Springwell Navigation Corporation v JP Morgan Chase Bank & Ors

A sophisticated commercial investor may be contractually bound by non-reliance and risk-allocation provisions in investment documentation. Such provisions can create a contractual estoppel preventing claims based on alleged pre-contractual representations, without any separate requirement that reliance on the estoppel be unconscionable.

Where a clause in substance excludes liability for a prior representation, it falls within section 3 of the Misrepresentation Act 1967 and must satisfy the reasonableness requirement in the Unfair Contract Terms Act 1977. In a transaction between experienced investors, such clauses may be reasonable. Whether a sales statement is actionable depends on its commercial context, including the recipient's knowledge and the risks disclosed.

Springwell, the investment vehicle of a shipping group, bought Russian GKO-linked notes from entities in the Chase group. The notes passed through the economic risks of Russian sovereign debt and included rouble-to-dollar forward currency contracts.

Following the Russian default and moratorium in 1998, Springwell alleged that the notes had been misrepresented as conservative, liquid and free from currency risk. It also alleged that Chase had failed to recover value from nine currency forwards after the default.

Gloster J dismissed the material claims, save for a minor custody-fees claim, in judgments reported at [2008] EWHC 1793 (Comm). Springwell appealed the dismissal of its misrepresentation and post-default claims.

1. Appeals dismissed unanimously. Lord Justice Aikens gave the judgment, with which Lord Justice Rimer and Lord Justice Rix agreed.
2. The alleged descriptions of the notes were not actionable representations. They had to be understood in the context of an experienced emerging-markets investor who knew the relevant risks. Describing the notes as conservative or liquid was comparative market shorthand, not an absolute assurance of investment-grade safety or liquidity. The currency hedge removed exchange-rate exposure but retained counterparty risk, which Springwell knew about.
3. The statements were opinions, not representations of fact carrying an implied assertion of objectively reasonable grounds. The court was prepared to accept a salesman's limited duty to avoid negligent misstatements and to warn of a highly risky recommendation. On the findings, however, no negligent misstatement had been made.
4. The note confirmations and terms bound Springwell. Although the financier was formally the note holder, “Holder” had to include Springwell as customer and ultimate economic beneficiary. The non-reliance provisions in the notes and the DDCS letters created a contractual estoppel. Applying Peekay Intermark Ltd v Australia and New Zealand Banking Group Ltd [2006] 2 Lloyd's Rep 511, commercial parties could agree the factual basis on which they contracted. The doctrine did not require proof that it would be unconscionable for Springwell to resile from the agreed position.
5. Clauses which retrospectively denied actual representations were, in substance, exclusions or restrictions of liability within section 3 of the Misrepresentation Act 1967. They were nevertheless reasonable under the Unfair Contract Terms Act 1977, given Springwell's sophistication, knowledge of the risks and contractual documentation.
6. The currency forwards were deliverable contracts. CMIL had to provide roubles in its S-account before CMBI had to provide dollars. After the Russian measures, CMIL could not fund that account. The force-majeure notice and subsequent termination were therefore reasonable. No separate negotiations could have obtained value from unperformable forwards, so CMSCI was not guilty of gross negligence or wilful default under the notes.

• Court of Appeal (Civil Division): dismissed Springwell’s appeals from the dismissal of its misrepresentation and post-default claims.
• Commercial Court: Gloster J dismissed the material claims, allowing only a minor custody-fees claim: [2008] EWHC 1793 (Comm).