Winnetka Trading Corporation v Julius Baer International Limited

Posted on 29/07/2011 · Posted in Expert Witness, Financial Litigation, Investment

Following client instructions and duty to warn

The Claimant was Winnetka, the holder of an investment portfolio. The Defendants were two subsidiaries of Julius Baer Group Ltd, providers of investment services.

In late 2005 the Claimant was in a position to make new investments and signed banking and investment mandates with the Defendants.

The Claimant suffered significant losses when in 2007 the Inyx Ltd shares in which it had invested through the Defendants became worthless. The Claimant sought damages from the Defendants alleging breach of contract and/or negligence.

The Claimant’s primary case was that the Defendants failed to comply with instructions when it did not put in place a secure method of ensuring that the Inyx shares would be delivered against payment. In the High Court Roth J disagreed with the Claimant. He held that the Defendants had correctly carried out their instructions when they made payment with the receipt of shares to follow.

The Claimant’s alternative case was that the Defendants failed to warn it of the risk of entering the Inyx transaction. Roth J accepted that it was an implied term of the parties’ relationship that the Defendants would exercise due care, skill and reasonableness, but he did not believe that a term requiring proper risk management was independently implied. It was accepted that while some advisers would have warned their clients as to risks in this case, it was not necessarily negligent to have not done so. In particular advisers would not be required to give a warning if acting on their client’s express instructions.

Link: Winnetka Trading Corporation v Julius Baer International Limited [2011] EWHC 2030 (Ch)

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