Court dismisses claim over Credit Suisse structured products

A High Court judge has dismissed a legal challenge against Credit Suisse over an investment of $12m (£7.6m) into a Lehmans Brothers structured product, saying it had “no real prospect of success”.

The complaint at the Commercial Court, brought by Charalambos Ventouris, owner of investment company Camerata, related to advice received from Credit Suisse relationship manager Petros Siakotos-Konstantinidis to invest in a Lehmans Brothers Five Year Autoredemption Note.

Mr Ventouris alleged that Credit Suisse’s advice to invest in the note, which was issued by Lehman Brothers Treasury BV, a subsidiary of Lehman Brothers, was “grossly negligent”.

The note did not pay a regular coupon but could be automatically redeemed throughout its life on certain observation dates if the exchange rate between the euro and the US dollar was at or below the “strike rate” of 1.374 US dollar per euro.

On 27 July 2007, Mr Ventouris decided to invest in $12m in this note, with $4m by way of equity and $8m leverage. However, Mr Ventouris claimed he was not aware who the issuer was and thought it was likely to be Credit Suisse.

The particulars of claim for this action were served on 4 August 2011. It alleged that Credit Suisse was in breach of contractual, common law and statutory duties because the Lehman Brothers’ note carried at least a medium risk level and as not a safe investment.

It was also alleged that Credit Suisse was grossly negligent in not taking account of the fact that Mr Ventouris was extremely risk averse.

However, Mr Justice Flaux ruled in favour of Credit Suisse, saying it was not made obvious to him that Mr Ventouris was strongly adverse to risk - thus making the product unsuitable - and nor did he accept that had Mr Ventouris received different advice he would not have entered into the transaction.

This was the second time that Mr Ventouris has taken Credit Suisse to court. The first proceedings were issued on 15 May 2009. The particulars of claim stated that Mr Siakotos-Konstantinidis should have been aware of Camerata’s aversion of risk.

There was no allegation in the initial claim that the advice was in breach of contract or negligent and hence no allegation about the suitability of the note was made.