for TJC Ltd in his own
name and
(ii)

that he would not be personally liable in respect
of that account but that he would be the agent of TJC Ltd.
However, he was unable to point to anywhere in the transcripts
of the telephone ca
lls on 9 or 10 August 2007 where such
representations were made. Insofar as he sought to assert that
there was another telephone conversation with

another
representative of the Claimant at the time (but now
untraceable
)
,
Ben Butterworth
,

during which su
ch


25

representations are made, this must be wrong

in light of Mr
Miah’s unchallenged evidence that the Claimant has not been
able to locate any record of any other telephone calls involving
Declan

at that time
with Ben Butterworth
or at all
.


iv.

Numerous breaches

of the COB Rules and COBS were asserted
in his Defence but were conceded during the course of the trial
on the basis that Declan conceded that they were
unsustainable. Declan must have known that some or all of
these allegations were unsustainable at the

time he signed the
Defence: for example, he must have known that he received
regular statements in relation to his accounts.


b.

Secondly, Declan
made at least one assertion
in his witness
statement
which he must have known
was
not true. At para 32 of
his s
on 29 January 2009 “
in the belief that, subj
ect to ratification by
therington, an agreement
not

to close [the accounts] out
had been reached…”

[emphasis added]. However, in cross
-
examin
ation he accepted that the Claimant’s note of the meetin
g
was accurate


stated the
exact
opposite, namely
that
su
bject to discussions with Mr He
theringon closing out seemed
the best/most likely option.


c.

Thirdly, h
is disclosure was clea
rly deficient

despite the fact that he
was represented by solicitors at the time disclosure took place
.

He
2009 but had fai
led to disclose them
. Similarly, he gave evidence
that he kept f
iles in his office in relation to the accounts with Cantor
Fitzgerald and in relation to his father’s account with the Claimant
However, no such documents appear in his disclosure list.



26

63.

H
e was plainly not an independent
witness so far as his fath
er is
concerned
.


64.

In my judgment, his evidence was contradictory, unreliable and self
serving. I reject his evidence where it is in conflict with contemporaneous
e
-
mail and transcript records, disc
losure lists and the evidence of the
Claimant’s witnesses.


Tommy Crinion

65.

Tommy was a poor witness in giving his testimony.


66.



a.

Concerned to argue his own case:

O
n numerous occasions during
h
is oral evidence it was clear that Tommy was more concerned to
argue his own case than to answer the questions
actually being
put
to him
. He was evasive.


b.

Gave confused and contradictory evidence
:
He was
frequently

confused and contradictory.
For example,

i
nitially in cross
-
examination
Tommy asserted
that he had no understanding at all of
the concept of “
leverage



an important feature of CFDs

-

in August
2007
. However, in his witness statement
at paragraph 9 he
had
stated that
at the relevant time
he
ha
d

vaguely understood that
instead of buying the shares themselves Declan’s trading involved
the trader putting up a loan and Declan putting up the deposit”
.
He was asked about this apparent inconsistency in cross
-
examination and his evidence
in response
was confused
, evasive

and
in parts
contradictory:


Q.

Right. We can see what it says in your witness
statement. If you flip forward to paragraph 9.
--

A. Right.


Q.

So you told us just now that you had no idea of the
concept of leverage unt
il proceedings started. The bottom of
page 28 you said, you say: “I vaguely understood”
-

so that’s at
the time both of the accounts were opened in August 2007: “I

27

vaguely understood that instead of actually buying the shares
themselves, Declan’s trading
involved the trader putting up a
loan and Declan putting up the deposit.”
--

A. Yes.


Q.

So you did understand the concept of leverage?
--

A.
Not really no.


Q.

Well ...
--

A. I still don’t.


Q.

re
aware of the concept of borrowing
-

putting down a deposit
and borrowing the rest, that’s right isn’t it?
--

A. Yes that’s
right.


Q.

So do you want to correct the evidence you gave just
now that you didn’t have any idea about leverage until
proceedi
ngs started?
--

A. No I didn’t have any idea about
leverage.


Q.

If Declan was putting up the deposit only and there was
a loan for the rest, who did you think would be responsible for
repaying the loan?
--

A. I didn’t know. I didn’t open this
accou
nt, I have nothing to do with this account.


Q.

Did you even think about
-

so you were aware, you say
you were aware that Declan was putting up a deposit and
somebody else was putting up a loan?
--

A. No.


Q.

Who did you ...
--

A. No, sorry, I wasn
’t aware anyone
was putting up a loan.


Q.

Well you said that in your witness statement, we’ve just
looked at it, paragraph 9: “I was vaguely aware”, that’s exactly
what you said, are you saying that’s wrong?
--

A. No I’m
vaguely aware of it.


Q.

So you
r witness statement is wrong is it?
--

A. No.


Q.

So which is right, you were either aware or you weren’t?
--

A. Yeah.


Q.

Will you answer the question?
--

A. Yes. Aware yes.


Q.

You were aware in August 2007 that Declan was putting
up the deposi
t and somebody else was putting up the loan, the
trader was putting up the loan?
--

A. No I wasn’t ...



c.

Exaggerated his evidence in order to help his own case:

On occasion

Tommy
demonstrably
exaggerate
d

aspects of his evidence
seemingly
in order to hel
p his case. For example, in his witness

28

statement he gave the impression that he was not at all
knowledgeable about business matters except for some limited
experience
gained
from
involvement in
his toyshop and newsagency
business
. However, in cross
-
exam
ination he revealed himself to be
a highly sophisticated
businessman
who had run a successful
business importing toys from China and who had a working
knowledge of
complex
financial instruments
such as bills of lading,
e
transactions
.

Similarly, in his
witness statement he made wide ranging and extremely serious
(and so far as the Claimant is concerned potentially defamatory)
allegations that the Claimant had dishonestly colluded with Declan
to keep him in the dark abou
t the status of his acco
unt (see Tommy
para 42
)

but
accepted
in cross
-
examination that
the allegati
on of
dishonesty was unfounded
and he was exaggerating th
e true
position.


d.

M
ade implausible assertions
:

Tommy
also
made
various
implausible assertions.

For

example, despite the fact that he
claimed that he could not remember having signed his own
Amended Defence on 24 October 2011 only two

weeks earlier,

he
from the Claimant dated 10 and 13 A
ugust 2007 over 4 y
ears
previously
.



e.

Refused to accept obvious propositions:

He also
refused to accept
obvious propositions. For example,
(
initially at least
)

he refused to
accept that he was aware
that
possibility that sinc
e account CB805 was in his name he might be
personally liable in

r
elation to it
. Similarly, he would not accept
that opening an account with a new CFD provider would
have
require
d

an application form


f.

Unable to explain matters in his own
documents
:

At paragraph 7 of
his witness statement, Tommy referred to account opening

29

documents in respect of his Cantor Fitzgerald account
.

However, in
cross
-
examination he stated that he had no such documents
in his
possession
and could not explain why
he had referred to them or
even what documen
ts he had meant
.

In addition, extraordinarily

he
denied ever having seen his own disclosure statement before,
despite having apparently

signed it
.


67.

Finally and most importantly of all,
Tommy
was unable to give
any
credible explanation
about why he had
radically
changed his pleaded
case at
the last minute or how his original Defence came to be pleaded as
it was.
He
accepted that
his
case
which
he sought to advance at trial

involved at the very least a serious
betrayal of trust by his own son and at worst a deliberate fraud on him
by
Declan
.

However,
he suggested that it
had
never occurred to him to
mention this to his previous solicitors, Thrings, or to anyone
else
until
on
e month before trial
,

even though by that stage proceedings had been
on foot for well over
two
years
.
Moreover, this is despite the fact that he
attended a two day mediation in June 2010 with Mr Sear, a partner at
Thrings, at which
he accepted that
they
d
iscussed his case
(the inference
must
be they did so
). His cross examination is revealing
about this testimony:

“Q.

... you are saying that at the very least there was a serious
--

A. Yes.


Q.

And at worst a
deliberate fraud by him on you, is that right?
--

A. Yes.


Q.

You said just now that you left your defence up to Declan, you
is that the explanation for ...
--

A. Yes.


Q.

... ho
w your defence is wrong in, or was wrong until you
corrected it?
--

whatever you call it, Thrings.


Q.

What I suggest to you is that makes no sense. If your case is
correct ...
--

A. Mm.


Q.

... and

you really thought from the outset that Declan had
--

A. Yes.


30


Q.

... or possibly even defrauded you ...
--

A. Yes.


Q.

... and made you liable for 800,000 Euros ...
--

A. Yes.


Q.

... there is no way that you wo
uld have allowed him to deal
with your legal affairs and there is no way your lawyers, Thrings,
would have been prepared to represent both you and him?
--

A. Well
they did it for a while and then they said it was conflict of interest in
the case.


Q.

Ye
s, that was in October 2011?
--

A. Yes.


Q.

So you never mentioned to Thrings until ...
--

A. No I had no
correspondence with Thrings.


Q.

You never mentioned to anyone at Thrings until October 2011
that in fact what had happened was Declan had serio
your trust or defrauded you?
--

A. Yes.


Q.

You never thought to mention that very important ...
--

A. I
didn’t.


Q.

--

A. Well he was standing ...


Q.

... Mr Sear?
--

A. ... he was standing ...


Q.

When yo
--

A. He ultimately transferred shares and
did all that himself with his money, so I didn’t think I was liable for


Q.

-

this was after
proceedings had been issued
-

if y
ou’re right you must have known by
that stage ...
--

A. I didn’t meet Mr Sear.


Q.

You’ve told us already today twice that you did?
--

A. A
mediation, I spoke to him on, on the telephone I didn’t meet him.


Q.

You spoke to him on the telephone and yo
--

A.
Yes.


Q.

... and you discussed the case with him?
--

A. I’m sorry I met
him in mediation.


Q.

And you spoke to him on the telephone?
--

A. Yes.


Q.

And when you spoke to him you talked about the case?
--

A. At
the conference

yes.


Q.

And he asked you questions presumably about your case
-

I
don’t want to know what advice he gave you, but I presume your

31

evidence here, it had never occurred to you that you ought to point out
that in fact what happened was it’s all Declan’s faul
trust, possibly even defrauded you, and that’s how you got into this
mess
-

it never even occurred to you to tell him that?
--

A. Well I
would expect probably reading the case he would have known that.


Q.

But you never, it never occ
urred to you ...
--

A. I never said it.


Q.

... to tell him ...
--

A. No.


Q.

... explicitly that that’s what had happened?
--

A. No.


Q.

And that’s your evidence to his lordship, it never ...
--

A. Yes.


Q.

... occurred to you?
--

A. No.”


68.

Mr Stuart
submits that Tommy is a simple ageing innocent pawn of his
son and that these criticisms are unfair.


69.

In my
judgment, the criticisms are fair. His evidence was externally and
internally inconsistent, self serving and incredible on all the key poi
nts in
the case against him. His motives are obvious for he stands to lose all
that his son managed to win for him and more. His very comfortable
existence is at stake. The only
credible explanation
f
or Tommy’s last
minute change to a cut throat defence bl
aming Declan for everything is
that it was a tactical
and cynical
decision to try and preserve as much
money as possible for the family as a whole

and prevent the Claimant
from recovering monies due to it
. From the point of view of the family, it
would cl
early be better to blame Declan because he is essentially
bankrupt anyway (and certainly will be if he loses the present claim
against him) and therefore a further debt of €800,000 would not really
matter to him,
and
it would allow Tommy to preserve what a
left

(includ
ing

a property in South Africa)
. However, a judgment against
both
Tommy and Declan would effectively leave the Defendants
as a
family
.


70.

I find him to be
an untruthful witness.

I disbelieve the evidence he
gave
to the court.



32

Sharon Sheehan

71.

Sharon Sheehan is Declan Crinion’s personal assistant. Tommy Crinion
was granted permission out of time to rely on her statement dated 26
October 2011

in which she gave evidence that Declan, not Tommy, had
signed the Po
wer of Attorney and that she had sent the email on 10
August 2007 asking for Tommy’s account to be upgraded to a standard
account based on Declan’s handwritten instructions. The Court did not
hear oral evidence from her because her evidence on both these
points
was accepted by the Claimant.


72.

The issues which were relatively prolix can now be more simply resolved
after these findings upon the witness evidence against the background of
contemporaneous documents rehearsed above.


Issues specific to Tommy Cr
inion Claim

73.

specific to the Tommy Crinion claim.


Issue 1:
(a)
Did Declan complete and submit the application form
in respect of account CB805?
(
b) If so,
did he do so

with his father’s
a
uthority and if not did Tommy subsequently ratify his son’s
actions?

74.

In light of the evidence

at trial
, the
re is no dispute that the

ans
wer is
“Yes”:

and submitted by Declan
,

not Tommy
.

Howeve
r, i
t is the Claimant’s case
that the application form was submitted with Tommy’s
(i)
express

or at
the very least
(ii)
implied

authority
,

and in any event Tommy
(iii)
ratified

Declan’s actions.


(i)
Express Authority

75.

The Claimant’s primary case on this is
sue is that Tommy expressly
authorised Declan to submit the application form on his behalf.
This
was
what was
pleaded in Tommy’s original Defence

and Tommy was content

33

to run his case on that basis for over two years until
only one
month
before trial.


76.

Mr Stuart submits that as there is (1) an absence of contemporaneous
evidence, such as e
-
mails, or witness evidence, linking Tommy with the
application and (2) agreed forensic evidence that he did not sign any
application, then the court must accept Tommy’
s evidence at trial.

He
further submits that these were Declan’s accounts based on Declan

s
conversation
with Mr Soliman and Tommy would not have authorised
anything which put him at personal risk.


77.

In my judgment, Tommy did play a passive role in the ap
plication
. This
was a situation where his son was merely moving
his
,

not Declan’s

authorised account from Cantor Fitzgerald to the Claimant and this was
done with admirable efficiency.
Both Declan and Tommy
gave evidence
that this was Tommy’s money and as
sets enhanced by his grateful son’s
share dealings and development business.
He was an experienced
businessman and his son had great expertise and success with
investment at the time. It was a situation where both had trust in each
other and were in it tog
The reason there was no e
-
mail trail
leading to Tommy’s door or contact by him with the Claimant was simply
that it was more efficient for Declan to look after the accounts as he had
don
e

in the dealings with Cantor Fitzgerald that Tommy accepts
wer
e
with his authority. It is perverse of him to say that dealings with his
account with Cantor Fitzgerald were with his authority but the switch to
the Claimant was not.



78.

I

accept Tommy’s admission in his original Defence

dated 28
th

August
2009 as being t
rue and his Amended Defence and testimony to the court
as false.

There is no credible explanation as to

why he changed his case
in this regard at the last minute
, save to avoid the
judg
ment
consequences where there was no other real defence to the claim o
n his
account
.



34

79.

Accordingly, I find

that the Tommy’s original pleaded case was correct
and Declan submitted the application form on

Tommy’s behalf
,
i.e.
with
his
express

authority.


(ii)
Implied Authority

80.

In any event,
the Claimant s
ubmits that

at the ver
y least Declan was
acting with Tommy’s implied authority. The relevant principles in
relation to implied authority are as follows:


a.

Implied authority is that
“inferred from the conduct of the parties
and in the circumstances of the case”
:
Hely
-
Hutchinson
v Brayhead
Ltd

[1968] QB 549

at 583.


b.

Authority will be implied where one party has conducted himself
towards another in such a way that it is reasonable for that other
person to infer from that conduct assent to an agency relationship.
Consent by the pri
ncipal to the agency relationship need not be
express (and may even be denied) but is often inferred by the Court
from the circumstances. The test is an objective one:
Bowstead &
Reynolds on Agency
(19
th

ed) at para 2
-
030

.


81.

Mr Stuart submits that
Tommy did not impliedly authorise Declan to
open an unlimited risk account and to enter into a contract on a
to trade on the new account and pay the margins.


82.

In cross examination,
De
clan
accepted that

he was authorised
by Tommy
to submit the application form on behalf of his father:

“Q.

-
-

A. I did.


Q.

--

A.

No.


Q.

But he knew you had opened an account with Cantor Fitzgerald
for him?
--

A. Yes.



35

Q.

And ...
--

A. Well he knew I had opened an account for him ...


Q.

Okay.
--

A. ... I won’t say where it ...


Q.

Okay so ...
--

A. ... I wouldn’t have n
eeded to.


Q.

... he knew you’d opened an account for him, you told him you
were going to transfer it to another provider, a company in England?
--

A. Yeah again I, I, I wouldn’t say I’ll transfer it, I would’ve said I’m,
I’m moving, I’m moving away.


Q
.

Okay. So you told him you were going to move that account.
an application form for the company, whichever one it was, to which
you moved to the account
-

is that fair?
--

A. I suppos
e it is fair to say
that yeah.”


83.

Similarly, Tommy confirmed that it was reasonable for Declan to assume
that he was happy for him to submit the application form on his behal
f
:

“Q.

Right, let’s leave that, we’ll move on. The position was this, you
knew he
’d opened an account with someone?
--

A. Yes.


Q.

It was in fact Cantor Fitzgerald?
--

A. Yes.


Q.

You knew he’d opened an account in your name?
--

A. Yes he
told me that.


Q.

And he told you he was going to move that account to a new
provider, th
at’s right isn’t it?
--

A. Yes.


Q.

And you agreed, or at least didn’t object, to him doing so, that’s
right ...
--

A. No I didn’t object.



Q.

Any reasonable person in Declan’s position would have thought
you were happy for him to present an applica
tion form for that new
account with the new provider?
--

A. Yes I suppose that’s right.



84.

In my judgment, this evidence clearly indicates that both Declan and
Tommy knew that Tommy’s account, as well as Declan’s accounts, were
going to be opened and tra
nsferred. At the very least Declan had the
authority of Tommy to act on his account
.

Tommy’s real complaint is that
it was an unlimited risk account but that does not go to authorisation but
to exceeding authority
, this implicitly admi
tting there was autho
rity in
the firs
t
place.

He would have been happy for any limited risk account to
be opened in his name.



36


(iii)
Ratification

85.

In the further alternative, the Claimant submits that Tommy ratified
Declan’s actions

on form
. The
relevant principles in relation to ratification are as follows:


a.

Ratification may be express or by conduct: see Bowstead at para 2
-
070 et seq.


b.

Express ratification is a manifestation by someone on whose behalf
an unauthorised act has been do
ne that he treats the act as
authorised. It need not be communicated to the third party or
agent: see Bowstead (above).


c.

Ratification will be implied whenever the conduct of the person on
whose behalf the act is done is such as to amount to clear evidence

that he adopts or recognises the act. It may be implied from the
mere acquiescence or inactivity of the principal: see Bowstead
(above).


d.

consequences of ratification:

AMB Generali Holding AG v

SEB Liv

[2006] 1 Lloyd’s Rep 318 at [43
].


86.

Mr Stuart submits that Tommy did not have the necessary full knowledge
to be able to ratify the contract and did not in fact do so.


87.

However, in my judgment the evidence demonstrates otherwis
e. It

show
s

that Tommy ratified Declan’s actions in
submitting the
application form
by
inter alia

(1)
allowing the account to remain open
and
(2)
authorising Declan to sign the Power of Attorney on his behalf

to
allow
trading to take place
o
n the account
.


88.

In cross
-
examination
, Tommy admitted this:


37

“Q.

But just on page 232, we’ve seen this already: “I was aware the
account was opened in August 2007.”
--

A. Yes.


Q.

So in August 2007 you were aware it had been opened?
--

A.
Yes.


Q.

Bu
t then on, over the page you say because you didn’t think you
had any risk in relation to the account, you didn’t think it necessary to
inform the claimant of such matters, i.e. that Declan had opened it
without your knowledge or authority?
--

A. Well s
urely they should
have known that, it wasn’t for me to inform them.


Q.

Well, so what you’re saying there is that you were happy
-

once
you found out Declan had opened the account
-

you were happy for
him to keep it going provided that you thought it was o
nly him ...
--

A. That there was no risk to me.


Q.

You were happy for him to have opened the account and
operate it in your name provided there was no risk to you, is that
right?
--

A. Yes.


Q.

So if the account had remained a limited risk account,
which
means that only the deposits made by Declan were at risk ...
--

A.
Yes.



Q.

... you would have been happy for him to keep the account and
operate it in your name?
--

A. Yes.”


89.

Then
again in the following exchange he admitted this
in relation t
o the
Power of Attorney
:

“Q.

So when you told Declan that he could sign the power of
attorney on your behalf ...
--

A. Yes.


Q.

... you must have known then that he had applied for an
account with the claimant ...
--

A. Yes.


Q.

... on your behalf, a
nd you agreed to him signing the power of
attorney on that basis?
--

A. Yes but he was going to trade shares, I
only did it for the shares only.


Q.

Exactly, so you agreed, so you knew he’d opened an account,
applied for it in your name and opened it, a
nd you thought the power
of attorney was required for him to be able to trade on the account?
--

A. Yes.


Q.

So when you said to Declan yes you can sign it on my behalf,
you didn’t qualify it in any way did you?
--

A. No.”



38

90.

In my judgment,

Tommy
was
well
aware
and had the necessary full
knowledge
that Declan had submitted an application form in his
(Tommy’s) name in order to open the account and he acquiesced in that
by allowing the account to remain open and/or not telling Declan to close
the account

or informing the Claimant that the account had been opened
without his authority.
Moreover, it was not necessary for Tommy to
communicate
his approval or agreement
to either the Claimant or to
Declan at the time. It is sufficient that he
tacitly agreed
to and/or
acquiesced in what Declan had done.

T
ommy’s actions in
authorising
Declan to sign the Power of Attorney
on his behalf, specifically on the
understanding that it was required
to
allow
him to trade on the account
,

amounted to an unequivocal act by

Tommy
,

which ratified

the
submission of the application form and the opening of the account.



91.

It is important to remember
in this regard that when
the application
form
was submitted
only a
limited

risk account was requested in
Tommy’s name. Similarly,

when the Power of Attorney was signed

and
the account was opened
,
it was on the basis of a
limited

risk account as
requested in the application form. The request to upgrade the account to
a standard account was only made after the account had been opened
.

Thus, even if

as
Tommy
suggested in his oral evidence
was
only
prepared
to allow the account to be opened on a limited risk basis (i.e. with only
Declan’s money at risk)
and submitting the application form

or
signing the Power of Attorney
which Tommy would have objected to.


92.

Accordingly, I find that the contract was in any event ratified by Tommy.


Issue 2: Is Tommy Crinion bound by the Power of Attorney signed
by Declan on his behalf and if so what is the

effect of this?

93.

This issue sub
-
divides into two issues:
(a)
Is Tommy bound by the Power
of Attorney; and
(b)

if so, what is the effect.



39

(a)
Is Tommy bound by the Power of Attorney?

94.

The Claimant accepts in light of the expert evidence that Tommy Crinion
d
id not personally sign the Power of Attorney
.

However,
the Claimant
submits that
the evidence is clear that Tommy expressly authorised
Declan to sign the Power of Attorney on his behalf
.


95.

Mr Stuart submits to the contrary that Declan did not explain the

contents of the

Power of Attorney and he never saw it. It was not
a deed
and not
binding on him.


96.

However, the evidence is that Declan spoke to
Tommy
before he signed
the Power of Attorney
and told him why the Power of Attorney was
required
.

Tommy expres
sly authorised him to sign it

on his behalf
:

“Q.

So do you accept that’s accurate, that you called him before you
signed it to ask for permission, he said yes?
--

A. Yeah my only, my
only point would be I did call him, I did discuss it with him briefly
.
after I opened the account I’m not sure. I would assume it was just
before to say I need a power of attorney to open the account.


Q.

That’s
-

that’s what I was going to say
-

it must
have been
before?
--

A. I would, I would assume but I, but it’s because obviously
it’s four years ago and even, I know the witness statements some of
them are done since 2009 or 10, it’s very hard to know did you do it,
you know, at five o’clock that ev
ening or at half seven that evening, I
suppose that’s my point.


Q.

Did you explain to him why you needed a power of attorney?
--

A. I said it was to open the account.”


97.

This was confirmed by Tommy in his evidence
:

“Q.

The next thing is the power of att
orney.
--

A. Yes.


Q.

Now your evidence is that Declan told you that a power of
attorney was needed ...
--

A. That’s right.


Q.

... for the account?
--

A. Yes.


Q.

This is at paragraph 20 of your witness statement.
--

A. Yeah.


Q.

“My son did m
ention to me that a power of attorney was
required”
-

do you see that?
--

A. Yes.



40

Q.

Then a few lines down: “I simply presumed”
-

the next line: “I
I assumed that it was therefore nece
ssary for me to provide a power of
attorney to enable him to carry out the trading.”
--

A. Yes.


Q.

Next line down: “So I was content to authorise him to have the
power of attorney.”
--

A. Yes.


Q.

Then you say ...
--

A. Yes just to trade in the s
hares not to
incur any losses ...


Q.

Yes so you were ...
--

A. ... which is ...


Q.

... content to have him on that basis ...
--

A. Yes.


Q.

... as your power of attorney? “I confirm that I did not
personally even sign the power of attorney ...”
-
-

A. Mm.


Q.

“... Declan told me that he would sign the power of attorney for
me and I allowed him to do so.”
--

A. Yes.


Q.

Then at the bottom of the page: “I can, I recall Declan phoning
me and mentioning the power of attorney ...”
--

A. Yes.


Q.

“... he didn’t explain it to me ...”
--

A. No.


Q.

“... but I allowed him to sign it on my behalf.”
--

A. Yes.

Q.

So you expressly told Declan to go ahead and sign the power of
attorney?
--

A. Yes. Understanding that it was just about the shares

not to incur me in any loss.”


98.

Tommy was also
clearly
aware that the purpose of the Power of Attorney
was to allow Declan to operate the account on his behalf
:

“Q.

Well of course you would know it wasn’t because you didn’t
sign it. I mean, are you famili
ar with the concept of a power of
attorney?
--

A. No.


Q.

You’re not?
--

A. No.


Q.

Well it authorises someone to act on your behalf.
--

A. Yes I
know that, yes
-

sorry I know that.


Q.

Yes so you knew it was needed for Declan to operate the
accou
nt on your behalf?
--

A. Yes.”


99.

I
t is
irrelevant whether or not Tommy in fact read the Power of Attorney
before authorising Declan to sign it on his behalf.
T
he position is the
same as if Tommy had signed the Power of Attorney himself. It is well

41

esta
blished that a party signing a contract is bound by the terms of the
he is ignorant of their precise legal effect:
L’Estrange v Graucob Ltd

[1934] 2 KB 394.

There is no need for a
formal

deed:
Bowstead &
Reynolds
para 2
-
035.

Mr Stuart’s technical objections are rejected.


100.

It appear
s from
Tommy’s evidence that he was only prepared to
authorise Declan to open and operate his account on the basis that he
would not incur any personal liabil
ity in relation to the account. Thus, in
the extract from the transcript above he stated that he authorised Declan
to sign the Power of Attorney on the “
understanding that it was just
about the shares not to incur me in any loss.”


101.

However, there is no ev
idence that Tommy ever communicated
any
such
understanding or
limit on his authority to Declan.
On the contrary, his
evidence was clear that he did not communicate any limit on his
authority to Declan
:

“Q.

Exactly, so you agreed, so you knew he’d opened a
n account,
applied for it in your name and opened it, and you thought the power
of attorney was required for him to be able to trade on the account?
--

A. Yes.


Q.

So when you said to Declan yes you can sign it on my behalf,
you didn’t qualify it in any

way did you?
--

A. No.”


102.

Moreover, at the time when Tommy authorised Declan to sign the Power
of Attorney on his behalf all dealings with the Claimant had been on the
basis of a
limited
risk account. That was what had been requested in the
application

form. It was only later that the question of upgrading the
account to a standard account was raised.


103.

This is significant because if the account had remained and been
operated as a limited risk account,
the effect would have been to limit any
losses to a
mount of the margin paid into the account by Declan and
Tommy would not in practice have incurred any liability. This was
confirmed by both Mr Soliman and Mr Russell.

Tommy

expressly

42

confirmed that he would have been happy to allow the account to remain
open and for Declan to trade on it on that basis
:

“Q.

You were happy for him to have opened the account and
operate it in your name provided there was no risk to you, is that
right?
--

A. Yes.


Q.

So if the account had remained a limited risk account, w
hich
means that only the deposits made by Declan were at risk ...
--

A.
Yes.


Q.

... you would have been happy for him to keep the account and
operate it in your name?
--

A. Yes.”


104.

Thus,
again
Tommy’s real complaint appears to be not that he did not
authorise Declan to open and operate the account under the Power of
Attorney but that Declan exceeded his authority by
subsequently
sending
the email asking for the account to be upgraded to a standard risk
account

and thereby exposed him personally to ris
k in relation to the
account
.


105.

However, it is clear from the evidence that
when Tommy authorised
Declan to sign the Power of Attorney on his behalf he intended to do so
and accordingly he
is

bound by its terms.


(b)
If Tommy is bound by the Power of At
torney, what is its effect?


106.

The effect is drastic:


a.

First,
it gave Declan express authority to do the following (see
clause 2 of the Power of Attorney
)
:


i.

Open and operate Tommy’s account. In this regard, it should
be noted that the account was only opene
d after the Power of
Attorney was signed
and received by the Claimant
and
therefore Declan was expressly authorised under the Power to
open the account on Tommy’s behalf.



43

ii.

Deal with the Claimant on Tommy’s behalf which included
giving oral and written inst
ructions. In this regard, Tommy
also expressly authorised the Claimant to accept all
instructions from Declan and the Claimant was not obliged to
make any further inquiries of Tommy before acting on such
instructions.


iii.

To pay margin on Tommy’s behalf in r
elation to the account.


iv.

To do anything else contemplated by the customer agreement
which was reasonably necessary for the purposes of Tommy’s
dealings with the Claimant, inc
lud
ing the
upgrading
of
the
account from a
limited

risk account to a
standard

acco
unt.


b.

Secondly,
Tommy
ratified Declan’s actions in completing and
submitting the application form in respect of the account. By
authorising Declan to open
and operate
the account with the
Claimant, he must necessarily have (at least retrospectively)
auth
orised the completion and submission of the application form
in order to do so.

Indeed, Tommy accepted as much in cr
oss
-
examination
.
In
th
ose

circumstances
,
he must
also
be taken to
have
ratified (and therefore be bound by) the representations made in
th
e application form about his knowledge and experience of CFDs
because the terms of the application form and the Intermediate
Customer Notice were clear: the Claimant’s CFD trading services
were only available to customers with sufficient knowledge and
exp
erience to be classified as intermediate customers.


Issue 3: Was account CB805 opened initially as a limited risk
account and if so was it validly upgraded to a standard, non
-
limited
risk account?

107.

It is clear from the email from the Claimant timed a
t 1
5.28 hrs on 10
August 2007
notifying Tommy that the account had been opened that the

44

account was initially opened as a
limited

risk account in accordance with
the request in the application form.


108.

The email from Tommy’s email account requesting the accou
nt be
upgraded was sent later at 15.45 on 10 August. This was therefore
after
the Claimant had received the
signed
Power of Attorney. The Claimant
accepts that this email was sent by Mrs Sheehan on Declan’s instructions,
after Declan had written out exac
tly what she should say in the email.


109.

Mr Chirnside submits that

the sending of this email was either expressly
or implied authorised by Tommy. Alternatively, Tommy is bound by it
because Declan was acting within his apparent authority.


Express Authori
ty

110.

As set out above,
the upgrade email was sent
after

the Power of Attorney
had been signed and received by the Claimant. T
he terms of the Power of
Authority are clear and Tommy accepted that he did not
qualify or
communicate any limit on Declan’s authori
ty
under it.
Under the Power
of Attorney, Declan was expressly authorised to deal with the Claimant
on Tommy’s behalf and “
To do anything else contemplated by the
customer agreement which was reasonably necessary for the purposes
of the customer’s dealings

with the firm”
.


111.

Mr Soliman explained in evidence that the size of the Defendants’
positions on the Cantor Fitzgerald accounts was such that it would not
have been possible to transfer those positions into a limit
ed

risk account
or even a standard risk
account unless t
he TDL was raised above
€50,000
:

“Q.

Given the size of the positions that were on the Cantor
Fitzgerald accounts, would it have been possible to transfer those
positions into a standard account at I G with the standard 50,000
maximum deposi
t?
--

A. No.


Q.

Would it have been possible, given the size of the Cantor
Fitzgerald accounts in this case, would it have been possible to
transfer those into a limited risk account?
--

A. No.”



45

112.

Thus, it was clearly necessary for Tommy’s account to
be upgraded to a
standard account with an increased TDL before the positions from
Cantor Fitzgerald could be transferred, which was

after all

the whole
point of opening t
he account in the first place. Accordingly, by sending
the email Declan was acting wi
thin his express authority under the Power
of Attorney.


113.

Moreover, even if the Claimant had had any way of knowing that the
email had not in fact been sent by Tommy, under the terms of the Power
of Attorney the Claimant was not required to make any inquiri
es of
Tommy to confirm the instructions.


Implied Authority

114.

Mr Chirnside submits that in the alternative,

Declan had Tommy’s
implied authority to send the email requesting that the account be
upgraded.

The Claimant relies on the following exchang
e in Decl
an’s
cross
-
examination:

“Q.

Did you speak to your father before this email was sent?
--

A.
I don’t believe I did.


Q.

So you called him before filing the power of attorney, do you
think it’s possible that you also called him in a similar way before
send
ing this email just to check?
--

A. I, it may, may have been
mentioned in the same conversation. I don’t, I don’t believe I ever
mentioned that I need to send an email. I don’t believe so.


Q.

But the same applies doesn’t it that you wouldn’t have sen
t this
email on his behalf if you thought he would object to it would you?
--

A. Well again it comes back to the same if, if, if he definitely, he
definitely would have asked more questions or would have asked
questions if I had have asked him.


Q.

Well

let’s put it this way ...
--

A. I didn’t believe I was doing
anything wrong ...


Q.

Yes ...
--

A. ... because I was just ...


Q.

... he’d just authorised you under a power of attorney, so he
agreed to let you have a power of attorney in relation to
the account,
you must have thought it would be okay to send this email?
--

A. Well
I did send the email so I must have thought at the time it was okay to
send the email.


46


Q.

And having discussed it was necessary to send this email to
upgrade the account

to standard account otherwise his positions from
Cantor Fitzgerald couldn’t have been transferred could they?
--

A.
Well it’s, that’s what Ramy Soloman says.”


115.

In my judgment,
it
is clear from the above that
Declan
reasonably
believe
d

that he
had autho
rity
to send the upgrade email

because Tommy
had only just given him authority to open and operate the account and
otherwise it would not have been possible to transfer the positions from
Tommy’s account with Cantor Fitzgerald.

Moreover,
as set out above,
Tommy’s evidence was clear that he never communicated to Declan any
limit on his authority under the Power of Attorney.


116.

It is also relevant in this regard to note that Tommy’s evidence was that
he recalled having seen the upgrade email but never objected
to it or
informed the Claimant that Declan had sent it without his authority.
Similarly, he accepted in cross
-
examination, that if he had received
either
of the letters sent by the Claimant in August 2007 notifying him that the
account had been opened and

then upgraded, he would not have
contacted the Claimant to challenge the contents of e
.


Apparent Authority

117.

In the further alternative,
Mr Chirnside submits

that Tommy should be
bound by the upgrade email pursuant to the doctrine of apparent
a
uthority, even if

Declan somehow exceeded his authority in sending it.


118.

The relevant principles in relation to apparent authority are as follows:


a.

Where a person (A) by words or conduct represents or permits it to
be represented that another person (B) ha
s authority to act on his
behalf, A is bound by the acts of B with respect to any third party (C)
dealing with B as an agent on the faith of any such representation,
to the same extent as if B had the authority he was represented to
have, even though he ha
d no such actual authority:
Bowstead &
Reynolds

(above) at 8
-


47


b.

The doctrine applies where a principal allows his agent to appear to
have more authority than he actually has, or alternatively makes
reservations to his agent’s authority which limi
t the authority but
fails to inform the third party of this: see
Bowstead

(above) at 8
-
027.


c.

Moreover, the fact that the agent acted in his own interests and/or
in fraud of his principal will not relieve the principal of liability if in
fact the agent’s a
ct was in other respects within the scope of his
apparent authority:
Hambro v Burnand

[1904] 2 KB 10.


d.

The development of the doctrine has been based in part upon the
principle that where the Court has to decide which of two innocent
parties is to suffer
from the wrongdoing of a third party the Court
will incline towards placing the burden upon the party who was
responsible for putting the wrongdoer in the position in which he
could commit the wrong:
Gurtner v Beaton

[1993] 2 Lloyd’s
Reports 369 at 379.


119.

In this case, Tommy clearly represented or permitted it to be represented
(
by authorising Declan to sign the Power of Attorney on his behalf
)

that
Declan had general authority to act on his behalf in respect of account
CB805.


120.

No limitation on Declan’s aut
hority was ever communicated to the
Claimant
(or to Declan)
and the Claimant acted in good faith in reliance
on the email in upgrading the account to a standard account. Thus
,

it is
submitted that Tommy should be bound by the upgrade email as if he
had au
thorised it, even if in fact he did not.


121.

Applying the approach suggested in
Gurtner v Beaton

above, in a case
such as this where both the Claimant and Tommy are arguably the
innocent parties to Declan’s reckless actions, the Court should place the

48

burden
on the party responsible for putting Declan in the position to
co
mmit the wrong. In this case,
that party is clearly Tommy

in allowing
him to open the account and authorising him under the Power of
Attorney
.


122.

I find that

acc
ount CB805 was correctly
opened by the Claimant in Tommy’s name and validly upgraded to a
standard account and that Tommy Crinion is personally liable for the
losses incurred.


Issue 4: Did the Claimant act in breach of contract as alleged at
paragraph 6
of the
Tommy’s Amended
Defence?

123.

This issue relates solely to Tommy Crinion. No allegations of breach of
contract have been pleaded in the Declan Crinion Claim.


124.

At paragraph 6(b) of his Amended Defence, Tommy alleges the following
breaches of contract on
the

part of the Claimant
:


a.

The Claimant operated the account as an unlimited risk account and
failed to agree a stop level with Tommy prior to commencing
trading.


b.

The Claimant accepted instructions from Declan which were not
authorised under the Power of
Attorney.


c.

The Claimant failed immediately to close out all positions and the
account upon margin calls failing to be met and instead
(i)
allowed
Declan to persuade it to keep the account open without making any
enquiries of Tommy; or alternatively
(ii)

al
lowed
the account to
remain open without making reasonable enquiries as to Tommy’s
financial position.



49

d.

The Claimant failed
to provide Tommy with
regular
statements in
relation to the account to his home address of 17 Sutton Castle,
Sutton, Dublin 13.


125.

It
is submitted
by Mr Chirnside
that these allegations of breach of
contract are unfounded for the
following
reasons:


a.

The Claimant accepts that it operated the account as a standard as
however,
the
accoun
t was
validly
upgraded

following
receipt of the upgrade
email
.
Further
, it is denied that the Claimant was under any
obligation to agree a stop level prior to trading commencing. Clause
11 of the Initial Customer Agreement places the onus on the
customer

to request a stop level in relation to a specific transaction.
Clause 12 of the COBS Customer Agreement
was in identical terms
.
However, no such request was ever received.


b.

instructions
from Declan pursuant to his actual or apparent
authority under the Power of Attorney. Furthermore,
under the
terms of the Power of Attorney
Tommy
expressly
agreed to ratify
all
acts
done
under
the authority or purported authority of
the Power
of Attorney.



c.

In relation to the third allegation, the Claimant submits as follows:


i.

There was no obligation on the Claimant to close out all
positions or the account when margin calls were made but not
met. The Claimant had an absolute discretion as to whether to
a
llow the account to remain open or to close it without prior
notice under clause 16 of the C
OBS Customer Agreement
.
Clause 15 of the Initial Customer Agreement

is in identical
terms
. Accordingly, in deciding whether to close out the
accounts the Claimant

was required only to act honestly and

50

rationally and was entitled to consult primarily its own interests:
Socimer International Bank v Standard Bank London

[2008] 1
Lloyds Rep 558 at [60
-
66] and [112].


ii.

Declan had authority under the Power of Attorney to
negotiate
with the Claimant about keeping the account open and the
Claimant was under no obligation to make further enquiries of
Tommy.


iii.

It is admitted that under clause 16(4) of the COBS Customer
Agreement the Claimant agreed that the exercise of its di
scretion
to allow the account to remain open would depend on its
assessment of Tommy’s financial circumstances
3
. However, at
all material times the Claimant believed Tommy’s financial
circumstances were more than adequate to support the trading
on the acc
ount. His estimated savings and investments were put
at €10m in the application form. On 14 August 2007 his
accountants sent a statement showing he

€14.8m
. Further on 13 November 2008 the Claimant was sent a
y h
ad assets of over €10m
.


d.

There was no requirement to send all statements to Tommy’s home
address. Under clause 13(9) of the C
OBS Customer Agreement

all
correspondence, written notices, confirmations and statements
could be sent to the email address specif
ied in the account opening
form
4
.
T
his is what the Claimant did according to Mr Russell.

In
any event, under clause 14(5) of the COBS Customer Agreement
Tommy acknowledged that it was his responsibility to be aware of
any margin requirements whether or n
ot the Claimant contacted


126.


All these submissions are supported by the evidence and I uphold them.




3

Clause 15(4) of the Initial Customer Agreement is identical.

4

Clause 13(9) is mirrored by clause 12(9) of the Initial Customer Agreement


51


Issues Specific to the Declan Crinion Claim

127.

The
following three
issues specific to t
he Declan Crinion Claim are only
relevant to Declan’s liability in relation to account CB988
: h
e
rightly
accepted
in oral evidence that account CB804 is his pers
onal liability
.
Thus

they do not affect his liability in relation to CB804.


Issue 5: Did Decl
an inform the Claimant that account CB988 was
held by him as agent or nominee for TJC Ltd?

128.

It is Declan’s pleaded case that at all material times the Claimant was
aware that account CB988 was held by him as agent or nominee for TJC
Ltd and therefore he is
not personally liable in respect of CB988 on the
basis that TJC Ltd was his disclosed principal for that account
(see
Defence para 5.4
).


129.

As to the circumstances in which the accounts were opened, it is pleaded
in Declan’s Defence
that during a telephone

call
on or around 9
August
2007 he told the Claimant (either Mr Soliman or Ben Butterworth) that
(see paras 5.1 to 5.3
and para 16.2
of
his
Defence):


a.

He wanted to transfer two CFD account
s

from Cantor Fitzgerald to
the Claimant and needed to do so urgent
ly.


b.

He explained that one account was his personal account and the
other was held by TJC Ltd.


c.

The Claimant stated that two accounts could be opened in his name
and that TJC Ltd’s account could be transferred into its name at a
later date.


130.

Declan confirm
ed in his oral evidence that it was his case that this
conversation took place on either 9 or
10 August 2007
.
However, there

52

were only two
substantive
telephone calls
5

between Declan and
the
Claimant
before the accounts were opened on
9 and
10 August 200
7

respectively
.


131.

The transcripts of these two calls
are accurate

so
there
no room for
debate as to what was said.

Declan accepted in cross
-
examination that
his pleaded case is
wholly un
supported by the
se

transcripts:

“Q.

... there’s no mention of TJC Li
mited, a company by that name,
in either the 9
th

or 10
th

August conversations in the transcript is there?
--

A. Well there is on my, on ...


Q.

The only reference is at page 6?
--

A. I know but you just said
there’s no reference, there is.


Q.

It’s a

reference to TJC, the name I trade under is TJC, it doesn’t
say TJC Limited, it doesn’t say that it’s a company, there’s no
indication at all is there?
--

A. No but, but there is no, but I would
assume that the same way as you say I G, you don’t always

say I G
-

you say TJC and the person says TJC, no problem,
and I’ll have a quick look and I’ll just type it in to see, now nothing’s
coming up under TJC.


Q.

So ...
--

A. I don’t believe I, I hid, I hid behind the facts that we
didn’t d


Q.

Well that’s a matter for submission I think. But also we can see
there’s no suggestion by Mr Soloman in either of those two
conversations that you could open an account for TJC Limited in your
name is there?
--

A. No the
re doesn’t seem to be.


Q.

And he never told you that you could do that and then transfer
the account into TJC Limited’s name at a later date?
--

A. No Ra...,
Ramy Soloman doesn’t seem to do that.”


132.

Although Declan asserted in his oral evidence that he
had a further
conversation with Ben Butterworth on 9 or 10 August 2007, he accepted
Mr Miah’s evidence that the Claimant had been unable to locate any
record of any other telephone conversation involving Declan.


133.

Moreover, a
ccount CB988
(which is the acco
unt which Declan alleges
was intended to be TJC Ltd’s account)
was not in fact opened until 30
August 2007 following Declan’s email asking Mr Soliman to “
arrange a



5

There was also a telephone message left for Declan on 10 August 2007


53

duplicate account/another account to be opened under my name


so
effectively I would be lef
t with two account numbers for me
personally

.


134.

There is no evidence that Declan disclosed to the Claimant that he was
opening CB988 as agent for TJC Ltd or that it was to be held by him in
such a capacity. On the contrary, he expressly
requested
that CB9
88 was
to be opened under his name and held by him personally.

Declan
concede
d

this in cross
-
examination

and was unable to explain why he
had requested CB988 to be for him “personally” if in fact (at least on his
case) it had been agreed that it would b
e for TJC Ltd
:

“Q.

At page 75 in the bundle you sent an email to Mr Soloman
asking for another account?
--

A. Yes.


Q.

And it says, you ask: “Would it be possible for you to arrange a
duplicate account, another account to be opened under my name so
effe
ctively I would be left with two account numbers for me
personally”
-

can you see that?
--

A. Yeah.


Q.

So there’s no suggestion is there that CB988 would be for a
company, specifically TJC Limited?
--

A. There’s no suggestion in
that email no.


Q.

S
o in fact it couldn’t be clearer that you want it to be for you
personally, that’s right isn’t it?
--

A. Well I, no I don’t, I disagree with
that.


Q.

Well that’s what it says: “for me personally”, can you see that?
--

A. Yes I, I see that.


Q.

JUDGE

BROWN: Well can you just tell me what it does mean
then?
--

A. Well no, but I think
-

why, why would you want to have
two accounts in your own name with the one, the, the, my plan, my
intention at the time was to move the shares that had been transfer
red
from the company account, which was DBY791, into 988
-

oh sorry
into, is this, this it right, did I do that, yes?



135.

If

Declan’s case were correct, this email would have said

something along
the following lines
: “
Please arrange another account to be op
ened
under my name


so effectively I would be left with two account
numbers
one for me personally and one for TJC Ltd

. However, th
at is
not what Declan asked for and he was unable to offer any explanation as
to why.



54

136.

In the
se
circumstances,
I find on
th
e balance of probabilities there were
no other telephone conversations between Declan and the Claimant on 9
or 10 August 2007 and Declan’s evidence on this point
is mistaken
.


137.

In my judgment, it is clear from the evidence that CB988 was to be a
personal

duplicate account for Declan.


Issue 6: Is Declan personally liable in respect of account CB988?

138.

Even if, contrary to the above, the Claimant knew that account CB988
was to be held by Declan as agent for TJC Ltd as
his
disclosed principal,
then

Declan is
nonetheless personally liable in respect of the account.


139.

The fact that a person is an agent, and is known to be so, does not
necessarily prevent him incurring personal liability. Whether this is the
case or not is a matter of construction of the relevant

contract:
Chitty on
Contracts (
30
th

ed) vol 2 at para 31
-
085.


140.

The terms of the Initial

Customer Agreement
are clear in this regard. It
provided as follows:




(1)

We will act as principal and not as agent on your behalf. You
will
open each Transaction with us as principal and not as agent for
any undisclosed person. This means that unless we have otherwise
agreed in writing, we will treat you as our client for all purposes
and you will be directly and personally responsible f
or performing
your obligations under each Transaction entered into by you,
not you identify that person to us, we will not

accept that person as
an indirect customer of ours and we will accept no obligation to
them unless specifically agreed in writing.



18.

Representations and warranties


(1)

You represent and warrant to us, and agree that each such
representation and warranty is d
eemed repeated each time you
open or close a Transaction by reference to the circumstances
prevailing at such time, that:




55

(c)

You will enter into this Agreement and open each Transaction as
principal.



n the
parties in relation to the dealing services we offer. Any
amendment to this Agreement must be in writing and signed on
behalf of the parties by you and by an authorised person on our
behalf…”


141.

Accordingly, on a proper construction of the contract De
clan agreed to
open account
CB988
and open each transaction as principal and thereby
agreed that he would be personally liable.


Issue 7: Did the Claimant commit an actionable misrepresentation
by representing to Declan that he would not be personally liab
le in
respect of account CB988?

142.

At para 16.2 of Declan’s Defence and Counterclaim it is pleaded that in a
telephone call on or about 9 August 2007 the Claimant misrepresented to
him that he would not incur any personal liability in relation to account
CB98
8.


143.

However, t
here is no evidence to support this allegation either in the
telephone transcripts from 9
or
10 August 2007 or in Declan’s witness
statement.

Moreover, in cross
-
examination Declan accepted that the
first time he had made this allegation was
in his Defence.
Also h
e could
not explain

why he
failed to
mentioned
this alleged misrepresentation
at
any point during the protracted negotiations with the Claimant between
February 2008 and January 2009.
In the circumstances, this allegation
is

dismisse
d
.


Issue
s

relating to FSA Rules

144.

It is common ground that all three accounts were governed by the
relevant FSA rules in force from time to time. Prior to 1 November 2007,
the relevant FSA rules were the COB Rules. From 1 November 2007
onwards the relevan
t rules were those contained in COBS.



56

145.

It is also common ground that a breach by the Claimant of one of the
COB Rules or the provisions of COBS (but not guidance) is actionable
under s.150 of FSMA 2000. However, this is subject to the requirement
to pro
ve causation and to any defences applicable to a claim for breach of
statutory duty.


Issue
8
: Did the Claimant provide the Defendants with its terms of
business in good time (within the meaning of COB Rule 4.2.5)
and/or take reasonable care to provide th
em with a proper
opportunity to consider them before allowing any trading to take
place on the accounts?

146.

Both

Defendants rely on COB 4.2.4 to 4.2.6A
6

in support of the
contention that the Claimant was required to provide its terms of
business to them bef
ore entering into any transactions with them and
that the Claimant was not permitted to enter into any customer
agreement with them unless it had taken reasonable care to ensure that
they had had a proper opportunity to consider the terms.


147.

As at 9 August
2007 COB 4.2.4 provided general guidance only (and is
not therefore action
able for breach under s.150
) and 4.2.6 had been


148.

Accordingly the rule is COB 4.2.5 which provided that:

“Unless any of the exemptions in
COB 4 Annex 1

applies, a
customer

must,
in good time

before
designated investment business

is conducted,
be provided with a
firm's

terms of business
, setting out the basis on
which the
designated investment business

is to be conducted with or for
the
customer


[emphasis added]


149.

COB Rule

4.2.5 should be read in conjunction with the guidance at COB
4.2.6A which indicates that the terms of business will be provided “in
good time” if provided in sufficient time to enable the customer to
consider properly the service or investment on offer be
fore he is bound.





6

See Tommy Amended Defence at para 3a(iii)E and Declan Defence at para 5.8(v)


57

150.

It is the Claimant’s case that the Defendants were provided with its terms
of business (in the form of the Initial Customer Agreement) in good time
and that they had sufficient time to consider
properly
its terms before
they were bound.

Tommy authorised Declan to submit the application
form and open the account in his name, it
therefore
follows that
if
Declan
was given a proper opportunity to consider the terms of the Initial
Customer Agreement

then

Tommy’s claim for breach of COB Rule
4.2.5
must fail.


151.

As can be seen from the Claimant’s
online application form
, the Initial
Customer Agreement was provided
prior

to
the
opening
of
the accounts
by means of an easily visible hyperlink in the declaration section at the
end of the form. Be
fore submitting the application,
applicants
were
required to confirm that they had read and understood the Initial
Customer Agreement and agreed to be bound by its terms. In addition,
the Claimant’s terms and conditions are available on its website to the

public at large and are not solely available once an application form is
ed
.


152.

Declan accepted in cross
-
examination that the Initial Customer
Agreement was “
there and available to read”

and that there was no
deadline set by the Claimant for the su
bmission of the application form
for
either account.

He
could therefore have taken as much time
as he
wanted or required
to consider the terms of the Initial Customer
Agreement.
The fact that he did not take that opportunity is irrelevant.



153.

Declan sugg
ested in his oral evidence that he was under pressure to
transfer the accounts from Cantor Fitzgerald to the Claimant and
therefore he did not have time to consider the Claimant’s terms properly.
However, he accepted that he could just
have
closed the acc
ounts with
Cantor Fitzgerald and then opened an account or accounts with the
Claimant at a later date: there was no urgent need to transfer the
positions from
Cantor Fitzgerald
to the
Claimant
. In addition,

even if he
was under pressure

then such pressur
e or urgency had nothing to do

58

with the Claimant: at all times the Claimant gave the Defendants the
opportunity to read its terms and conditions properly but they chose not
to do so.


154.

Moreover
,
Declan
confirmed
on his own behalf and on behalf of Tommy
that

he
had read and understood the terms of the Initial Customer
Agreement.
In the circumstances,
both Defendants
are now
contractually estopped from claiming that they did not have a proper
opportunity to consider the terms of business before agreeing to be

bound by them
:

Peekay International Ltd v ANZ Banking Group Ltd

[2006] 2 Lloyd’s Rep 511, in particular at [56
-
60] and [70]; and
JP

Morgan Chase Bank v Springwell Navigation Corporation

[2010] EWCA
Civ 1221 at [169].


155.

Furthermore, it is standard industry
practice for the terms of business to
be provided via a
link on the website in this way
. There is nothing to
prohibit it under the FSA Rules and the FSA has not queried this practice
during any of its regular inspections of the Claimant. Moreover, from a

practical point of view, it would be impossible for a firm in the Claimant’s
position to do more
or
to ensure that its customers had
in fact
read and
understood its terms and conditions before agreeing to them.


Issue
9
: Did the Claimant’s terms of busin
ess include the Power of
Attorney

for the purposes of COB Rule 4.2.5
?

156.

The issue of whether the Power of Attorney formed part of the Claimant’s
“terms of business” for the purposes of COB Rule 4.2.5 only arises in
relation to Tommy.


157.

T
he Power of Attorney d
id not form part of its terms of business. The
Power of Attorney was a separate and distinct document from the Initial
Customer Agreement which was concerned with the agency relationship
between Tommy and Declan. It did not relate to the terms and
condit
ions on which the Claimant was prepared to offer its CFD trading
service to customers.


59


158.

In any event, the Power of Attorney was provided to Tommy (via Declan)
in good time for him to be able to properly consider its terms. The
Claimant did not impose any
deadline as to when the Power of Attorney
was to be signed and it could have been signed and returned at any time
or not at all because it was unnecessary for the operation of the accoun
t.

This was confirmed by
Mr Russell in cross
-
examination.


159.

In the
se

c
ircumstances, Tommy Crinion could have taken as much time
as he wanted to consider
the
terms
of the Power of Attorney
and their
effect and/or take legal advice in relation to it but chose not to do so.
Instead, it appears he simply authorised Declan to si
gn it on his behalf
without even bothering to read it for himself. In the circ
umstances, it is
he
who
must bear the consequences of his actions and not the Claimant.


Issue 1
0
: Did the Claimant correctly classify the Defendants as
Intermediate Customers
or take reasonable steps to do so under
COB Rule 4.1.4 and/or COBS?

160.

The Claimant submits that

it correctly classified both Defendants as
intermediate customers based on the information provided in their
application forms; alternatively, it took reasonable
steps to classify them
and treated them accordingly.


161.

There are two aspects to the issue of classification: (i) initial
classification under the COB Rules when the accounts were opened and
(ii) classification under COBS from 1 November 2007 onwards.


Cl
assification under COB Rules

162.

COB Rule 4.1.4 provided as follows:

“(1)

Before conducting
designated investment business

with or for any
client
, a
firm

must take reasonable steps to es
client

is a
priv
ate customer
,
intermediate customer

or
market counterparty


(2)

A
firm

which takes reasonable steps to classify its
clients
, as
required by the
rules

in this section, and treats a
client

in accordance
with the classification it has established for that purpose, does not

60

breach any other
rule

in
COB

to the extent that the breach arises only
from inappropriate classification of that
client



163.

COB Rule 4.1.9
provided that
the Claimant was entitled to classify a
client who would otherwise be a private customer as an intermediate
customer if c
ertain conditions were satisfied as follows:

“(1) A
firm

may classify a
client

who would otherwise be a
private
customer

as an
intermediate customer

if:


(a)

the
firm

client

has sufficient experience and understanding to be classified as an
intermediate customer
; and


(b)

the
firm
:


(i)

has given a written warning to the
client

of the protections
under the
regulatory system

that he wil
l lose;


(ii)

has given the
client

sufficient time to consider the
implications of being classified as an
intermediate customer
;
and


(iii)

has obtained the
client's

written consent,

or is otherwise
able to demonstrate that informed consent has been given.”


164.

Th
e guidance at COB 4.1.10
sufficient experience and understan
ding to be a classified as an
intermediate customer.

COB 4.1.10(2) provides that: “
It is likely that a
firm will need to have regard to more than one of these criteria, or to
other criteria, before it can be satisfied that a client, who would
otherwise b
e a private customer, is eligible to be classified as an
intermediate customer.”


165.

Thus, in
summary
the regulatory framework was as follows:


a.

Before allowing any trading to take place on the accounts, the
Claimant was required by COB Rule 4.1.4 to take reas
onable steps to
establish whether the Defendants were intermediate customers.



61

b.

As to what those reasonable steps were, COB Rule 4.1.9 required the
had sufficient experience and understanding

to be classified as
intermediate customers and COB 4.1.
10

sets out guidance as to the
factors to which the Claimant should have regard in taking
reasonable care.


Interpretation

166.

The above provisions of the COB Rules have recently been considered in
Bank L
eumi (UK) Plc v Wachner

[2011] EWHC 656 (Comm)
and
Wilson
v MF Global UK Ltd

[2011] EWHC 138 (QB)
from
the following
principles can be identified:


a.

The COB Rules as to classification do not require a firm to arrive at
an objectively correct classification
of a client, but only to have
taken reasonable steps to do so. Thus, even if Declan and/or
Tommy did not in fact have sufficient experience and understanding
to be intermediate customers, the Claimant will only be in breach of
COB Rules 4.1.4 and
/
or

4.1.9

if it failed to take reasonable steps
and
/or

reasonable care in classifying them as intermediate
customers (see
Wacher

(above) at [216]).


b.

The issue of whether the Claimant to
ok

reasonable steps and
/or

reasonable care to classify the Defendants is to be d
on what was done and known at the time, not with hindsight by
reference to the disastrous trades carried out by Declan on the
accounts (see
Wacher

(above) at [244]).


c.

Accordingly
, compliance with the Claimant’s duties under COB
Rules 4.1.4
and 4.1.9 does not depend on the objective
characteristics of the Defendants but on following the procedural
requirements under the rules
at the time the accounts were opened
(see
Wachner

(above) at [218]).



62

d.

The relevant procedural requirements are set out

in COB 4.1.9R and
COB 4.1.10G. In this regard, it is not necessary for the Claimant to
have complied with all four criteria under the guidance at COB
4.1.10. COB 4.1.10G merely indicates that it is likely that in
establishing that it has taken care for
the purposes of COB Rule
4.1.9 that the firm will need to have regard to one or more of the
criteria set out in COB 4.1.10G: see
Wachner
(above) at [260].


e.

There is no requirement under COB Rule 4.1.9 or the guidance at
COB 4.1.10 that
requires a
firm
to i
nterview or
nor is
it necessary to cross
-
check information provided by a third party
with the customer: see
Wachner
(above) at [263].


f.

Similarly, the Claimant was entitled to take statements made by or
on behalf of the Defendants about the
ir knowledge and expertise at
face value unless and until there is some reason for further scrutiny:
Wilson v MF Global

(above) at [28].



Declan

167.

In cross
-
examination Declan accepted that the information he provided
in relation to his financial circumstan
ces and his experience and
understanding of CFDs in his application form was correct:

“Q.

Okay. So do you accept that the information that you typed
into the application form about your financial position and your
trading experience is correct?
--

A. Y
es.



Q.

So all that information is correct. You also ticked a box in the
declaration saying that you had read and understood the risk
disclosure notice, the customer agreement and the intermediate
customer notice, and you agreed to be bound by the terms
of the
customer agreement, and you agreed to being an intermediate
customer
-

that’s right isn’t it?
--

A. I, it’s correct that I ticked the
boxes
-

I didn’t read it.”


168.

On the basis of his answers to the questions in the application form
(which mirrored

the guidance at COB 4.1.10), it is clear that he had
sufficient understanding and experience to be classified as an
intermediate customer and the Claimant complied with the other

63

procedural requirements under COB 4.1.9(b) by virtue of the fact that
Declan

ticked the box in declaration section of the application form.


169.

Further and in any event, Declan is contractually estopped from denying
that he was correctly classified as an intermediate customer because he
expressly consented to being classified as such

in the application form.



Tommy

170.

It is submitted
by Mr Chirnside
that
the Claimant took reasonable steps
and/or reasonable care to classify Tommy for the following reasons:


a.

The Claimant complied with the guidance at COB 4.1.10 and
took
reasonable care to

Tommy

had sufficient experience
and understanding to be classified as an intermediate customer by
asking the questions set out in the application form. In
Tommy’s
application form

it was clearly stated that he
understood

the nature
and ris
ks of margined products, which includes CFDs, and
had over
12 months’ experience of trading CFDs in an execution only
capacity.
It was
also stated that during the previous 12 months
he
had traded CFDs on average more than 5 times per month

and that
he
had
assets of €10m.

On the face of it, this information was
sufficient to justify the Claimant in classifying him as an
intermediate customer.


b.

The Claimant was entitled to take the information in Tommy’s
application form at face value
: see
Wilson v MF Global

(above).

COB Rule 2.3.3
also
state
s

that: “
A firm will be taken to be in
compliance with any rule in COB that requires a firm to obtain
information to the extent that the firm can show that it was
reasonable for the firm to rely on information provided t
o it in
writing by another person”
.

In this case, there was no reason
for
the Claimant to doubt that the answers given in Tommy’s
application form were correct
at the time when the application form
was submitted (which is the relevant time because that wa
s when he

64

was classified). In the circumstances,
it is
it was reasonable for the
Claimant to rely on the information in the application form in
classifying Tommy as an intermediate customer.


c.

There was no requirement under the COB Rules to contact Tommy
d
irectly (or for that matter to cross
-
check any information provided
by Declan on his behalf).
The Claimant’s evidence from Mr Soliman
and Mr Russell was clear that the Claimant’s classification process
was highly automated
and relied on information provid
ed by
clients
. There was no need for any human review of the
classification process unless an exception showed up.

Mr Russell
confirmed that this was standard industry practice and has never
been questioned by the FSA on its regular inspections of the
Cl
aimant.

The only reason that there was any direct contact
between Mr Soliman and Declan in this case was because firstly he
called the Claimant on his own initiative before submitting the
application forms and then later because he and Tommy failed the
au
tomated identification checks because they were resident outside
the UK.


171.

Tommy is contractually estopped from denying he was correctly
classified for the following reasons:


a.

For the reasons set out above, Tommy authorised Declan expressly
or impliedly t
o submit the application form on his behalf. He is
therefore bound by the statement in the application confirming that
he agreed to being classified as an intermediate customer.


b.

Alternatively, Tommy ratified the opening of the account. The
account coul
d only be opened if Tommy agreed to be classified as an
intermediate customer. Accordingly, he cannot now be heard to say
that he was incorrectly classified.



65

c.

The
document headed “IG Markets Ltd D
eclaration


signed by
Tommy
on 7 September 2007
contains
si
milar assertions as to
Tommy’s knowledge and experience and also
a further express
declaration which stated (inter alia) as follows: “
I/we confirm that
I/we have sufficient experience and understanding to trade CFDs
and that I/we understand the risks of CF
D trading. I/we confirm
that I/we have read and understood the IG Customer Agreement,
Risk Disclosure Notice and Intermediate Customer Notice and
agree to be bound by its terms”
. The handwriting experts agree
that the signature on this document “
appears
more similar to the
signatures of Mr Tommy Crinion, suggesting that this is a copy of
a genuine signature”
. Although in cross
-
examination Tommy
denied that h
e had signed this document, this was the first time he
had done so, in particular he did not deny
signing it in his witness
statement.
Moreover, he could not even remember signing his own
Amended Defence only two weeks earlier.
In my judgment, his

memory in relation to what documents he had or had not signed
cannot be relied upon
.


172.

Despite protestat
ions to the contrary,
Tommy did in fact have sufficient
knowledge and experience to be classified as an intermediate customer
:



a.

Despite the impression given in his witness statement, Tommy
Crinion was clearly a sophisticated businessman. In cross
-
examina
tion, he accepted that he would not have been able to
accumulate a personal fortune of over €13m without being

financially astute or commercially savvy


. He also accepted that
in his role
as managing director of
TJC Ltd he had personally been
responsibl
e for visiting factories in China to discuss specifications
and for dealing with all contractual negotiations with TJC Ltd’s
credit and foreign exchan
ge transactions
.



66

b.

Moreover, when he wa
s taken to the Claimant’s internal checklist
for classifying customers
, he accepted that he would have been able
to tick 4 out

of the 5 boxes
. Although the Claimant’s internal
procedures required customers to tick all 5 boxes, this went further
than what
was required under COB 4.1.9 and 4.1.10. As set out
above, the Claimant was only required to have regard to one or
more of the criteria at COB 4.1.10 (see
Wachner

at [
2
60]).

Given
the level of Tommy’s business sophisticatio
n and extremely high net
worth
the Claimant
was
entirely justified in classifying him as an
intermediate customer.


Classification under COBS

173.

T
he
Claimant was entitled
automatically
to reclassify

the Defendants
as
elective professional clients under
COBS Transitional Provision 1.2
with
out
more
: see
Wachner

(above) at [234]. This process is known as
“grandfathering”.


174.

Further and in any event,
the Defendants
accepted their new
classification under COBS by their conduct in continuing to use the
Claimant’s services and the Claimant was ent
itled to treat
them
accordingly:

ED&F Man v Fluxo
-
Cane Overseas Ltd

[2010] EWHC 212
(Comm) at [72] to [74].


Issue 1
1
: Was the Claimant in breach of COB Rule 8.1 and/or COBS
16.2 or 16.3 by failing to provide records to the Defendants in
relation to the a
ccounts?

175.

COB Rule 8.1.3 and COBS 16.2.1 required the Claimant to provide the
transa
ctions
.


176.

Declan conceded this issue during the course of the trial and now accepts
that he received regula
r statements in relation to all three accounts.



67

177.

In addition, Tommy also accepts that Declan received regular statements
in relation to his account.


178.

C
lause

12(9) of the Init
ial Customer Agreement

and clause 13(9) of the
CO
BS Customer Agreement
permitted

the Claimant to send all
statements and correspondence to the email address specified in
Tommy’s account opening form (which was Declan’s email address).


Issue 1
2
: Did the Claimant fail to act in the Defendants’ best
interests in breach of COBS 2.1.1?


179.

The Defendants have both alleged a failure to act in their best interests
under COBS 2.1.1, although different allegations are raised by each of
them.


Tommy

180.

In relation to Tommy, the
re are four main

allegations

which may be
summarised as follows
:


a.

Fi
rst
, it is alleged that the

Claimant failed to ensure that the account
CB805 was initially opened as a limited risk account and
validly
upgraded

to a standard risk account subsequently
.


b.

Seco
ndly, it is alleged that t
he Claimant failed to ensure that the
account was closed when an exposure “greater than 10%” was
reached or
when the first margin call was made but not met
:



i.

Tommy has sought to explain the reference to exposure
“greater than 10
%” at Responses 9.1 and 9.2 of the Response
to
the Part 18 Request
. It appears to be alleged that the Claimant
should have closed the account when the margin of 10% had
been lost in respect of any one trade. However, there is no rule
under COB or COBS to

that effect
.


A client may expressly
request a guaranteed stop loss on a transaction which would

68

have a similar effect but the Defendants chose not to do so in
this case.


ii.

Moreover, margin rates differ between stocks and between
CFD providers (this was th
e reason Declan wanted to transfer
this kind would be impractical.




iii.

Further
, such a draconian rule would be potentially unfair

and
not in the client’s best interests for several reasons
.
Fi
rst
, a

margin call might not be met immediately for any number of
reasons beyond the customer’s control.
Secondly, i
t would be
uncommercial and potentially unfair if
a
customer’s whole
account had to be closed as a result of one missed margin call
in relation to
a
particular stock even
though
all other positions
on the account were in profit.
Thirdly
, it
might
require
a
particular trade to be closed out at a loss
even t
hough the stock
in question rose
again
almost immediately afterwards
.


c.

Thirdly, it is alleged that t
he Claimant failed to ensure t
hat Tommy
consented to continue

trading

on the account

and
/or that

his
financial cir
cumstances allowed him to do so:


i.

At al
l material times, the Claimant dealt with Declan as
Tommy’s authorised agent under the Power of Attorney or
alternatively in reliance on Declan’s apparent authority.
Under
the

Power of Attorney there was no

requirement to confirm
instructions received fro
m Declan.


ii.

Further, the Claimant was under no obligation to
(a)
satisfy
itself as to the suitability of transactions on the account;
(b)

monitor or advise Tommy on the status of the account;
(c)
make margin calls; or
(d)

to close any transactions on the

69

ac
count: see clause 3(2) of the Ini
tial Customer Agreement

and clause
2(4) of the C
OBS Customer Agreement
.


iii.

Finally, as regards Tommy’s financial circumstances, at all
material times the Claimant believed Tommy’s financial
circumstances were more than adequ
ate to support the
trading
on the account. First
, his estimated savings and investments
were put at €10m in the application form. Secondly, on 14
August 2007 his accountants sent a statement showing he

had
net assets of €14.8m
. Thirdly, on 13 November 2008 the
omm
over €10m
.


d.

Fourthly it is alleged that t
he Claimant failed to ensure that Tommy
(as opposed to Declan) was aware of the state of the account

and the
losses being incurred: at a
ll material times it dealt with Declan as
Tommy’s authorised

agent under the Power of Attorney or
alternatively in reliance on Declan’s apparent authority.


Declan

181.

In relation to Declan the complaint is that the Claimant failed to act in
accordance with his best interests
:

(i)
by failing to advise him that he was

personally liable in relation to account CB988 and
(ii)

in the manner in
which it closed out his accounts.


182.

T
he Claimant was under no duty to offer advice to Declan. All dealings
were
on an execution only basis:
clause 2(4) of the COBS Customer
Agreement
.

Declan was well aware that he was personally liable in
respect of account CB988. He
had specifically
requested that the account
be opened in his name and fo
r himself “personally”
. Further, all
negotiations with him were on the basis that he was person
ally liable
.
The first time he denied he was so liable was in his Defence dated
January 2010.



70

183.

In relation to the second allegation,

t
he duty under COBS 2.1.1 does not
apply to a closing out situation: see
ED&F Man v Fluxo
-
Cane Overseas
Ltd

[2010] EWHC 2
12 (Comm) at [76].


184.

Moreover, the Claimant did not close out the accounts
on only 4 hours’
notice to Declan. It gave notice of its intention to close out the accounts
r dated 27 January 2009
January 2009.
I
n addition, it was made clear to Declan at
on 28 January 2009
that it was most likely that t
he accounts would be
closed out
.


185.

In any event, the Claimant had an absolute discretion to close
out
the
accounts without prior notice under clause 16(2
) of the COBS Customer
Agreement
. Accordingly, in deciding whether to close out the accounts
the Claimant was required only to act honestly and rationally and was
entitled to consult primarily its own interests:
Socimer International
Bank v Standard Bank
London

[2008] 1 Lloyds Rep 558 at [60
-
66] and
[112].


Issue 1
3
: Was the Claimant in breach of COBS 10.2 and/or 10.3 by
failing to request sufficient information about the Defendants’
knowledge and experience?

186.

The Defendants allege that the Claimant failed

to request sufficient
information regarding their knowledge and experience relevant to CFDs
in order for the Claimant to be able to assess whether its CFD trading
service was suitab
le in breach of COBS 10.2
and failed to provide
appropriate warnings in br
each of COBS 10.3.


187.

Neither Defendant has particularised what questions the Claimant
should have asked in relation to their knowledge and experience but
failed to do so.


188.

T
he Claimant correctly classified both Defendants as intermediate
customers under th
e COB Rules
.

As a result
they were both
automatically

71

reclassified as
elective professional clients under COBS. On that basis
the Claimant was entitled to assume that
they had the necessary
knowledge and experience to understand the risks involved in trad
ing
CFDs so that no breach of COBS 10.2.1 could arise: see
Wachner

(above)
at [309].


189.

I
n any event, the Claimant asked sufficient questions in relation to the
Defendants’ knowledge and experience in the application form. These
questions mirrored the gu
idance at COB 4.1.10. Moreover, pursuant to
COBS 10.2.4, the Claimant was entitled to rely on the information
provided by the Defendants

in the application forms unless it was
manifestly out of date (which it was not

case here



the information was
less t
han 3 months

old

on 1 November
200
7
)
. On that basis the Claimant
decided that its CFD trading service was suitable for them. Accordingly,
no warning was necessary under COBS 10.3.1
.


190.

The
Defendants already had very large positions on their CFD trading
a
ccounts with Cantor Fitzgerald when they applied to the Claimant.
Moreover, the Claimant also provided the Risk Disclosure Notice and
Intermediate Customer Notices which the Defendants confirmed they
had read and understood before opening the accounts.


I
ssue 1
4
: Is the Claimant liable to either Defendant on the
Counterclaims?

191.

In light of the
se findings,

the Counterclaims in both cases must fail. The
Defendants have failed to establish any breach by the Claimant or (in
Declan’s case) any actionable misre
presentation.


192.

Accordingly,
t
he Claimant succeed
s

in both claims and the Counterclaims
are
dismissed.


His Honour Judge Simon Brown QC


Specialist Mercantile Judge


Birmingham Civil Justice Centre



72

Clerks: Alison Wood & Caroline Norman

[email protected]


Tel: (0121) 681 3035


Website:
www.justice.gov.uk/guidance/courts
-
and
-
tribunals/courts/mercantile
-
court/index.htm


3
rd

April 2012



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