Diamantis Diamantides v JP Morgan Chase Bank & Ors

An individual who invests through a company cannot ordinarily claim personally to be the bank’s customer where the accounts, contracts and investments are in the company’s name. The company’s separate legal personality cannot be disregarded merely because the individual owns, controls, funds and benefits from it. A regulatory regime protecting private investors cannot be manipulated by describing the individual as the customer while treating the company as the investor. A shareholder also cannot recover loss which merely reflects loss suffered by the company. A claim may be struck out where the pleaded case is fanciful, unsupported by primary facts and doomed to fail.

Mr Diamantides claimed damages from JP Morgan Chase Bank for allegedly negligent investment advice, breach of contract and breach of fiduciary duty concerning GKO-linked notes purchased through corporate vehicles, ultimately Pollux Holding Limited. The proposed amended claim treated him as the bank’s customer and pleaded Pollux only in the alternative. The bank applied to strike out his personal claim, arguing that Pollux was the customer, the investments were made in its name, and the loss belonged to it. The central issue was whether a credible case existed that the bank had entered into a banker-customer or advisory relationship with Mr Diamantides personally.

1. Disposition. The individual’s claim was struck out. The proposed amended pleading was also criticised as prolix and contrary to the requirement for a concise statement of facts; the judge indicated that permission to amend would not be granted in its existing form.
2. Customer relationship. The pleaded facts showed that Pollux opened and maintained the accounts, purchased the investments and entered into the relevant agreements. Mr Diamantides acted as Pollux’s principal, controller, funder and representative. There was no pleaded primary fact, such as a personal account-opening agreement or communication, establishing that he personally became the bank’s customer.
3. Separate personality and regulatory status. The court rejected the artificial division between an advisory relationship with Mr Diamantides and a transactional relationship with Pollux. The corporate vehicle could not be disregarded merely because it was used for his benefit: the separate legal personality of Pollux had to be respected. Pollux was not a protected private investor under the statutory scheme then in force, and Mr Diamantides could not obtain that protection by characterising himself as the customer.
4. Reflective loss. The discussion in Johnson v Gore Wood & Co [2002] 2 AC 1 did not assist the individual. If Pollux succeeded, his alleged loss would reflect Pollux’s loss; if Pollux failed, that failure would not create a personal claim for him. The individual’s case was therefore fanciful, lacked a factual foundation and was doomed to fail.
5. The parties were to agree the form of order or return to court for directions.