Ang v Reliantco Investments Ltd

A broker may terminate a customer agreement where the customer permits unauthorised access to the trading account, if the contract confers that right. That does not necessarily permit the broker to cancel open positions so as to deprive the customer of unrealised gains. Contractual terms producing that result for trivial breaches may be unfair under the Consumer Rights Act 2015. A broker holding customer funds in a fiduciary capacity must account for those funds and must not deal with open positions for its own or an associated party’s benefit. An indemnity clause does not ordinarily protect a trader from liability arising from its own improper performance, negligence, fraud or wilful default.

The claimant traded Bitcoin futures through the defendant’s UFX platform. The defendant terminated her account, cancelled or closed her trades, and withheld the account balance after concerns arose concerning her husband, the source of her wealth and her trading activity.

The claimant sought the return of deposited funds, the unrealised gains on open positions, consequential investment losses and relief for alleged data-protection breaches. The defendant relied on contractual termination provisions, alleged misrepresentations and breaches concerning account access, and counterclaimed costs and sums previously paid pursuant to an earlier jurisdiction decision.

The court had to determine whether termination was justified, whether the defendant could cancel or close the open positions without accounting for their gains, and whether the counterclaim was established.

1. The claim succeeded and the counterclaim failed. The defendant was obliged to return the deposited funds. It also had to account for the value represented by the unrealised gains on the claimant’s open positions when the account was terminated.
2. The claimant had opened and principally operated the account, although her husband had accessed it and probably assisted with some trading. That access breached contractual provisions requiring authorised access and use of the account. Those breaches entitled the defendant to terminate under the relevant contractual provision.
3. Termination did not confer a right to cancel the open positions as if they had never existed. The agreement distinguished cancellation from closing or closing out. Closing the positions would have realised the gains. The contractual right to cancel depended on an event which had not occurred. The failure to close the positions and pay the resulting balance breached the agreement.
4. Alternatively, if the contract permitted cancellation for the breaches found, those provisions were not binding under section 62 of the Consumer Rights Act 2015. They would cause a significant imbalance to the consumer’s detriment, contrary to good faith, by allowing the defendant to deprive her of substantial gains for potentially trivial breaches. The same conclusion followed under the agreed application of Cypriot law and Directive 93/13/EEC.
5. The defendant held the claimant’s trading funds in a fiduciary capacity. Its dealings with the open positions, at least substantially intended to benefit it or related parties, breached fiduciary duties and justified equitable compensation.
6. The claimant’s intended reinvestment loss was recoverable. It was within the reasonable contemplation of the parties that failure to pay sums invested in or gained from Bitcoin futures could cause loss of returns from similar investments.
7. The indemnity clause did not cover the claimant’s claims, which arose from the defendant’s improper performance rather than the proper performance of the claimant’s obligations. In any event, the clause’s exception for the defendant’s negligence, fraud or wilful default applied, with any ambiguity construed in the consumer’s favour under section 69 of the Consumer Rights Act 2015.
8. The fraud-based counterclaim failed. Although the claimant had given untruthful evidence about her husband’s access, she was the principal user and the alleged dishonesty was not material or causative of the earlier jurisdiction decision or the German proceedings.

The judgment records earlier jurisdiction proceedings before Andrew Baker J. His application judgment and consequential order are described, but no citation is stated. The present court determined the substantive claim and counterclaim at first instance.