In Zaki & Ors v Credit Suisse (UK) Ltd  EWCA Civ 14, the Court of Appeal upheld the decision of the High Court in finding that Credit Suisse (UK) Ltd (the Respondent) was not liable for financial losses suffered as a result of alleged breaches of its statutory duty.
The Applicant in this case was the widow and two daughters of an Egyptian businessman (Mr X) who had died in 2010. Mr X had invested in structured financial products bought from the Respondent with the assistance of loans from an associate company of the Respondent in 2007. Following the severe downturn in the markets in 2008, the Respondent issued a margin call which Mr X was unable or unwilling to meet and his holdings were subsequently liquidated causing Mr X to suffer financial losses to the value of US$69.4 million. The Applicant claimed damages on the grounds that the losses were caused by the Respondent’s breach of its statutory duty, namely the FSA’s Conduct of Business Rules 5.3.5 and 7.9.3.
Rule 5.3.5 required the Respondent to take reasonable steps to ensure that its advice on investments or transactions was suitable for Mr X. Rule 7.9.3 required the Respondent to assess Mr X’s financial standing and take reasonable steps to ensure that the arrangements for the loan, and its amount, were suitable for the type of investment proposed.
The Court of Appeal considered the obligation of a financial institution to assess the suitability of a loan made to a customer for an investment opportunity, and held that the judge at first instance had been entitled to find that the relevant loan had been suitable for the customer, having regard in particular to both his experience, and the market and financial information provided to him. As such, the appeal was dismissed.
This case serves to highlight both the objective and the subjective elements that the Court will consider in assessing whether or not advice given by a financial institution ought to be deemed as suitable for the investor.
A copy of the full judgment can be viewed here.