Rubenstein v HSBC overturned on appeal.

A case that we reported on earlier in the year has been heard in the Court of Appeal. The matter of Rubenstein v HSBC Bank Plc [2012] EWCA Civ 1184 was a claim arising out of an AIG Premier Access bond. Rubenstein had stated that his attitude to risk was as a risk free investment. The adviser recommended the AIG premier access bond and stated it was the same as cash deposited in one of their accounts. Rubenstein accepted that advice and invested the money in the bond.

As a consequence of the Lehman Brothers’ failure there was a rush on bonds and Rubenstein’s investment reduced substantially – he lost £180,000. At first instance the court found that the advice given by the Bank was negligent and that Rubenstein had relied on that advice. However the court  found that the loss suffered was not caused by the Banks negligence but by the unprecedented market turmoil which was not foreseeable.

The matter went to the Court of Appeal who reversed that decision.  Rix LJ stated that the Bank must reasonably contemplate, if it misleads its clients as to the nature of the investment and puts into place an investment that is unsuitable, that they will be liable for the loss.

There was an alternative investment in which the money could have been invested and which in fact suffered no loss.

The Bank had failed to follow the basic provisions of the Conduct of Business Rules such as know your Customer. If it had it would have recommended the right product.

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