FXCM Securities v Digby

On an application for summary judgment, the question is whether the defence or counterclaim has a real, rather than fanciful, prospect of success, and whether there is any other compelling reason for trial. The court must examine the evidence, even where the application is made late.

A contractual power to close out positions following an unmet margin call may be exercised where the applicable terms permit it. A customer’s lack of knowledge of a change in ownership does not, without more, establish misleading non-disclosure. A failure to communicate amended terms does not itself create a contractual claim where the original terms continue to govern. In the circumstances considered, no duty arose concerning the timing of the close-out.

FXCM Securities Limited sought summary judgment for £544,029.12, together with interest, arising from losses after it closed out foreign exchange derivative positions held by Digby. An application to strike out Digby’s pleadings was also made but was not considered separately.

The parties’ relationship began under contractual terms adopted in 2004. The claimant later relied on amended terms introduced in 2007 and 2011, but accepted that, for summary judgment purposes, the 2011 terms had not been incorporated. The court therefore considered whether the 2007 terms had replaced the 2004 terms, whether the claimant was entitled to close out after an unmet margin call, and whether Digby had any defence arising from non-disclosure, refused hedging instructions, regulatory obligations, or the manner and timing of the close-out.

1. Disposition. The claimant was entitled to summary judgment, subject to interest. There was no defence or counterclaim with a real prospect of success. The claim for interest other than statutory interest was withdrawn, and interest was awarded at 2 per cent.
2. Applicable contractual terms. There were substantial questions whether the 2007 terms had been effectively communicated under the 2004 terms. These included whether an email had been actually received, whether the notice period was sufficient, and whether the Unfair Terms in Consumer Contracts Regulations 1999 affected the amendment power. Those issues did not need to be resolved because the claimant accepted that the 2004 terms should be assumed for the application.
3. Close-out entitlement. Under the 2004 terms, as under the later terms, the claimant was entitled to close out the positions after the margin call was not met. The existence of an event of default provided an additional basis for that conclusion.
4. Other defences. The claimant had no obligation to disclose fully the takeover or ownership change. Notification of the change of name was not misleading merely because other explanations for the change were possible. Failure to communicate amended terms did not give rise to contractual damages or another contractual remedy where the consequence was simply that the 2004 terms remained applicable. The claimant was entitled to refuse instructions which might have enabled Digby to hedge, provided it did not act in bad faith, arbitrarily, or contrary to its contractual rights.
5. Regulatory and close-out duties. The judge considered whether failure to communicate the 2007 terms breached the regulatory regime, but concluded, in light of section 151(2) of the FSMA, that the point afforded no defence. The judge expressed no concluded view on the broader question whether a party closing out positions might owe duties concerning the price obtained, referring to Euroption Strategic Fund Ltd v Skandinaviska Enskilda Banken AB. For present purposes, however, the authorities, beginning with Cuckmere Brick Co Ltd v Mutual Finance Ltd, established that no duty was owed concerning the timing of the close-out.

First-instance decision. No earlier appellate decision was stated in the judgment.