On 25 July, Field J held that Marex was entitled to recover sums from its Defendant customers (BVI trading entities) reflecting the majority of the negative balances left in those customers’ accounts after the close out of their large JPY related currency forward positions (NZDJPY and EURJPY), following the severe earthquake and catastrophic tsunami that struck Japan on 11 March 2011 and caused the USD/JPY exchange rate to drop steeply to historic lows over the subsequent days. The Court also entirely dismissed the Defendants’ counterclaim for damages for negligence and breach of duty against Marex. The dispute involved issues as to the nature and scope of duties owed by a closing broker to its client and the detailed workings of the FX markets (as to which there was expert evidence).

The majority of the 2 week trial was spent exploring issues related to the Defendant’s counterclaim, in particular (1) whether a broker in Marex’s position, when exercising a right to close out a customer as a result of it failing to meet its minimum margin requirement, owed a contractual or tortious duty of care to that customer in the way it conducted the close out, or whether such duty was limited, as Marex argued, to one of acting rationally and in good faith and (2) whether Marex had breached either of those duties, in so far as they applied.

The Court also considered a third issue: whether Marex had been entitled unilaterally to charge an element of profit or mark-up on top of the prices it achieved for the customer in the market, during the close out.

On the issue of duty, Field J held that there was no duty on the Claimant to take reasonable care not to cause the Defendants loss when closing out their positions unilaterally. The Defendants had failed to establish that such a duty had been imposed either (i) as a matter of construction of the express terms of the relevant contracts (ii) by way of a term implied by Section 13 of the Supply of Goods and Services Act 1982 (iii) by way of an term implied under common law or (iv) in tort. In doing so, Field J considered and endorsed the judgments of Gloster J (as she then was) in Euroption Strategic Fund Ltd v Skandinaviska Enskilda Banken AB[2012] EHHC 584 (Comm) 22 and followed the Court of Appeal decision in Socimer International Bank Ltd v Standard Bank London Ltd [2008] 1 Lloyd’s Rep 558.

Further, on the facts, Field J held that Marex had not breached its duty to act rationally and in good faith in the way it conducted the close-out; the Defendants’ counterclaim was therefore dismissed. Finally, the Court held that because there was no clear contractual basis for the unilateral imposition of a mark-up on the prices achieved for the customer in the market, Marex had no entitlement to recovery of sums that reflected such profits.

Alain Choo-Choy QC and Mehdi Baiou appeared for Marex Financial Limited and were instructed by Thomas Cooper.

Full text of the Judgment available here.