VADIM DON BENYATOV v CREDIT SUISSE SECURITIES (EUROPE) LIMITED

An employer does not generally owe an employee a duty to protect against pure economic loss. A focused duty may arise in a novel case through incremental development by analogy with established authority, where the particular harm is reasonably foreseeable and it is fair, just and reasonable to impose responsibility. The scope of the duty must be defined by the specific damage alleged.

On the facts, no such duty arose in relation to the risk of criminal conviction and consequent career loss. The country and transaction were not regarded as high-risk, no relevant warning flags were established, and political risk assessment was not standard practice at the relevant time. The implied employment indemnity was confined to payments, expenses and liabilities, and did not extend to loss of earnings.

The claimant, a senior investment banker employed by the defendant bank, was arrested and later convicted in Romania in connection with work on an electricity privatisation. He claimed substantial career loss against the bank.

He advanced alternative claims for breach of a contractual and tortious duty to protect him from criminal conviction and resulting economic loss, and for an implied contractual indemnity. The bank denied liability and relied, among other matters, on the Romanian convictions and limitation.

The court determined whether the alleged duty and indemnity existed on the facts, whether either had been breached, whether the convictions could be relied upon, and whether limitation defeated the claim.

1. Duty of care. The court held that the contractual relationship was the primary source of the parties’ rights and obligations. There was no general employer’s duty to protect employees from economic loss. In a novel case, however, a focused duty could arise incrementally by analogy with established authority, applying foreseeability, proximity and whether it was fair, just and reasonable to impose the duty.
2. The alleged duty was fact-sensitive and concerned protection from conviction and consequent loss of career earnings. It was not established. Romania was not regarded as a high-risk country, the EMS transaction was not regarded as high-risk, none of the alleged warning flags was proved to have required action, and there was no standard practice of political risk assessment in 2005–2006. The conviction and losses were therefore not reasonably foreseeable, and imposing the duty would not be fair, just and reasonable.
3. Breach. The absence of a political or full risk assessment was not negligent in the circumstances. The court assessed the position by reference to information reasonably available at the time and avoided hindsight. The alleged failures to seek advice, review risk, assess the claimant’s suitability, investigate the consultant, or advise about surveillance were rejected.
4. Indemnity. The implied indemnity in an employment or agency relationship covered payments, expenses and liabilities incurred in carrying out authorised duties. It did not extend to consequential loss of earnings. The narrower formulation concerning an unlawful enterprise did not create a separate or broader indemnity. The possibility of an indemnity implied in fact was left open for a different case, but the factual basis for it was not established here.
5. Convictions and limitation. The Romanian convictions did not prove wrongdoing on the particular evidence and circumstances of this case. In any event, the rule in Hollington v Hewthorn rendered the foreign convictions inadmissible as evidence of guilt. If liability had otherwise been established, losses suffered in 2007 and 2008 would have been damage outside the limitation period arising from the same alleged wrong.
6. The claims for breach of duty and indemnity were dismissed.