Zaki & Ors v Credit Suisse (UK) Ltd

The Court of Appeal refused an application for pre‑hearing disclosure under CPR 31.12 of documents produced to the Financial Services Authority (FSA) in relation to its investigation and skilled person’s report. The claimants sought these documents to support possible additional grounds of appeal arising from alleged systemic regulatory failings identified by the FSA. The court held that the FSA materials were not relevant to the specific grounds of appeal before the court (which concerned rule 7.9 of the Conduct of Business Rules and issues surrounding financing) and that the FSA findings related to systemic record‑keeping and monitoring failures rather than the discrete factual questions the judge had decided (suitability of particular recommendations and causation of loss).

Because the claimants did not challenge the judge’s principal findings on suitability and reliance, and because the FSA had not investigated whether individual sales were unsuitable, the court concluded the application amounted to a speculative fishing exercise that would impose a substantial burden on the respondent. The order for disclosure was therefore refused.

Background and parties: The claimants are the family and personal representatives of Mr Mohamed Magdy Zeid. They sued Credit Suisse (UK) Limited for alleged mis‑selling of ten structured capital‑at‑risk products (SCARPs) purchased between 2007 and 2008, many bought with substantial leverage. At first instance Teare J dismissed the claim. The claimants appealed with leave and sought pre‑appeal disclosure of documents relating to an FSA investigation and a skilled person’s report which had resulted in a published final notice and penalty against Credit Suisse.

Nature of the application and relief sought: The application before this court was for an order under CPR 31.12 that Credit Suisse disclose documents relating to the FSA investigation and the skilled person’s report within 14 days, on the basis that those documents either undermined Credit Suisse's case at trial or supported the claimants' case and might give rise to further grounds of appeal.

Issues framed by the court:

• whether the FSA materials were relevant to the grounds of appeal (principally issues under COB 7.9 and financing);
• whether the FSA findings as to systemic failures could affect the trial judge's findings on the suitability of particular recommendations (COB 5 / COBS 9) and causation (reliance by Mr Zeid);
• whether disclosure would be appropriate in advance of the appeal or merely amount to a fishing expedition imposing disproportionate burden.

Reasoning and conclusions: The court analysed Teare J's factual findings that (a) notes 1–7 were suitable for Mr Zeid, (b) notes 8–10 were unsuitable but Mr Zeid did not rely on Credit Suisse's advice in purchasing them, and (c) failures in record keeping and monitoring might evidence lapses in taking reasonable steps but did not establish that recommendations were in fact unsuitable. The FSA final notice criticised Credit Suisse's systems and controls generally but expressly did not determine whether any individual advised sales were unsuitable. The Court of Appeal concluded that the FSA materials were unlikely to have affected the judge's assessments of Mr Zeid's understanding, the credibility of the relationship manager, or the question of reliance and causation. Granting the wide disclosure sought would be speculative and burdensome. The application was therefore refused.

The Court of Appeal refused the claimants' application for disclosure under CPR 31.12. The court held that the FSA materials were not relevant to the specific grounds of appeal (principally rule 7.9 and related financing questions), that the FSA's findings related to systemic record‑keeping and monitoring rather than the discrete factual issues decided at trial (suitability and causation), and that ordering the broad disclosure sought would amount to a speculative fishing exercise and an undue burden on the respondent.

Appeal to the Court of Appeal ([2012] EWCA Civ 583) from the Queen’s Bench Division, Commercial Court (Teare J, judgment handed down 4 October 2011). Leave to appeal was granted by Sir Mark Waller. The present hearing concerned an interlocutory application for disclosure made in advance of the substantive appeal.