SUSAN FIELD v. BARBER ASIA LTD

HCA 7119/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 7119 OF 2000

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J U D G M E N T

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Introduction

1. This was the trial of an action by Susan Field ("Ms Field") against Barber Asia Limited ("Barber Asia") in which Ms Field claims damages in respect of financial advice given to her by Barber Asia. Ms Field alleges that the advice that she was given was negligent, and that losses which she suffered as a result of relying on such advice are recoverable either on the basis of a breach of contract by Barber Asia or because Barber Asia owed her a duty of care in tort in relation to such advice.

2. Ms Field's complaints relate to an investment strategy which she says was recommended to her by Mr Andrew Barber ("Mr Barber") of Barber Asia in July 1998. I shall deal with the facts underlying Ms Field's claim in more detail below, but, in brief, this strategy involved gearing up Ms Field's existing investments (which she had acquired earlier on Mr Barber's advice) by using them as collateral for a loan to be used to acquire further investments, which would also be pledged as security for the loan. The loan would be in a low-interest rate currency (in this case, Japanese Yen), but the assets securing the loan would be denominated in Sterling, and were expected to produce a return that was rather higher than the rate of interest payable on the loan. With the effect of the gearing, it was envisaged that the rate of return on Ms Field's initial investment could be considerably enhanced.

3. Unfortunately, as a result of a sharp appreciation of the Yen against Sterling, Ms Field was faced with demands to top up the security provided for the loan in substantial amounts on two occasions within a just over a year after this arrangement was entered into. On the first occasion, about seven months after entering into the arrangement, Ms Field was able to provide the additional security demanded, wholly or partly from further loans (from different sources). On the second occasion, some 6 months later, Ms Field did not provide further security, and as a result the lender switched the loan into sterling, crystallising the exchange loss. Shortly afterwards, Ms Field repaid the loan by realising the assets against which it was secured. The balance of the security was returned to her, but this represented only a small part of her initial investment and she thus incurred a substantial loss overall.

The Parties' Cases Summarised

4. In essence, Ms Field's complaint is that she was an inexperienced investor, and from the outset made it clear to Mr Barber that she wanted to invest her savings, which represented substantially all of her capital, in a conservative way. She says that she did not change these guidelines at any material time. Notwithstanding this, Mr Barber advised her to enter into an investment structure which was unsuitable for her and inconsistent with her objectives, in that it involved risk of a significant loss of her capital, without explaining to her the nature of the risk involved.

5. Barber Asia's position was that Ms Field was a fairly sophisticated investor, who wished to retain control of her investments, and chose not to enter into any formal contractual relationship with Barber Asia, but simply wished to obtain from Barber Asia information as to investment opportunities which might suit her needs, and to make her own decisions as to such investments. While accepting that Ms Field's initial request had been for a conservative investment strategy, Barber Asia claimed that this had changed over time, and that by the time that the investment now complained of was entered into, Ms Field wanted (or at least was prepared to accept) a strategy that was much riskier in order to obtain the prospect of better returns.

6. Barber Asia was of the view that it had complied with all relevant regulatory requirements and codes of practice, and owed Ms Field no further duties. In any event, Barber Asia denied having acted negligently, whether as alleged in Ms Field's Amended Statement of Claim or at all. Barber Asia further emphasised the fact that Ms Field entered into direct contractual relationships only with the financial institutions from which she acquired investment products or loans. Its position was that any losses which Ms Field suffered were caused (wholly, or at least in part) by her own acts and decisions, in particular her decision not to continue with the investment and loan arrangement at the time of the second demand for further security, and not by any default on its part.

7. At the trial, Ms Field was represented by Mr Maurellet of counsel. Barber Asia's defence was conducted by Mr Barber, leave for him to do so having been granted prior to the commencement of the trial.

The Issues

8. The broad issues which arise for decision are as follows:-

(1) Whether Barber Asia owed Ms Field any duties in contract, and if so what those duties were.

(2) Whether Barber Asia owed Ms Field any duty of care in tort in relation to the investment information or recommendations which it provided to her.

(3) If Barber Asia owed any duties to Ms Field, whether in contract or in tort, whether Barber Asia were in breach of such duties.

(4) If so, whether any losses which Ms Field suffered were caused by such breach or breaches of duty, or whether they were attributable (in whole or in part) to Ms Field's own actions.

(5) The quantum of the loss (if any) for which Barber Asia might be liable.

9. In the course of the trial, a number of factual issues arose on which the parties' evidence was contradictory. The most important of these was whether or not Ms Field had, between the time she first had dealings with Barber Asia and the time when she entered into the investment structure complained of, changed her investment objectives by being prepared to accept much higher levels of risk than she had been at the outset. There were also several other areas of factual dispute. I shall deal with these issues when considering the evidence and stating the facts as I find them to be.

The Witnesses

10. At the trial, factual oral evidence was given by Ms Field and by Mr Barber. Both of them had made witness statements, which stood as their evidence in chief. However, both gave further evidence in chief by way of amplification of their witness statements and in response to some of the matters raised in the other party's evidence. Although a witness statement was also made by another employee of Barber Asia, Mr Chris Barber ("Chris Barber"), he was not called to give evidence, and accordingly his witness statement was not referred to during the trial.

11. I had the opportunity to observe both Ms Field and Mr Barber give evidence during the course of the trial. I have borne in mind that they are the principal protagonists in this action.

12. In the case of Ms Field, I have taken into account the fact that given the sense of grievance which she clearly felt, her evidence may have been coloured by this. That said, however, I found Ms Field to be a straightforward witness. She readily admitted that her recollection was in some respects limited. She was also prepared to accept contemporaneous documents at face value. There were occasions when she appeared quite willing to accept matters which were put to her which might be thought to be damaging to her position. Although Mr Barber levelled a number of criticisms at her evidence and the manner in which she gave it, which I shall touch on when examining the evidence in question below, I should say that I did not consider such criticisms to be justified, and I am satisfied that Ms Field was a generally truthful witness, who was doing her best to recollect matters as they had occurred.

13. So far as Mr Barber is concerned, I have made allowance for the fact that, apart from the strain which any witness is likely to be under, he was giving his evidence under the additional burden of having to conduct Barber Asia's case on his own without the benefit of legal representation. I have also allowed for the fact that there would be additional stress arising from the fact that it was his conduct and advice that was the subject of criticism in these proceedings. However, that said, I did find that there were a number of respects in which his evidence was difficult to accept, and did not sit particularly well with contemporaneous documents. It seemed to me that he was, on several occasions, anxious to deflect responsibility away from himself, and onto Ms Field.

14. As will be apparent from my findings as to the facts, to the extent that Ms Field's evidence has conflicted with that given by Mr Barber, I have generally had little hesitation in preferring Ms Field's evidence to that of Mr Barber.

15. Expert reports in relation to investments, investment advice and quantum were also lodged by both parties. However, at the trial, only the Plaintiff's expert, Mr Green, attended to give evidence. His report was admitted as his evidence in chief, subject to some clarification and expansion. As the Defendant's expert, Mr Rigby, was not called to give evidence and was unavailable for cross-examination, his report, like the witness statement of Chris Barber, was not referred to at trial, and I have not had regard to any of the matters contained in it.

16. Mr Green's qualifications were attacked by Mr Barber, who suggested that Mr Green had had little relevant experience, and that his involvement in investment advice and financial advisory services was out of date. I do not accept this criticism. Mr Green's curriculum vitae is impressive. Having trained as an actuary, he worked with a number of substantial companies as Pensions Secretary, Pensions and Investment Manager, and Investment Manager. This included a period in the 1960s with what is now British Airways, where he had responsibility for its pension scheme's investments, which at the time totalled some ￡500 million (and which would be many times that amount in current terms). In 1971 he formed his own investment management firm, in partnership with others, and when his partners sold their shareholding to Nikko Securities Ltd in 1985, he remained with the firm until 1992 on a full-time basis, after which he continued as a consultant until 1995. He has given expert evidence in a large number of cases, and is and has been a member of several committees of professional associations.

17. Although it is fair to say (and Mr Green readily accepted) that he had no experience of acting as a financial advisor to expatriates, or in Hong Kong, I do not consider that these limitations impinged significantly on Mr Green's ability to express an opinion on what I consider, at the end of the day, to be reasonably straightforward matters of investment and financial advice.

18. Mr Green gave his evidence in a careful manner. He was, as I have indicated, ready to accept the limitations of his experience and knowledge. I found him to be a satisfactory witness, and have no hesitation in accepting his evidence.

The Evidence

Ms Field's Background

19. I turn now to consider the evidence. In doing this, it is necessary first to consider the position of Ms Field in about mid-1997, when she met Mr Barber. Her evidence as to her own working experience was uncontroversial. She said that she first came to Hong Kong in the mid-1980s. Prior to coming to Hong Kong, she had worked in the United Kingdom, first as a receptionist, and then working for Grand Metropolitan plc, a company with interests in the hospitality field. After coming to Hong Kong, she worked for a time with an Australian company, Goodman Fielder Wattie, where her principal role was to work on a tender to retain certain concessions at the Hong Kong airport. In this connection, her work involved an element of lobbying or liaison with the Hong Kong Government (in particular the Civil Aviation Department). She was not, however, required to prepare financial projections or budgets. She also worked for a time with the Ramada hotel group, in their public relations department, having responsibility for regional public relations, but also dealing with those matters in Hong Kong when the local hotel's purblic relations manager left.

20. Thereafter, in about 1990, she set up her own marketing and communications business through a firm called Susan Field and Associates. At the same time she had an interest in a hospitality industry publication called "Asian Hotelier". Both proved to be successful ventures. By 1997, the marketing and communications business was being operated through a company called The Impact Group Limited ("Impact Group"), of which she was the major shareholder (a small passive shareholding in that company being held by a friend) and for the business of which she was the main driving force. By this time, she had, through her own efforts, built up the turnover of Impact Group to some HK$3 million per annum. Impact Group provided media relations and public relations services and advice, including graphic design and event management services for a range of clients which were primarily international companies in the travel and hospitality businesses, such as hotel groups and airlines, but which also included from time to time some other consumer companies, such as San Pellegrino and Toppy Fashions.

21. Ms Field said that the business depended largely on her relationships with the clients whom she serviced. She said that the business had been profitable, although margins have declined substantially in recent years. She said that while she expected to make a profit, she conducted her business without preparing budgets and financial forecasts or targets, instead relying on a sense of the general level of the expenses, and working out quotations on the basis of experience and a sense of what the job would bear. Her personal expenses were mostly put through the company, and although she drew a modest salary, surpluses were generally kept in the bank, and ploughed back into the business, as there was usually some money owing to its bankers at any given time.

22. By 1997, the Asian Hotelier publication business had been sold for some HK$2 million to a publishing group, generating about HK$1 million for Ms Field. Together with her savings over her years working in Hong Kong and from the business of Impact Group, Ms Field had built up some US$300,000 in total assets. There was some uncertainty about the exact amount available to Ms Field for investment at this point in time - in her witness statement she had said that she had some US$190,000 available for investment, which had increased to some US$300,000 by early 1998 when she made her first investment through Barber Asia. However, in cross-examination, she agreed with Mr Barber that she might have been mistaken, and that there was probably US$300,000 by the time she first met him in June 1997, but that she had initially been inclined to invest only part of it through Barber Asia. Given that Impact Group at that time had a turnover of some HK$3 million, it seems unlikely that she would have been able to effect savings of nearly HK$800,000 (or US$100,000) in the space of some 9 months, and I conclude that it is more likely that Ms Field had some US$300,000 in savings by around June 1997.

23. So far as her experience in investing was concerned, Ms Field's evidence (which was not challenged) was that, as at June 1997, she had never owned any stocks, shares, bonds or unit trusts. She did not own property, and did not have a mortgage. She had only ever had bank accounts, these being maintained with the Hongkong and Shanghai Banking Corporation ("HSBC"), with whom both she and Impact Group banked. She had an account known as an AssetVantage account, which provided multi-currency savings accounts facilities, and allowed for time deposits to be made in various currencies. She said that she found that the AssetVantage account was rather complicated, and later terminated it, replacing it with a slightly simpler account known as a PowerVantage account, which provided similar multi-currency savings and time deposit facilities. She said that Impact Group found it useful to have foreign currency accounts, since this enabled it to make payments to foreign suppliers conveniently, and also provided its clients with the facility of being able to remit foreign currency in settlement of Impact Group's fees and charges. Ms Field said that she kept any spare money on time deposit, usually for fairly short periods (a month or so), and only in Sterling or US Dollars, deciding between the two having regard to which currency offered a higher rate of interest at the time.

24. Ms Field's personal life is also relevant to some of the evidential issues arising in this matter. As at June 1997, Ms Field had a relationship with Frank Van Amelsvoort ("Mr Van Amelsvoort"), a Dutch gentleman who was working at the time in the United Kingdom. Her mother was also living in the United Kingdom. Although she was happy working in Hong Kong, she had in the back of her mind an idea that she might return to the United Kingdom in about 5 years' time. This is a time frame which has been extended over the years, and she says that even now she envisages returning to the United Kingdom in 5 years from now.

25. Ms Field's background is important, as it will be necessary to have regard to her personal situation and her experience in investing and financial matters when considering the advice that she received from Barber Asia.

Mr Barber's background

26. By comparison, Mr Barber's background is of less relevance, and can be more briefly summarised. Having resigned his commission from the British Army in 1984, he joined the financial services industry in the United Kingdom, where he worked for Towry Law, and then joined the Mannin International Bank, where he started working in Asia. Mannin International Bank having been taken over by the Royal Bank of Canada, he became an employee of the Royal Bank of Canada, eventually becoming head of their private banking operation in the Asia Pacific region in 1991. He then joined Coutts & Co in 1993, setting up their private banking operations in Hong Kong and Singapore, and leaving in 1995 to form Barber Asia, as his own investment advisory company to service clients with whom he had built up a relationship over the years. Apart from dealing with clients of Barber Asia, for a period from sometime in 1996 or thereabouts until about 2000, he was involved with assisting a Canadian client, the Zi Corporation, in setting up an office in Hong Kong, something which took up perhaps half his time.

The first meeting

27. Ms Field and Mr Barber met for the first time on 19 June 1997. The meeting took place in the Clipper Lounge at the Mandarin Hotel. Ms Field had been introduced to Mr Barber by a friend of hers, Ms Jane Wild, who was at this time also involved, on something of a trial basis, with Impact Group's business. The meeting was in the nature of an exploratory one, with Ms Field explaining her personal situation and the financial objectives which she had in mind, and Mr Barber explaining the background of Barber Asia, and the ways in which Barber Asia might be able to assist Ms Field to attain those objectives.

28. Although there are some differences of recollection in relation to some of the matters discussed or mentioned at this meeting, it was common ground that at this meeting, Ms Field told Mr Barber that she had saved up some money which she wished to invest, and that she wanted to invest it in a conservative way, with the objective of doing better than leaving the money in the bank. Ms Field's desire for a conservative investment strategy is reflected in handwritten notes made by Mr Barber at or shortly after the meeting. It is also recorded in a memorandum which Mr Barber sent to Mr Field the same day, when, having recorded that she had told him that she had some US$190,000 which she wished to invest using a "conservative risk" strategy, Mr Barber went on to recommend an insurance product offered by Old Mutual International ("Old Mutual"), which was known as the Alpha Capital Investment Plan. This essentially involved a single-premium investment, which could be allocated between different investment sectors, where it would be invested into professionally managed investment funds.

29. It is clear from Mr Barber's notes of the meeting that there was some discussion of Ms Field's business and personal background, and that Mr Barber obtained information as to the nature and financial position of Ms Field's business, as well as of her own financial position. I note that the figures in Mr Barber's notes (both in respect of Impact Group and Ms Field's personal worth) are slightly higher than those which Ms Field mentioned during her evidence at trial, but neither party suggested that much turns on this.

30. I have noted that Mr Barber's note does not contain any information as to whether or not Ms Field had any previous investment experience. There is no reference to any other investments which she held at the time (no doubt because she did not have any). I therefore conclude that Mr Barber knew that Ms Field did not have any other form of investment, beyond the bank accounts to which I have referred, at this time. While it is not clear from the notes whether Mr Barber knew that Ms Field had never had any other form of investment, Ms Field said in her statement that she told him that she had no previous experience of investing, a statement which was not challenged. I therefore conclude that Mr Barber knew this.

31. Ms Field said that at this meeting, she told Mr Barber that she had accumulated some savings over the years which she wished to invest. She says that she made it clear to him that she did not wish to lose any of these savings, as they represented virtually the entirety of what she had to show for many years of hard work. Ms Field says that she told Mr Barber this on a number of occasions. This evidence was not challenged by Mr Barber.

32. Mr Barber did, however, say that apart from the amounts which Ms Field had told him that she had available (some US$300,000 for investment, with a relatively small amount left over for emergencies), he also had regard to the fact that Ms Field's business was worth something. On the basis of a turnover of about HK$3 million a year, he said that her business would be worth approximately HK$6 million. Ms Field said that the value of her business was never discussed - Mr Barber accepted this, but took the view that it was appropriate for him to make an assessment of the value of the business of Impact Group, and to take it into account when considering Ms Field's overall net worth.

33. Ms Field says also that she had in mind a return of about 10%, as she had been told by friends (who were not investment advisors) that this would be something that could be achieved given her desire to invest in a conservative way. She said that she mentioned this to Mr Barber, and that he agreed that such a return was consistent with a conservative investment strategy. Mr Barber's evidence was to the effect that Ms Field was initially looking for a return that was slightly lower, but that she increased it to 10% subsequently. This difference is not one which is to my mind critical, as both Mr Barber and Mr Green agreed that a return of approximately 10% was something which could reasonably be regarded as achievable consistently with Ms Field's objectives, as although the range of risk involved might move slightly upwards, from low to low-medium, a strategy of this sort could still be described as conservative, despite the slight increase in the level of risk.

34. Mr Barber also explained that his practice is to define risk by reference to the level of returns in excess of base rates for the currency in which the investment is to be denominated, and that he explained this to Ms Field. Ms Field said that she did not recollect this. This is not recorded in Mr Barber's memorandum to Ms Field, although it is consistent with his handwritten note (which was not sent to Ms Field at the time). While it may be that Mr Barber gave Ms Field an explanation along these lines, it is an explanation that is not, in my view, likely to have meant a great deal to Ms Field, given her lack of experience in relation to investments. In any event, given that an investment strategy could be regarded as conservative whether it carried with it low or low-medium risk, it seems to me that this is again a difference of no great significance.

35. Mr Barber says that he went on to explain the way in which Barber Asia could assist Ms Field with her investments. He outlined two main ways in which Barber Asia serviced its clients. One approach, known as a discretionary investment service, was for the client to hand over control of his or her investments to Barber Asia, who would make all investments on behalf of the client at their discretion, based on a mutually agreed set of guidelines which would be determined at the outset, and reviewed from time to time. The other approach, known as an advisory investment service, involved Barber Asia in providing advice and recommendations to its client, but not having the authority to make investments on the client's behalf. Under this approach, the client made the decisions, based on the advice or suggestions which had been received. Both the discretionary and advisory services involved the entering into of a formal written contract, under which Barber Asia would be entitled to payment of a fee based on the value of the client's assets under management. Apart from these two services, Barber Asia would also act on an execution basis, where no fee was payable by the client, but Barber Asia would implement investment decisions of the client by assisting the client in investing in the investment products that the client had decided upon, perhaps in the light of advice or suggestions which had been provided by Barber Asia. In this case, Barber Asia would receive no remuneration from the client, but would receive payment from the organisations with whom investments were placed.

36. Mr Barber said that from the outset, Ms Field did not seem to be interested in a discretionary service. Initially, he had in mind that she might become a client of Barber Asia's advisory investment services. As things turned out, Ms Field never signed any client agreement or other formal contract with Barber Asia, and never herself paid them any fees. Instead, Mr Barber provided her with investment advice on occasion, which Ms Field appears to have accepted, acquiring the investments that she did through Barber Asia, which was thus enabled to earn commissions from the companies whose investment products were acquired. Ms Field did not, I think, dispute any of this. While accepting that she did not herself wish to have to pay any fees to Barber Asia, she said that Barber Asia would of course have to earn its income from somewhere, and she realised that commissions or fees would be earned from the insurance or fund management companies in whose products she invested.

Whether Ms Field was a sophisticated investor

37. Finally, in relation to the first meeting, I should deal with Mr Barber's suggestion that Ms Field was not a naive or inexperienced investor, but a fairly sophisticated one. Mr Barber appeared to base this contention on two factors few factors some of which would have arisen from the first meeting, and two others which would have arisen later. These were as follows:-

(1) Ms Field was a financially astute business woman (not a widow or nurse or other person who might have no or little experience of business or finance), running her own company, in the course of which she must have built up considerable experience of preparing budgets, costings and financial projections.

(2) She had a number of multi-currency accounts which she used to manage Impact Group's currency exposure in various currencies.

(3) She did not raise any objections or concerns prior to making her investments.

(4) She signed various declarations in connection with her investments and financial arrangements entered into on Barber Asia's advice, to the effect that she had read the product literature and understood the risks involved as well as the applicable charges and fees.

38. As to these matters, while it is undoubtedly correct to say that Ms Field was an experienced and successful businesswoman, it is important to bear in mind the limitations of such a statement. Ms Field's expertise lay in the area of public and media relations, and while managing the business of Impact Group and running it on a profitable basis undoubtedly called for business skills, those skills are not necessarily those which equip the business owner with the ability to understand and appreciate the merits and risks involved in the types of investments which Ms Field was recommended by Barber Asia. Accordingly, I do not think that it was reasonable for Mr Barber to conclude solely on the basis of Ms Field's business background that she was a sophisticated investor with a good understanding of the investments which he might recommend to her. Further, I do not see that the possession of a multi-currency account is necessarily an indicator of sophistication or acumen so far as investments generally are concerned. Multi-currency accounts of the type which she held were common in Hong Kong by the mid-1990s, and the movement of funds between currencies to obtain better interest rates is not, to my mind, evidence of great financial sophistication (indeed, if anything, it may betray a lack of awareness of risks in the movement of exchange rates).

39. As to the suggestion that Ms Field did not raise concerns or objections to the investments suggested by Barber Asia, this would seem to me to be more likely to be evidence of the fact that she trusted and relied implicitly on the advice that she was being given - sophistication and awareness of the factors involved in making an investment of the magnitude that Ms Field was making would, to my mind, be better demonstrated by a questioning attitude as to the merits or otherwise of particular investments, which is conspicuous by its absence in this case. Equally, the making by Ms Field of declarations as to having received and understood documentation supplied by investment product providers does not, in my view, assist Barber Asia, since such declarations are clearly designed to provide comfort and protection to the investment product provider, who will generally be unaware of the circumstances of the person acquiring the investment product, of the information supplied to him and his ability to understand it. Barber Asia, through Mr Barber, were well acquainted with Ms Field and her personal situation and attributes, and to the extent that they knew or ought to have known that she did not or might not understand the risks involved, they cannot, in my judgment, improve their position by reference to the declarations which she signed.

The second meeting - Ms Field's first investment through Barber Asia

40. Following the initial meeting with Mr Barber, Ms Field did not in fact make an immediate investment. It was not until some 9 months later, in March 1998, that she made her first investment through Barber Asia. At this time, Ms Field made an investment in the Old Mutual product which had been recommended by Mr Barber in his memorandum of 19 June 1997. As she felt comfortable with Mr Barber, she invested substantially the whole of her available funds - a total of some US$306,380. She said that following this investment, she still had some money in reserve, to cover unexpected expenses or contingencies. She was unable to recollect the exact amount available, but thought that it was in the region of US$20,000 or perhaps ￡20,000.

41. The decision to invest was made following a meeting between Ms Field and Mr Barber, at which Mr Barber assisted Ms Field with the application to Old Mutual, by filling in substantially the whole of the application form for her to sign. Mr Barber also made recommendations as to the mix of funds offered through Old Mutual into which Ms Field should put her funds for investment. These comprised five separate funds, to each of which between 10% and 30% of the total sum invested was allocated. It does not appear that Ms Field played any active role in the choice of funds - rather, she seems simply to have accepted the recommendations that were made by Mr Barber. Ms Field said that she did not really understand the various funds that were offered under the Old Mutual product, but that she simply trusted Mr Barber, whom she regarded as the expert, to make choices for her which would be in line with the conservative investment strategy which she had asked for.

42. Mr Barber said that he went through the Old Mutual documentation with Ms Field before it was signed. He took issue with Ms Field's statement that she trusted his advice, pointing out that she apparently did not trust him and Barber Asia enough to enter into a discretionary investment service agreement with Barber Asia, under which Barber Asia would have authority to make investment decisions on her behalf. I do not think that this point is a valid one - in saying that she trusted Mr Barber, I think that Ms Field was doing no more than saying that she relied on his advice, which she believed to have been given to her in good faith, and in accordance with the investment strategy or objective which she had told Mr Barber about. I have no doubt that in this sense, Ms Field trusted Mr Barber, and relied on his advice. There was no suggestion that Ms Field was, at this time, consulting other investment advisers (or for that matter, anyone else) as to possible investments that she might make. Although Mr Barber suggested in his submissions that she did take advice from others, relying on later correspondence and e-mail messages, I do not think that this detracts from Ms Field's evidence, as the time frame is quite different - the later correspondence relating to a period after problems had arisen in respect of Ms Field's investments. Further, it was not suggested by Mr Barber that he ever provided Ms Field with a recommendation which she did not accept and follow - on the evidence before me, on each of the occasions when Mr Barber made a recommendation as to a particular course of action, Ms Field simply accepted his advice.

43. Mr Barber also emphasised that the investment contract was between Ms Field and Old Mutual, and that Barber Asia were not parties to this contract. This is undoubtedly correct. However, if Mr Barber was seeking to suggest by this that Ms Field did not rely (or was not entitled to rely) on his advice, I would reject such a suggestion. Far from excluding the possibility of any reliance by Ms Field on Mr Barber's advice, this simply illustrates the manner in which she relied on his advice - by entering into the contract with Old Mutual on the strength of it.

44. Although Barber Asia did not receive any fees from Ms Field in connection with this investment, it did receive commissions from Old Mutual. The existence and rate of commissions was disclosed Ms Field (who, as I have said, readily accepted that Barber Asia would have to earn remuneration from somewhere). It appears that the amount of commission to be earned by Barber Asia from the sale of this product was some ￡9,127, spread over five years.

45. Although the commission paid to Barber Asia by Old Mutual was met by Old Mutual as part of its general selling and administrative costs, and was not therefore borne by Ms Field, whose entire investment was placed into the various funds selected, it is pertinent to note that the investment with Old Mutual was subject to surrender penalties which reduced on a sliding scale over the first five years of the investment. In other words, there was a penalty attaching to early withdrawal from the investment, which would be borne by Ms Field, which might well be regarded as going some way towards covering the costs to Old Mutual of administering the investment, including the commission payable by it to Mr Barber.

46. In the course of his evidence, Mr Barber produced a document published by Old Mutual which indicated that the particular funds into which Ms Field's investment was made were mostly rated as medium risk. However, he did say also that the fact that the investment was into pooled funds meant that it was less risky than a direct investment into the underlying securities or markets in question. As I have pointed out, Ms Field said that she did not really understand the nature of the funds in which her investment was being made, and assumed that the mix of funds was in accordance with her objective of making a conservative investment. Mr Green's evidence was that taken as a whole, the mix of funds was one which he would regard as carrying a low-medium level of risk, and compatible with Ms Field's instructions to invest in a conservative manner. Mr Green also pointed out (agreeing in this respect with Mr Barber) that there would usually be some scope for differences of categorisation of risk levels in respect of particular investments, so that what one investment professional regarded as low risk might be regarded by another of low-medium risk, although he thought that this would be the case only as between one level and the next, in the case of investments that could be regarded as being on the borderline between the two levels. In these circumstances, I conclude that the initial Old Mutual investment was one which could be regarded as being in line with Ms Field's objective of having a conservative investment, which she had made clear at the outset. Indeed, no complaint is made by Ms Field as to this investment.

47. From this point onwards, it appears that Ms Field and Mr Barber also developed a personal friendship, and met from time to time on social occasions. Mr Barber said, and Ms Field agreed, that he assisted her with a number of personal problems, including the withdrawal of Ms Wild from the business of Impact Group, which did not, it seems, take place on particularly friendly terms, and the resolution of problems which had arisen with Ms Field's landlord following a fire at her home, which had rendered it uninhabitable for a time.

The third meeting

48. Towards of the end of May 1998, there was a further meeting between Ms Field and Mr Barber. It appears that Ms Field had been hearing positive things about the European stock markets, and wanted to consider the possibility of adjusting the mix of funds under her investment with Old Mutual to take advantage of this. Following a meeting between them, it appears that a form authorising a switch of part of the investment mix was prepared, altering what had been a 20% allocation of Ms Field's investment to an international stockmarket fund so that 10% of the original investment remained in that fund, with the remaining 10% being switched to a European stockmarket fund. In the event, it seems that although the switch form was signed, it was never acted upon, perhaps because it was overtaken by the events to which I now turn.

The making of the investments complained of

49. Mr Barber said that just a week after the meeting at which the switch of part of the Old Mutual investment was discussed, Ms Field called him and asked for another meeting, at which she told him that as a result of changes in her personal situation (relating principally to her relationship with Mr Van Amelsvoort, and her mother's situation), she wished to make her money work harder, to facilitate the possibility of relocating to the United Kingdom slightly sooner than she had previously had in mind. Mr Barber said in the course of giving evidence that he understood this to mean that Ms Field wished to move to a higher risk strategy, with a view to enhancing her returns.

50. Mr Barber went on to say that on being told this, they discussed various options within the Old Mutual investment structure, examining funds which had better recent performances such as Latin American stockmarket funds. These, however, were considered and rejected because of their volatility - while they had shown high growth in the recent past, there had been periods when they had suffered substantial losses as well. Mr Barber says that he then mentioned the existence of an investment structure that was offered by N M Rothschild & Sons (C.I.) Ltd ("Rothschild"), a part of the well-known banking and investment house. This was called the Loan and Guarantee Scheme ("the Scheme")

51. Mr Barber said that he briefly described the Scheme, which he said he had studied after its launch earlier in the year, and had recommended to a number of his other clients. He said that after the meeting he sent Ms Field a full set of documentation concerning the scheme, including a brochure produced by Rothschild describing the Scheme and giving information as to its features, a document which specifically discussed the gearing options available in connection with the scheme, and an application form for a loan pursuant to the Scheme. These were, according to Mr Barber, in Ms Field's possession for some weeks (perhaps four or five weeks), after which there was a further meeting on 10 July 1998, when Ms Field, having decided to go ahead with an investment strategy using the Scheme, met Mr Barber again and Mr Barber, as he had done in relation to the investment with Old Mutual, assisted Ms Field by filling in the relevant forms. Mr Barber said that he explained the Scheme in detail to Ms Field, and that he went over the application form, which included a number of declarations by the applicant acknowledging the opportunity to take legal advice, and the risks involved in entering into the Scheme, with her in some detail.

52. Mr Barber's version of events was disputed by Ms Field. According to Ms Field, there was no meeting a week after the meeting at the end of May when the switch in the Old Mutual investments was discussed. Ms Field said that there were a number of social occasions at which she and Mr Barber met, but that the first occasion on which the Scheme was mentioned by Mr Barber was on about 10 July 1998. She said that Mr Barber called her either on 10 July 1998 or the day before, and told her that there was an exciting new investment opportunity that he wanted to discuss with her. They therefore arranged to have lunch on 10 July 1998. It was at this lunch that Mr Barber described the Scheme to her. She said that he explained what was meant by gearing, and that she understood from his explanation that it involved taking out a loan so as to have additional funds with which to make a further investment. She said that he explained that the idea was to borrow money in a low interest currency (in this case Yen), and invest it in assets in a different currency which would produce a rate of return substantially in excess of the interest costs. As she understood his explanation, the Scheme was a sure winner. She said that he did not explain to her the risks involved in gearing. Nor did he explain to her the risks involved in borrowing in one currency and investing in another. All that he mentioned concerning borrowing in Yen was to say that if anything were to happen to the Yen, the Scheme provided for a currency switching facility, which could be exercised so as to switch the loan into another low interest rate currency.

53. She said that having heard the explanation, in the light of which she did not envisage that there were any significant risks involved in the Scheme, she agreed to go ahead with it, as she was at this point entirely happy with the advice that she had received from Barber Asia so far, and given her friendship with Mr Barber, was content to rely on his recommendation. At the end of the lunch, Mr Barber returned to his office to get the Rothschild application forms, and came with them to her office, where they went through the forms fairly quickly together, and he filled them in for her signature. He also had with him forms relating to an insurance product from the Scottish Life International Insurance Company ("Scottish Life"), which provided a capital protected investment scheme, offering a range of options from 95% to 100% capital protection, with potential returns based on the movement of identified stock markets, the rate of return being affected by the amount of capital protection desired. These were also completed by Mr Barber and signed by Ms Field. In various places in these forms, Barber Asia and Mr Barber were described as Ms Field's financial adviser, and Mr Barber also signed the application forms for the Scheme and the Scottish Life product in that capacity.

54. Ms Field was adamant that there had been no meeting at about the beginning of June 1997. She said that none of the factors which Mr Barber put forward as reasons which she had given for a change of investment strategy were valid, in that her relationship with Mr Van Amelsvoort was at the time (and remains) perfectly solid, that it was not the case that he would have asked her to return to the United Kingdom, since he was himself there only on a temporary basis, on an assignment which was not expected to last more than two years. Moreover, her mother was in good health, and young for her age, and there was no change in her mother's situation that would have necessitated any earlier return to the United Kingdom. She said that in 1998, just as in 1997 (and indeed today), her time frame for a possible return to the United Kingdom was about five years, not a shorter period, as suggested by Mr Barber.

55. Although Ms Field accepted that she might at some point in the course of her dealings with Mr Barber have said something to the effect that she wanted her money to work harder for her, she regarded these as just "general words". She also said that she could not have said this in June 1998 at the meeting alleged by Mr Barber, as there was no such meeting. She said that throughout her dealings with Mr Barber, she did not at any time tell him that she wished to depart from her original instructions for a conservative investment strategy in favour of a higher risk strategy, and that she throughout believed that the advice that she was being given was given with her original instructions in mind. In any event, I would have been of the view that even if Ms Field had said, at some point during her dealings with Mr Barber, that she would like her money to work harder for her, this would not have been understood by her to have been an instruction to increase the risk level of her investments - it seems to me that when used by a lay person, a phrase such as this is likely to be simply an indication of a desire to achieve somewhat better returns, without implying a desire to move further out on the risk spectrum.

Was there a meeting in early June 1998?

56. Before turning to the details of the Scheme, and its relevant terms and conditions, it is necessary to resolve the conflict of evidence as to whether or not there was a meeting in early June 1998, as Mr Barber suggests, or whether the position is that Ms Field's entry into the Scheme took place in the manner she described - effectively in the course of a single day.

57. I start with the oral evidence. Ms Field's evidence as to the absence of any meeting in June 1998 was firm. She was not, in fact questioned about such a meeting during her initial cross-examination. However, when, as a result of Mr Barber's oral evidence, it became clear that there was a significant divergence between his evidence and that of Ms Field on this point, I drew Mr Barber's attention to the fact that he had not challenged Ms Field's evidence that she had come to invest in the Scheme following a single meeting with Mr Barber on 10 July 1998. As Ms Field was still available for further cross-examination, I allowed Mr Barber the opportunity to cross-examine her further, specifically to deal with this point, and one other matter that had arisen. However, such further cross-examination proved fruitless, as Ms Field remained unshaken in her evidence that there had been no meeting in early June 1998. She was adamant that she was only shown the application form, and not the general information concerning the Scheme or the additional sheet relating to the effects and risks involved in gearing, and the levels of gearing permitted under the Scheme. She denied having suppressed any documentation, insisting that she had turned over all the documents in her possession to her legal advisers, and that these did not include either of the documents which I have just mentioned. She said that the first time she saw either of these documents was when they were produced by Mr Barber during his evidence.

58. Mr Barber's cross-examination of Ms Field on this point was somewhat brief. When confronted with her firm denial of any meeting in early June 1998, and her denial that he had provided her with any documents or information concerning the Scheme prior to 10 July 1998, he fell back on an alternative suggestion that this still left her with a period of some five weeks before the loan was actually drawn down, during which she could have read the documents which she was given more closely, and reconsidered her position if she thought it necessary to do so.

59. Apart from Ms Field's evidence, and her having effectively dispelled the reasons which Mr Barber gave for her having wanted a further meeting in early June 1998, I have also had regard to a memorandum which Mr Barber prepared for Ms Field, which is dated 10 July 1998. The body of the memorandum contains an explanation of the mechanics by which the various components of the Scheme would be put into place. However, the first paragraph of the memorandum states:

"Further to our lunch meeting today I have returned to you copies of the various applications and declarations for your files and confirmed a number of important details."

It seems to me that this reference suggests that the date of the meeting was indeed 10 July 1998, as Ms Field says. There is no doubt that the relevant application forms were not completed until that date, and the reference to returning copies for Ms Field's files is, to my mind, a clear indication that this memorandum is referable to a meeting on 10 July 1998, and not to an earlier meeting.

60. The memorandum further refers, at the end of the second page, to a number of documents which are described as having been left with Ms Field for her perusal. Although they include reference to some documents which Ms Field said that she did not receive (she says in her statement that she only received the standard policy terms and conditions for the Scottish Life product), it seems to me that the relevance of this passage for present purposes is that it too is, as Mr Maurellet suggested, consistent with there having been a meeting on 10 July 1998, and not earlier. There is no suggestion in the memorandum that such documents were provided to Ms Field prior to the meeting to which the memorandum refers.

61. These points were put to Mr Barber in the course of his being cross-examined by Mr Maurellet. Mr Barber sought to suggest first that the memorandum might have been wrongly dated, in that it might in fact have been first written following the early June meeting, but printed out again after the July meeting, and, because of the vagaries of the word processing programme used, had the current date inserted in place of the actual date on which it was written. I must confess that I found that explanation unconvincing. Quite apart from the fact that the memorandum makes perfectly good sense on the basis that it refers to a meeting which both witnesses agreed did take place - that on 10 July 1998, there are several other references in the memorandum which are inconsistent with it having been written at an earlier date. Thus, for example, there is a reference to Ms Field having to complete a switch form for the Old Mutual investment, and more significantly, an acknowledgment of receipt of the Old Mutual policy documents for assignment to Rothschild as security for the loan to be granted under the Scheme. I cannot see any reason why this would have been provided to Mr Barber for handling some weeks before any decision had been made to go ahead with the Scheme. It is far more likely that it would have been provided to him after a decision had been made to enter into an investment structure based on the Scheme, which did not take place until 10 July 1998. Mr Barber also suggested that he might have given Ms Field two copies of the documentation referred to on the second page of the memorandum, one set shortly after the June meeting, and another set at the meeting on 10 July 1998. Again, I find this suggestion unconvincing. It seems to me much more likely that the memorandum was correctly dated, and on this basis, it is inconsistent with Mr Barber's case that there had been an additional meeting in the early part of June 1998.

62. Further, and to my mind more importantly, bearing in mind that the principal significance of the alleged meeting between Mr Barber and Ms Field in early June 1998 is that Ms Field is alleged, at this meeting, to have indicated a desire to make a significant modification of the level of risk that she was prepared to accept in order to attempt to achieve better returns on her investment, it is strange that when Ms Field complained (about a year later) of the level of risk to which she had been exposed, Mr Barber and Barber Asia did not, despite several opportunities to do so, ever suggest that there was no cause for complaint, since the level of risk involved in the Scheme was commensurate which the increased level of risk that she had, in June 1998, instructed Barber Asia she was prepared to accept. As will become apparent when that correspondence is looked at, Barber Asia's response (through Mr Barber) was to affirm that Ms Field's instructions had been that she wished to invest in a conservative/medium risk strategy, and that the Scheme was, for reasons which were given, a strategy that met that description.

63. Having regard to all of these factors, I conclude that Ms Field's evidence as to the Scheme having been introduced to her on about 10 July 1998, the same day on which she signed the various documents to put it into effect, is to be preferred to that of Mr Barber. That being so, I accept also Ms Field's evidence that she did not receive a copy of the two documents that Mr Barber produced during the course of her evidence. While it is fair to say that there was little reason for Mr Barber not to have given copies of these documents to Ms Field, it seems to me that, given that everything took place on one day, it is on balance more likely that Mr Barber would have seen no need to provide that material to Ms Field, and did not do so, since she had already agreed to go ahead with the scheme.

The structure of the investment complained of

64. I turn now to consider the nature of the investment involved in the Scheme, as proposed by Mr Barber to Ms Field. As I have indicated, in broad outline the Scheme involved assigning Ms Field's existing investments with Old Mutual as security for a loan from Rothschild, the proceeds of which would be used to acquire an investment from Scottish Life, which would also be assigned to Rothschild as security for the loan. The loan was to be denominated in Yen, and would carry a low rate of interest.

65. The introductory brochure to the Scheme (which was headed "The Loan and Guarantee Scheme"), which I have found was not in fact supplied to Ms Field, set out in point form what were said to be the benefits and main features of the Scheme. One of the benefits was said to be that investment returns could be maximised by introducing an element of gearing into an investment portfolio. It would seem that this was the reason for which Barber Asia introduced the Scheme to Ms Field. The document explained that the size of the loan that could be obtained under the scheme depended on the nature of the investments offered as collateral. This aspect of the Scheme was further explained in the additional document which commented on the effect of gearing (which I have found was also not supplied to Ms Field), which I shall consider below. Thus, for example, where money market funds in the same currency as the loan were offered as security, the maximum loan that could be drawn down would be 85% of the value of the security. The maximum loan drawdown would drop to lower percentages of the security value for other forms of security. Where money market funds in a different currency to the loan were offered as security, the maximum loan would be 70% of the value of the security, and where mixed bond and equity market funds were offered as security, the maximum loan was 60% of the value of the security.

66. The brochure went on to explain that following drawdown of the loan, the borrower would be required to maintain a minimum level of security cover. This allowed for some erosion of the margin of cover that was provided at the initial drawdown, but the borrower was required to ensure that the amount outstanding did not at any time exceed this higher percentage of the value of the security available.

67. Interest payable on the loan could either be paid off as it fell due, or rolled up and added to the amount of the loan at each interest payment date. If interest were rolled up, the amount of the interest would result in an increase in the amount outstanding under the loan, and would only be possible if the increased amount was within the limits of the minimum security cover required.

68. At page 4 of this document, reference was made to what were described as "Important Notes". These recommended that, as the loan agreement was legally binding, clients should consider seeking independent legal advice on the application form and the terms and conditions before signing the application form, as this would bind them to the terms of the loan. The notes went on to point out that:-

"Should the Maximum Maintained Drawdown levels be breached at any time [Rothschild] may without any further notice realise the collateral and apply the proceeds to repay the loan and/or cash collateralise its guarantee liability. In such circumstances, any surplus would be paid to you and should a shortfall arise, such outstanding amount (including accrued interest) would be immediately due and repayable by you to [Rothschild]. The enforcement by [Rothschild] of its rights thereunder may result in the loss of part or all of the collateral."

69. There was also a further section headed "Risk Considerations", which stated:-

"The value of the collateral, and the income therefrom, can fall as well as rise and fluctuations in currency exchange rates can affect performance returns. ..."

70. The separate document which explained the effect of gearing (which, as I have found, was also not provided to Ms Field), contained the following statements:-

"[The Scheme] has been used ... to introduce an element of gearing into ... investment portfolios with the intention of enhancing investment returns. ... your exposure to investment markets increases, thus offering the opportunity to enhance your investment returns through greater capital and/or currency gains."

"It should be noted, however, that gearing your investments is only beneficial when the return gained from your investments exceeds the interest incurred on your loan ..." [an example was then given, illustrating the beneficial effect of gearing based on assumed returns and interest rates (which were lower than the assumed returns)]

"Gearing, however, can be a high risk strategy and hence is certainly not for every investor. Whereas gearing can increase potential gains, any losses are likewise magnified ..." [revised figures were then provided, based on less favourable assumptions, which nonetheless provided net returns (although at a lower rate than the returns without gearing)]

"It is therefore essential to understand these risks before arranging such a facility and then, having done so, to ensure that the geared investment is regularly monitered by you, your financial adviser and/or your trustees taking investment performance, interest rate exposure and currency rate exposure into account."

71. The Rothschild application form, which was signed by Ms Field at the meeting on 10 July 1998, contained on the front a prominent warning. It was headed "Important Notice" and read as follows:-

"This Application form together with the Terms and Conditions set out the basis upon which the Bank will provide a credit facility under [the Scheme]. Their contents are important and should be read carefully before completing and signing the Application Form as together they constitute the Client's contract with the Bank.

"Private individuals are advised to seek independent legal advice before signing and where the Client consists of more than one person, each individual is advised to seek such legal advice independently of the other.

"The enforcement by the Bank of its rights hereunder may result in the loss of part or all of the Collateral."

72. Ms Field acknowledged having seen the notice on the front of the application form. She said, however, that rightly or wrongly, she did not take legal advice before signing it. She explained that so far as she was concerned, she did not feel that a legal adviser could have told her whether or not she should be investing in the manner that was being recommended. As Mr Barber was with her and had gone through the form with her, it did not seem to her that there was any question of getting legal advice. She thought that it was not so much a question of the forms being legally binding, which she accepted, but of whether the product was the right one for her circumstances, a question which would not be affected by the legal position.

73. Ms Field also acknowledged having gone through the contents of the form with Mr Barber, although she did not recollect actually having gone through the detailed terms and conditions (which were in a separate document), either with Mr Barber or later. She did not recollect having received a copy of these.

74. The Application form itself set out a number of declarations by the applicant. These included the following:-

"(e) I/We understand that I am/we are required to maintain a minimum level of Collateral as security for the Facility as set out more fully in paragraph 8 of the Terms and Conditions and in the event of my/our failure to comply with this or any of the other Terms and Conditions the Bank may realise the Collateral as set out in paragraph 12.7 of the Terms and Conditions."

"(f) I/We understand that the value of the Collateral can fall as well as rise, fluctuations in currency exchange rates can affect performance returns and that the Bank makes no recommendation whatsoever as to the suitability, quality or future performance of any of the Assets which either form part of the Collateral or are listed in the List of Approved Funds, nor does it in any way make any representation or give any warranties that those funds isted under the same category in the List of Approved Funds are subject to the same risks."

"(g) I/we understand that this agreement is an important document, that the enforcement by the Bank of its rights hereunder may result in the loss of part or all of the Collateral and that I am/we are hereby advised to seek independent legal advice before signing."

75. Under the Application form, the amount of the loan applied for was the Yen equivalent of ￡468,000. The period of the loan was to be five years. An election was made to have interest payments rolled up over the life of the loan, so that interest would not have to be kept current, but would simply be capitalised (thus increasing the size of the loan) on each interest payment date.

76. So far as the detailed terms and conditions are concerned, the most relevant are the following:-

"8. UTILISATION

8.1 Within the total amount of the Facility, utilisation will be limited so that the total amount drawn, including capitalised and accrued interest, may not exceed the Maximum Maintained Facility Drawdwon from time to time ...

8.2 In the event that at any time utilisation under the Facility exceeds the amount permitted under sub-paragraph 8.1 above, the Client undertakes immediately on demand from the Bank to repay such excess to the Bank or to provide the Bank with additional security satisfactory to the Bank of sufficient value to remedy the excess and to provide a margin of security therefor satisfactory to the Bank."

"12. SECURITY INTEREST AGREEMENT

...

12.7 Enforcement of Security

The security created by this Agreement shall immediately become enforceable at any time after notice demanding payment of any sum secured by this Agreement has been given by the Bank to the Client and at any time thereafter the Bank may without prior notice to the Client redeem, exchange, switch, convert, sell, transfer and/or apply all or part of the Collateral in such manner and for such consideration (whether payable or deliverable immediately or by instalments) as the Bank in its absolute discretion may determine. ..."

"13. VALUATION OF THE COLLATERAL

...

13.2 Valuation of any life assurance policies comprised within the Collateral shall be by reference to the latest surrender values available to the Bank converted into the currency of the Facility at the prevailing spot rate of exchange where appropriate.

13.3 In the event of any dispute regarding the valuation of all or part of the Collateral the Bank's decision will be final."

77. Having signed the Scheme Application form, and the application form for the Scottish Life investment that was to be acquired with the loan proceeds, these documents were despatched by Mr Barber on Ms Field's behalf.

78. As at 10 July 1998, Ms Field's investment with Old Mutual was split among five funds (the switch contemplated at the end of May 1998 not having been processed at this point), which included both equity and money market funds. In his memorandum of 10 July 1998, Mr Barber had recommended that Ms Field should switch all of her Old Mutual Investments (which were worth approximately ￡187,000) into the Sterling Money Market Fund. He explained that this was to provide maximum security, and a better interest rate than US dollar money market rates. It appears from a letter dated 16 July 1998 from Old Mutual to Rothschild that this was done on or about 14 July 1998.

79. The loan applied for under the Scheme was the Yen equivalent of ￡468,000, which was expected to be some 106,704,000 Yen (an exchange rate of 228 Yen to the pound). This figure was based on a gearing factor of 2.5 times applied to the value of the original Old Mutual investment. The loan proceeds would be converted into Sterling and remitted to Scottish Life, for investment into their International Secure Investment Portfolio, using the 100% Capital Protected Deposit Bonus Fund. The policy issued by Scottish Life, together with the Old Mutual Policy would be assigned to Rothschild as security for the loan to be made by them.

80. Thus, what was envisaged was that Ms Field would borrow the equivalent of ￡468,000 from Rothschild. The loan would be secured against the two policies (from Old Mutual and Scottish Life respectively) which had a combined value of ￡655,000. The amount of the loan would be 2.5 times Ms Field's original investment (it was in fact some ￡500 more than this amount, but that is, I think, immaterial). After the entire structure was put into place, the loan would represent some 71.45% of the available security. The maximum maintained amount of the loan does not appear to have been stated in the application form. However, it is clear from other correspondence that this was set at 85%, so that Ms Field was obliged to ensure that at all times, the value of the loan did not exceed 85% of the value of the security which had been provided. This was equivalent to a security cover requirement of about 117.76%.

81. I note in passing that the figures for initial and ongoing security cover do not match any of the categories in either of the Rothschild explanatory documents. Mr Barber explained that this was probably due to the use of the Scottish Life product, which provided a higher level of security than money market funds because of the capital guarantee feature, so that Rothschild was prepared to offer greater gearing on a specially tailored basis. Mr Barber said that it was in fact Barber Asia who had asked Rothschild to consider permitting the use of this product, which a number of Barber Asia's clients had invested in, as security for loans under the Scheme.

82. Although there was a switch of the Old Mutual investment from the original five funds to the Sterling Money Market Fund, this change appears to have escaped the attention of Rothschild, notwithstanding that it was mentioned in Old Mutual's letter to Rothschild dated 16 July 1998. On 3 August 1998, Rothschild wrote to Charles Dunford, a colleague of Mr Barber at Barber Asia, saying that on the basis of the original five funds (which were a mixture of major market equity funds and major and other market bond funds), it would not be possible to lend as much as ￡468,000, but only some ￡367,500, based on Old Mutual's valuation as at 16 July 1998. Rothschild suggested that in order to obtain approximately the loan applied for, the Old Mutual investments should all be switched into major money market funds. It was also indicated that a slightly larger loan could be obtained if the entire investment were switched to the Scottish Life product, probably because of the capital guarantee feature attaching to that investment.

83. In fact, as I have noted, the Old Mutual investments had already been switched. Although not in the evidence before me, it seems probable that this was brought to Rothschild's attention, as by 13 August 1998, Rothschild had approved a loan facility for Ms Field of some 110,000,000 Yen (which was equivalent to ￡461,913.16 at the then exchange rate of 238.14 Yen to the pound), and had effected a drawdown of 107,520,210 Yen by remitting its Sterling equivalent (￡451,500) to Scottish Life, to be invested into the Scottish Life investment product. A facility arrangement fee of a further 155,000 Yen had been added to the loan balance, leaving some 2,324,790 Yen (￡9,762.28) available to cover the interest on the loan that would be capitalised from time to time. The interest rate applicable to the loan was 2.1875% per annum.

The risks and level of risk involved in the Scheme

84. I pause here to consider the risks attaching to the investment structure into which Ms Field had now entered. These included the following:-

(1) The element of gearing gave rise to increased risk, in that while it was designed to enhance the returns available on an ungeared investment, it would also amplify any decreases in value, and losses which might be suffered. Mr Green illustrated this with a simple example. If an investor invested ￡100, it would be necessary for the value of the investment to fall by ￡100 (or 100%) before he would lose everything. If, however, the same investor had the same capital (￡100) and borrowed a further ￡100, and invested the total, the total investment would be ￡200. However, in such a case, a 50% fall in the value of the investment would result in the loss of ￡100, or the whole of the investor's own money. Thus, with gearing, a smaller percentage fall in the value of the underlying investment can result in the loss of the investment. The greater the amount of the gearing, the smaller the percentage fall required to result in loss of the investor's own (as opposed to borrowed) funds.

（2） By utilising gearing in the form of the loan from Rothschild, there was a further element of risk arising from the possibility that it might be necessary for Ms Field to put up further security if called upon by Rothschild to do so, and that if she could not or did not do so, Rothschild might realise the existing security, and perhaps demand immediate repayment of the loan, thus crystallising any loss which might exist on paper. Although this might not result in the loss of the whole of Ms Field's capital, it might result in a loss being incurred as a result of the premature termination of the investment, since it would preclude the possibility to holding on to the investment and waiting for a hoped for recovery to materialise.

(3) The mismatch between the currency of the loan and the currency of the assets to be invested in introduced an element of currency or exchange rate risk - the risk that there might be a movement in the relative exchange rates of the two currencies that might adversely affect the returns on the investment. For example, if an investor borrowed in Yen to make an investment in Sterling, and the value of the investment increased by 10%, but Sterling fell by 20% against the Yen, the investor would suffer a net loss in Yen terms.

(4) There was also, I think, an element of interest rate risk - i.e., that the interest rate applicable to the loan might rise, in the event that the LIBOR rate for Yen moved upwards.

85. In subsequent correspondence with Ms Field, Mr Barber had suggested that her investments as a whole under this structure were consistent with her stated desire for a conservative/medium risk investment strategy. However, in the course of cross-examination, he stated that he would consider the investment strategy entered into on the basis of the Scheme to be of medium to high risk, a risk level that was not, in my view, consistent with such a strategy.

86. Mr Green disagreed with this assessment. While accepting that there would be some investments which might fall on the borderline between different risk levels, and which might reasonably be thought to fall within either of two adjoining categories of risk, Mr Green was of the view that the investment strategy entered into on the basis of the Scheme was of at least high risk, possibly very high risk. He explained that while the underlying Old Mutual and Scottish Life investments were in themselves compatible with a conservative/medium risk strategy, the addition of the elements of leverage and the currency mismatch rendered the investment structure as a whole one which carried a high to very high level of risk.

87. Mr Barber sought to explain the basis on which he evaluated the investment structure under the Scheme by reference to a document which he produced at trial, which he said represented the sort of analysis which would have been done by Barber Asia in relation to that investment structure. In brief, Mr Barber said that consideration was given to the amount of collateral cover taking account of the initial collateral cover, the minimum collateral cover required after drawdown, and the income surplus that was expected to be earned over the course of a year, having regard to the interest differential between the cost of borrowing and the yield on the investments securing the loan. For the purposes of the example, Mr Barber assumed an initial investment of ￡100,000, gearing of 2.5 times to produce a loan of ￡250,000, resulting in total funds available for investment of ￡350,000. The excess of collateral over loan was therefore ￡100,000 (the amount of the investor's own funds). As the loan could not exceed 85% of the value of the security during its life, Mr Barber assessed the minimum margin cover at 115% of the value of the loan, so that a minimum of ￡287,500 of security would be required during the life of the loan. As there was in fact security of ￡350,000, there was an excess of collateral to the extent of ￡62,500, which provided a cushion against the possibility that the collateral might, for whatever reason, decline in value. Mr Barber then made a projection as to the likely growth rate of the investments (net of annual fees assumed to be 1% for both Old Mutual and Scottish Life), and the likely interest costs. On the basis that the Old Mutual investment would return 5% net per annum on ￡100,000, and the Scottish Life investment would return 9% net per annum on ￡250,000, total returns would be some ￡27,500 per annum. From this would have to be deducted the borrowing cost, which at an interest rate of 2.2% per annum would be ￡5,500. Thus, over the course of a year, the investments would produce net income of ￡22,000, a return of 22% on the original investment. This ￡22,000 would also be available to augment the security cover, so that at the end of a year, assuming that exchange rates did not move, there would be excess collateral cover of ￡84,500 in total, which would be available as a cushion against a decline in the value of the security.

88. Mr Barber says that he then made some calculations in order to assess the currency volatility of the Yen against Sterling. Based on research which was available at the time, he concluded that there had been six periods in the preceding three years in which the Yen had strengthened against Sterling, and the average appreciation was some 5.7%. Applying this figure to the loan, Mr Barber estimated that on any single strengthening of the Yen, the loan principal amount might increase by some ￡14,000 (5.7% of the loan amount of ￡250,000). This was, he said covered by the net investment return over the year, apart from which there was the excess collateral of ￡62,500 available as a cushion. His assessment was that the Yen was, on the basis of his research, not an excessively volatile currency, and he therefore thought that the investment structure was not unduly risky.

89. Mr Green made a number of comments on this analysis. First, he said that the minimum collateral cover was not 115%, but 117.6%, since the calculation had to be done by reference to the ratio of collateral to loan. This is clearly correct. Collateral cover of 117.6% produces a loan to collateral ratio of 85% (which was the maximum ratio which Rothschild had agreed to), whereas collateral cover of 115% produces a loan to collateral ratio of just under 87% (which is higher than the maximum ratio which Rothschilds would accept). The figure put forward by Mr Green also coincides with the figures put forward by Rothschild later, when the issue of collateral cover arose in the course of 1999. This increased the minimum amount of security required to ￡294,000, reducing the cushion to ￡56,000.

90. Mr Green also took issue with the assumptions as to returns on the investment, pointing out that the fees were in fact higher than had been assumed by Mr Barber. In the case of the Old Mutual product, Mr Green thought the difference was immaterial, but he pointed out that there was a set up charge of 1.6% per annum for the first five years of the Scottish Life investment, which would reduce the return to 7.4%, or ￡18,500 per annum on that investment. This would reduce the net return from the two investments after interest costs to ￡18,000, or 18%. Adding this to the excess of security, there was a cushion of some ￡74,000, as opposed to Mr Barber's figure of ￡84,500.

91. More importantly, Mr Green drew attention to clause 13.2 of the Terms and Conditions of the loan, which I have set out above. The significance of this is that it makes it clear that for valuation purposes, Rothschild would have reference to current surrender values where their security took the form of insurance policies. Given that there is typically a surrender penalty of in the region of 5% applying to insurance products in the early years of the investment (usually the first five years, at least), the value of the total investment of ￡350,000 for collateral purposes was reduced to some ￡322,500, so that the cushion available was significantly reduced. Mr Green therefore considered that the amount of leeway available to cover adverse currency movements was significantly less than Mr Barber had calculated (some ￡57,000, instead of the ￡84,500 which Mr Barber had arrived at).

92. While not accepting that it was necessarily correct, Mr Green did not comment on Mr Barber's analysis of the volatility of the Yen against Sterling.

93. I did not understand Mr Barber to disagree with the qualifications which Mr Green indicated should be made in relation to either the calculation of minimum collateral cover (and there could, I think, realistically be no disagreement as to this), or the returns on the investments (which was in any event a relatively small adjustment). However, Mr Barber took issue with the question of using current surrender values as the basis of valuing the security for the loan. He asserted that Rothschild had, after Ms Field (and other clients of Barber Asia) had taken up loans under the Scheme, "moved the goalposts" by valuing the security which had been provided on the basis of surrender values, and on the basis of current values, rather than the value at the end of the loan term, whereas it had been Barber Asia's clear understanding that security would throughout be valued on the basis of its value at the end of the loan term (at which time there would not be surrender penalties).

94. In support of this point, Mr Barber drew attention to the fact that the calculation by Rothschild of the maximum loan amount appeared to have been predicated not on surrender values, but on the (higher) policy values of the investments.

95. However, apart from this, there is no evidence to support either of these suggestions. To the contrary, such evidence as there is points the other way.

96. So far as the point on policy values as against surrender values is concerned, I start with the observation that the terms of Clause 13.2 of the loan Terms and Conditions are unambiguous, and state that valuations of insurance products will be based on latest surrender values. Moreover, in a letter dated 26 February 1999, written at a time when the collateral cover for Ms Field's loan was under close scrutiny, Rothschild stated that it had always been their policy to value securities such as those provided by Ms Field on the basis of their surrender values.

97. I am therefore unable to accept that there was any change of stance by Rothschild in this respect, and am of the view that throughout, the relevant value of the insurance investments for security purposes were their surrender values.

98. The suggestion that Rothschild would have regard not to current values, but the value of the security at the end of the loan term is equally one which is unsupported by evidence.

99. Further, it seems to me that Clause 13.2 is also inconsistent with such a suggestion, referring as it does to the latest surrender values available to Rothschild. This clearly implies that current valuations will be used, and not some valuation based on the likely value of the security at the end of the loan term.

100. Moreover, I note that in an e-mail message to Ms Field of 21 September 1999, Mr Barber appears to recognise that Rothschild were entitled to use current values, notwithstanding that the loan was for a five year term (although he does suggest that such an approach was somewhat inflexible).

101. In any event, I find it difficult to see how such the approach suggested by Mr Barber would work in practice. It would appear to involve a forecast by Rothschild of the future value of the security, which would be a difficult exercise to carry out, particular in the case of securities such as equity or bond funds, the value of which will fluctuate from time to time. It is also difficult to see why such an approach would have been agreed to by Rothschild, since it could not be in their interests to have to proceed on the basis of an assessment of future values which might turn out to be wrong, leaving them with the risk of an increased exposure to the borrower at the end of the day.

102. For all of these reasons, I conclude that in this respect, too, there was no change of stance by Rothschild.

103. I therefore conclude that Mr Green's qualifications to Mr Barber's analysis are well founded, and that the amount of cushion available in respect of the security for the loans was significantly less than that suggested by Mr Barber. It would, I think, follow that the level of risk involved in the investment strategy was at least somewhat higher than that which Mr Barber suggested.

104. Further, it seems to me that in considering the analysis carried out by Mr Barber, prudence would indicate that allowance should be made for the possibility that the assumptions as to returns and calculations of currency volatility might turn out to be wrong, since it is not uncommon for unexpected movements in relation to such matters to occur.

105. Mr Green also emphasised that the use of gearing always gives rise to the second form of risk identified above. The lender will almost inevitably stipulate for an element of margin cover, which means that there is a risk that additional margin will have to be found at some point during the period during which the investment is held, and if this is not done, the result is likely to be that the lender will foreclose on the loan at an unfortunate time, causing loss of capital to the borrower/investor. There is thus always a risk of loss of capital, which means that such a strategy cannot properly be described as conservative, a term which implies an approach that has as one of its main objectives the conservation of the original investment.

106. For all of these reasons, I would accept Mr Green's assessment of the level of risk associated with the investment strategy which was embarked upon on 10 July 1998 - i.e. that it carried at least a high level of risk of loss, and could not for that reason be described as conservative, and did not, therefore, comply with the type of investment strategy requested by Ms Field.

107. I would also mention briefly at this point a suggestion which Mr Barber made (in later correspondence and in the course of his testimony) that gearing of 2.5 times could be considered to be conservative in the Hong Kong context, where, he said, it was not uncommon for foreign exchange and futures dealers and financiers to offer leverage of up to 20 times the investor's investment. It seems to me that this is not a particularly helpful approach to take. While there are undoubtedly extremely high risk investment strategies available in the marketplace, their existence does not render a less risky, but still high risk strategy, any the less one which carries a high degree of risk for the investor.

Whether the risks were explained to Ms Field

108. It was Ms Field's evidence that, apart from telling her that the Scheme offered a currency switching option for the loan, so that if anything happened to the Yen, the loan could be switched to another low interest rate currency such as the Swiss Franc, Mr Barber did not explain to her the nature of the risks involved. She said that she was left with the impression that the proposed investment structure was a safe one, which carried with it little or no risk of loss of capital. Mr Barber, on the other hand, said that he explained all the relevant risks to Ms Field.

109. I have found that Mr Barber did not supply Ms Field with the Rothschild documents which introduced the Scheme, and the concept of gearing, which contained clear references to risk (particularly in the case of the latter document, which indicates that the use of gearing can be a high risk strategy). However, it is fair to say that some references to risks can also be found in the Application Form itself. That said, however, given that I have accepted Ms Field's account of the manner in which the investment was entered into, it seems to me unlikely that a detailed explanation of the various risks involved was provided in the time during which Mr Barber was at Ms Field's office, completing the forms with her. In any event, Ms Field said that although she understood that there might be some risks involved in the investment (as with any investment), she believed that any risks that there might be would be in line with her stated desire for a conservative investment strategy.

110. Moreover, there is nothing in the documentation to suggest that any explanation of the nature of the risks involved was given to Ms Field. This is perhaps unsurprising, given the suggestion in later correspondence that the strategy was in fact one which met her requirements. If this was what Mr Barber believed, there would have been no obvious reason why he would have thought it necessary to highlight such risks to Ms Field.

111. It is also, I think, instructive to note Mr Barber's approach to the question of what information should be provided to investors by way of illustration of the possible outcomes of a given investment strategy. Although there is some doubt as to whether or not the illustrative document said to have been appended to his memorandum to Ms Field dated 10 July 1998 was in fact attached to it, it is to be noted that it projected a highly satisfactory rate of return. Even the examples provided by Rothschild in their document on gearing, which I have found was not seen by Ms Field at the material time, which provided two calculations, resulted in a positive return in both cases (albeit the worse of the two cases shown involved a return that was less than that which could have been achieved without gearing). Mr Barber was asked whether projections were ever produced by him which showed a loss arising. He said that no such projections were ever provided. When asked why this was, he explained that there was no requirement to do so, saying that even in relation to matters governed by the Securities and Future Commission's Code of Conduct (which he did not accept applied to this case) there was no requirement to provide projections showing a negative outcome.

112. Given this approach, I conclude that it is more likely than not that Mr Barber did not explain to Ms Field the possibility that the investment strategy which he was proposing carried with it the risk of a loss of a significant part of her capital, or the reasons for this.

113. Ms Field said that had it been explained to her that the investment strategy being recommended carried such a risk of loss of capital, she would not have entered into. Having regard to the fact that her investments represented the fruits of many years of hard work, I accept that evidence.

114. At this point, it is pertinent to note that as a result of the entering into of the arrangements under the Scheme, Barber Asia stood to receive some ￡22,575 in commissions from Scottish Life over five years, and annual fees from Rothschild of some 268,800 Yen, or in excess of ￡1,200 per year. Thus, although Barber Asia were not earning any fees from Ms Field herself, the business which she had placed through them was producing fees of over ￡7,000 per year for Barber Asia.

The period up to the first margin call

115. The loan from Rothschild having been drawn down and the investment in the Scottish Life product having been obtained on 13 August 1998, the Yen almost immediately began to strengthen against Sterling. I should make it clear that no complaint is made by Ms Field in relation to Barber Asia's failure to predict the actual extent to which the Yen was to strengthen against Sterling over the course of the next year or so.

116. On 4 September 1998, Ms Field received a letter from Barber Asia referring to the fact that the Yen had strengthened, although this was more in relation to the US dollar than in relation to Sterling. However, the letter indicated that it was considered that the Yen was likely to weaken again in due course, and recommended that existing loans in Yen be maintained. Ms Field said that she was not unduly concerned by this letter. A few weeks later, on 28 October, Ms Field received a further letter from Barber Asia, commenting on the Scottish Life investment, and mentioning that the Yen had weakened somewhat, and that there was evidence to suggest that this trend would continue.

117. In October 1998, the Yen resumed its upward trend against Sterling. Ms Field says that during October, she met Mr Barber at a social event in Macau, at which the subject of the strengthening Yen came up, and she asked him about it. Mr Barber's recommendation was to keep the Rothschild loan in Yen. Subsequently, on 26 October 1998, Mr Barber sent a memorandum to Ms Field, stating that the Yen had unexpectedly strengthened sharply against Sterling, to the surprise of the market. Mr Barber indicated that it was still thought that the Yen would weaken again, and recommended that no changes should be made to the Rothschild loan currency.

118. It seems that during November 1998, Ms Field requested a further review of her position. This resulted in a further memorandum being prepared by Mr Barber, dated 2 December 1998. For reasons which were not entirely clear, further copies of this memorandum, bearing later dates (in March and April 1999) also appear to exist. However, it seems reasonably clear from the terms of the memorandum that it was in fact produced on or about 2 December 1998. This memorandum purported to provide an overview of Ms Field's investment position as at the end of November 1998. It commented on the assets which Ms Field owned (the Old Mutual and Scottish Life policies which were pledged as security for the Rothschild loan), both of which it described as "Low Risk". This description was accurate, so far as the investments underlying the policies themselves were concerned. The memorandum stated that in US dollar terms, the Old Mutual investment had increased by 4.4% and the Scottish Life investment by 2.2% since they had been acquired. The overall increase for both investments taken together was 2.8%, which was said to be equivalent to a gross return of some 9.8% over Ms Field's original investment with Old Mutual. These figures did not take account of the interest cost associated with the Yen loan, and the memorandum went on to say that taking those costs into account, there had been a net return of some 7.7% on the initial investment with Old Mutual.

119. The report ended by commenting on the recent strength of the Yen against Sterling, expressing confidence that this was a short term phenomenon, and that the Yen would weaken back to levels close to those prevailing when Ms Field took out the Yen loan.

120. Although this purported to be an general overview of Ms Field's various investments, it seems to me that in failing to factor in the current liability under the Yen loan, in the light of the Yen's strenghening, it did not provide a complete picture as to Ms Field's position. The strengthening of the Yen had the effect of significantly increasing Ms Field's liability to Rothschild at this point in time. In order to provide an accurate picture of the position and the return (if any) which she had achieved at this point, it seems to me that it was necessary to deduct from the value of the investments (whether their face or surrender values) the amount of the Yen loan. Only after this was done would Ms Field have a true picture of whether she was ahead or behind on her original investment at this stage. Although no calculation was provided to me of the amount of the Yen loan (in Sterling or US Dollar terms) at this point, it would appear, based on the drawdown amount, and an exchange rate of 198 about Yen to the pound (which I have taken from a graph depicting the movement of the Yen against sterling between between July 1998 and January 2002 appended to Mr Green's report), the amount drawn down under the Rothschild loan to acquire the Scottish Life investment, in Sterling terms, had increased to some ￡543,031, more than ￡90,000 over its original amount (this does not take account of the facility fee and accrued interest, which would increase the outstanding amount further). This was an increase which exceeded by many times the return earned on the assets against which the loan was secured.

121. A similar report titled "Fourth Quarter 1998 Investment Report" was provided by Mr Barber to Ms Field in a letter dated 4 February 1999. This indicated slightly lower returns than had been recorded in the report of 2 December 1998. However, it still suggested that there had been a net return (in US dollar terms) of 6.21% on the original investment which had been placed with Old Mutual in March 1998. The total value of Ms Field's investment was stated to be some ￡651,687.45 (or US$1,081,801). It seems likely that this value was based on the investment value of the Old Mutual and Scottish Life policies, and not their then surrender values. However, as with the 2 December 1998 report, this report did not indicate the current level of the Rothschild loan either in Sterling or US dollar terms. As at 1 February 1998, the Yen/Sterling exchange rate was approximately 187 Yen to the pound (I have again taken this figure from the chart annexed to Mr Green's report). On this basis, the Rothschild loan (again ignoring the arrangement fee and accumulated interest, which would increase it somewhat), would have been equivalent to some ￡574,000, leaving Ms Field with a net investment of just under ￡78,000, less than half of her original investment. I note that at these levels, Ms Field would at this point have been in breach of the minimum collateral cover requirements under the Rothschild loan.

The first margin call

122. On 18 February 1999, Rothschild wrote to Barber Asia to say that Ms Field was in breach of the minimum collateral cover requirements under the loan, and to call for the position to be rectified immediately. A number of options were suggested as ways of achieving this. These included a switch to a higher rated category of security (which would decrease the amount of cover required), the provision of further security in the form of cash or other investments, the repayment of part of the loan, or the full repayment of the loan (in the latter two cases, repayment being made either from the assets or some other source). Rothschild indicated in the letter that it was its intention to write to Ms Field shortly.

123. Ms Field was not immediately informed of the problem. Instead, it seems that Barber Asia discussed the position with Rothschild, with a view to obtaining some time. It appears from a letter dated 25 February 1999 that Rothschild had been told that action would be taken, but none had yet been. Rothschild therefore said that it would write to Ms Field if nothing were done by the next morning.

124. Nothing was in fact done within that time frame, and Rothschild accordingly wrote to Ms Field on 26 February 1999, informing her that her security for her loan was some way short of the minimum cover requirements, and indicating that they wished to speak to her about this. Ms Field said that prior to receiving this letter, she had been unaware of the problem that had arisen, as Barber Asia had not been in touch with her. On the same day, Rothschild wrote to Barber Asia to indicate that in fact, the position was worse than they had previously thought, as their valuations of the security had been made on a partially erroneous basis, in that their valuations of the Scottish Life policy did not take account of the surrender penalty attaching to that investment. As I have mentioned previously, it was in this letter that Rothschild confirmed that it had always been their practice to value security on the basis of surrender values. It seems that Barber Asia agreed that if necessary, it would cover the surrender penalty in order to persuade Rothschild not to take immediate action to switch the loan into Sterling, thereby crystallising a substantial exchange loss to Ms Field.

125. Rothschild continued to press for action to be taken, and on 3 March 1999, Mr Barber wrote to Ms Field to explain the problem which had arisen. Mr Barber said, correctly, that the problem had arisen as a result of the strengthening of the Yen, which had resulted in the Sterling equivalent of the loan increasing from its original amount of ￡451,500 (wrongly stated by Mr Barber to be ￡450,000) to ￡566,610. Mr Barber said that this meant that the value of the collateral cover was short by some ￡115,666 (in fact this was not strictly accurate - this was actually the approximate amount by which the loan principal had increased in Sterling terms). Mr Barber mentioned as an "option" the possibility of switching the loan to sterling, so as to reduce the collateral cover required (by putting the loan and security into the same currency, thus eliminating the currency mismatch). However, he made it clear that this would have the unsatisfactory consequences of locking in the exchange loss of some ￡115,000, and moving to a higher interest rate on the loan. He suggested that Ms Field should look into the possibility of obtaining a loan from her local bankers (HSBC), on the basis that even though the interest rate might be higher, the total amount of interest payable would be less than would be the case if the Rothschild loan were redenominated into Sterling. He also emphasised that this would eliminate the exchange loss, and that when the Yen weakened (as he thought it would), it would be possible to withdraw some security and so repay the additional loan. A later letter the same day provided Ms Field with Mr Barber's reasons for thinking that the Yen would indeed weaken in due course.

126. Although Mr Barber sought to suggest that his first letter of 3 March 1999 simply offered Ms Field options as to what could be done to remedy the situation in respect of the Rothschild loan, it is clear from the tenor of that letter that his firm recommendation was to maintain the loan in Yen, and to seek to provide Rothschild with further security, by obtaining a loan from HSBC. This is clear from the first and last paragraphs of the letter. I note also that the fact that Mr Barber appears to have assumed that a loan would be necessary to enable the further security to be provided is indicative of an awareness on his part that Ms Field might not have ready access to additional funds.

127. Mr Green was critical of this advice, saying that it resulted in Ms Field being subjected to an even higher level of gearing, and hence to even greater risks. It seems to me that this is a fair criticism.

128. It seems that (perhaps because of a misunderstanding) Ms Field thought that the branch of HSBC with whom she and Impact Group banked would not assist. In the result, Mr Barber introduced her to a Mr Cho, the manager of another branch of HSBC with whom Barber Asia banked. Following a number of meetings between Ms Field and Mr Cho (Mr Barber did not take part in these negotiations), HSBC agreed to grant a term loan of HK$650,000 to Ms Field, at an interest rate of some 11.75%. This was much higher than the rate of interest which Mr Barber had thought might be available (see his letter to Ms Field of 3 March 1999, which indicated an interest rate of 7-8%). The principal of the loan was to be paid off in 11 instalments of HK$55,000 and a final instalment of HK$45,000, with interest on the outstanding amount being debited to Ms Field's current account every month. Apart from the proceeds of the HSBC loan, Ms Field also had recourse to further funds from another loan source, and was able to provide a total of about ￡76,000 by way of fortification of the security for the Rothschild loan. This was placed on monthly deposit with Rothschild, earning a small amount of monthly interest.

The period up to the second margin call

129. Ms Field was, understandably, somewhat unhappy at this turn of events, and sought an explanation from Mr Barber, and reassurance that the strategy was still the right one for her. By an e-mail message of 17 March 1999, Mr Barber sought to explain the rationale behind the scheme, and to make the point that when (as he still expected) the Yen weakened back to its level at the time of the loan, the structure would have produced satisfactory results. This analysis did not, however, appear to take account of the possibility that the Yen might strengthen further so as to result in Ms Field facing a further margin call.

130. Ms Field pressed for further clarification on about 13 April 1999, asking how the Scheme was benefitting her, particularly given the substantial additional commitments she had undertaken with the loan from HSBC, and asking how it was helping her meet her objective of a small return on her investments. Mr Barber replied the same day, saying that in fact, the interest payable on the HSBC loan was significantly less than the interest which would have been payable had the Rothschild loan been switched to Sterling. Further exchanges took place in April 1999, in which Ms Field continued to press for explanations as to the rationale underlying the Scheme, and Mr Barber continued to say that Ms Field was still making net positive returns each year. However, it is again pertinent to note that such returns were calculated only by deducting interest costs from assumed returns on the security placed with Rothschild (by this time, the two insurance products and the deposit from the further funds lodged in March 1999), and did not reflect Ms Field's net asset position having regard to the amount of the outstanding loan in Sterling terms.

131. By late July 1999, Ms Field was still seeking explanations. In an e-mail message of 27 July, she reminded Mr Barber of his statement that should anything happen to the Yen, the loan currency could be switched to a safer option, and asked for a clear explanation of her position. In his replies to these queries, Mr Barber reiterated the low risk level attaching to the security and suggested that gearing of 2.5 times was not unreasonable given the use of low risk collateral, and the existence of much higher levels of gearing available in Hong Kong. Mr Barber suggested that the problem lay with the appreciation of the Yen against Sterling. In saying this, he was undoubtedly correct, however, this was clearly one of the components of the risk involved in the Scheme, as I have explained above.

The second margin call

132. Unfortunately, the Yen strengthened further during late July and August 1999, and on 25 August 1999, Rothschild wrote to Barber Asia advising that Ms Field's loan was once again in breach of the minimum collateral cover requirements. No immediate action having been taken to rectify the breach, Rothschild wrote to Ms Field on 2 September 1999, warning that Rothschild would be entitled to take such steps as they thought necessary if the breach was not remedied, indicating that this might well include switching the currency of the loan to Sterling and switching the Scottish Life investment to a more secure one. Ms Field says that she tried to contact Mr Barber, but was unable to do so, as he was out of Hong Kong. She managed to contact Chris Barber, but he was only able to suggest putting up further security. This was not done, and on 14 September 1999, Rothschild wrote to Ms Field demanding immediate payment of the loan, which then stood at 110,112,357 Yen. The next day, 15 September 1999, Rothschild wrote to say that it had decided to switch the loan into Sterling, although leaving open the possibility of a subsequent switch back into Yen should the position be rectified to their satisfaction.

133. The switch was effected at the then current exchange rate of 166.25 Yen to the pound. The effect was that the loan then stood at ￡662,330, nearly ￡210,000 more than its value at the date of drawdown. Ms Field e-mailed Mr Barber at this time, asking why he had taken such risks with her money, leaving her with very substantial losses, when she had reminded him many times how conservative she was. Mr Barber replied suggesting that the best course might still be to service the loans and hope to hold on long enough to avoid what was still at that stage a paper loss, rather than cashing out and crystallising Ms Field's losses. In fact, at this point, unless the switch into Sterling could be reversed at no cost, Ms Field had already suffered a substantial exchange loss.

The period up to the closing out of Ms Field's investments

134. It seems that Ms Field subsequently faxed a copy of the Rothschild letter of 14 September 1999 demanding repayment of the loan to Mr Barber on 21 September 1999, expressing her indignation at Rothschild's attitude, and indicating that she was minded to complain to the press about them. However, the copy of this letter than was produced in the bundles of documents had these handwritten comments blanked out. Mr Barber suggested that this had been done deliberately by Ms Field, in order to create the impression that she had all along blamed Barber Asia for the losses which she suffered, whereas the truth was that she initially blamed only Rothschild. Ms Field said that this had not been her intention. She was unable to explain how it was that the copy of the document which was sent to her solicitors (which found its way into the bundle of documents) had been partially obscured. However, she was sure that she did not ask for this to be done, and thought that it might simply have been something that her secretary had done without asking her. Mr Maurellet also drew my attention to the fact that the bundle of documents did, in any case, contain a letter from Messrs Johnson Stokes & Master, Ms Field's former solicitors, addressed to both Rothschild and Barber Asia and in which complaints were addressed to both of them.. He suggested that this was inconsistent with any attempt to create the impression alleged by Mr Barber. I think that this is right - indeed, in addition to the letter from her former solicitors, it is clear from several e-mail messages sent by Ms Field to Mr Barber or Chris Barber at this time that she considered that they had let her down as well. Her unhappiness with Barber Asia at this time is also, I think, evidenced by the complaint which she was to lodge with the Securities & Futures Commission in October 1999 against Barber Asia. I therefore reject Mr Barber's suggestion that the partial obscuring of this document was deliberate, or due to sinister motives on Ms Field's part.

135. E-mail correspondence between Ms Field and Mr Barber and Chris Barber continued. On 20 September 1999, Ms Field wrote to Mr Barber, demanding a strategy to deal with the situation. In this e-mail, she summarised her grievances in these terms:-

"... my grievance right now is two-fold:

a) I told you I was a 'conservative investor' right from the start. Was it wise to put all my eggs in one basket and 'over-gear' me so much (I have sought independent advice on this - and been told I was over-geared given the amount of the investment and the fact that my entire savings were put into one scheme)

b) Why didn't you take remedial action to change the loan currency and prevent this as soon as the yen started it[s] mammoth slide? ..."

136. It will be clear from this that Ms Field was by now consulting others as well. She said in her evidence that by this point, she had enlisted the assistance of Mr Van Amelsvoort, and also a friend in the United Kingdom who was a banker. I also note that the second complaint is not one that is pursued in these proceedings.

137. So far as the first complaint is concerned, Mr Barber responded in the following terms in his e-mail to Ms Field of 21 September 1999:-

"7. Eggs in one basket issue: Your investments are spread between Rothschild, Scottish Life and Old Mutual, they are not in 'one basket'. In addition, the underlying Scottish Life investments are spread between several different stock market indices and at varying levels of capital protection. The underlying collateral investments are all sound conservative investments, which are still worth in excess of ￡750,000. It is the foreign exchange position that has caused the problems.

"8. 'Over-geared': When we originaly discussed this type of investment, I outlined that 2-2.5 times gearing was considered conservative gearing, particularly when compared to many private banks who offer 5 - 10 times gearing (I have even seen 20 times gearing FX trading programmes). Taking into account the low interest rate on Yen borrowing; the Scottish Life growth track record plus the capital guarantee structure, the reasons for this gearing strategy were sound and, at that time, acceptable to you because you were looking for conservative/medium risk growth. If for one moment we had been able to predict the rapid and historic appreciation of the yen, then obviously we would not have commenced this strategy."

138. As I have noted earlier, this e-mail message is significant as much for what is not said, as for what is said. In particular, it is instructive to observe that Mr Barber confirmed that Ms Field's objective at the time the Scheme was entered into was to achieve conservative/medium risk growth, and that there is no suggestion that her investment objectives had changed since her initial dealings with Barber Asia. I have already considered above the suggestion that the Scheme was consistent with conservative/medium risk growth - as I have concluded, the Scheme in fact involved a significantly higher degree of risk than was compatible with such a strategy. Mr Barber suggested that he did not respond to the complaint as it would have been impolite to do so - an explanation which I found weak, to say the least.

139. At about the same time, on 22 September 1999, Chris Barber provided Ms Field with a number of options to consider, ranging from putting up additional security to enable the Rothschild loan to be redenominated back to Yen, to closing out all the investments and paying off the loan in full. Ms Field consulted Mr Van Amelsvoort about these options, and it appears to have been his advice that although closing out would crystallise substantial (and perhaps total) losses, staying in the loan structure would carry the risk of further losses, particularly if it were redenominated back into Yen, and the Yen did not weaken, or strengthened further against Sterling. Ms Field also consulted a friend, a Mr Temple, who also advised her to close out her positions, since there was no guarantee that she would ever be able to recover her losses, and he felt it unsatisfactory for her to have to remain in a relationship with Barber Asia for what might be a substantial period of time, in the hope of recovering her losses.

140. Ms Field continued to consider the various options which Chris Barber had suggested to her. Chris Barber was, it seems, pressing her to continue with the loan and investments, although he did suggest reducing the loans and investments in various ways. This continued until December 1999. During this time, Ms Field also lodged a complaint about Barber Asia with the Securities & Futures Commission on 11 October 1999. It seems that this did not result in any action being taken against Barber Asia.

141. On 15 October 1999, Barber Asia wrote to Scottish Life to instruct them to cease paying the management fee of 1% per annum payable to Barber Asia for managing Ms Field's investments with Scottish Life. As I understand it, this would have had the effect of reducing the charges payable by Ms Field to Scottish Life on this investment, thus increasing slightly the value of the investment. On the same day, Chris Barber wrote to inform Ms Field that this had been done.

142. Thereafter, Ms Field instructed her former solicitors, Messrs Johnson Stokes & Master to write to Rothschild and Barber Asia setting out her complaints about the Scheme - this was done by letter dated 12 November 1999, in which the unsuitability of the investment for Ms Field, and its incompatibility with her objectives and instructions was complained of. Rothschild instructed solicitors to respond denying liability. As I have noted earlier in this judgment, no response to this letter was forthcoming from Barber Asia.

The closing out of the investments

143. Finally, in early December 1999, Ms Field decided to close out her whole position, and instructed Chris Barber to do so on 8 December 1999. The Old Mutual and Scottish Life policies were therefore surrendered, attracting penalties for early surrender, and the cash deposit with Rothschild was realised. The Rothschild loan was repaid out of the proceeds, and it was common ground that Ms Field eventually received a total of ￡44,152.36.

144. Mr Barber made the point that it was not reasonable for Ms Field to have chosen to close out her whole position, when there were other options available, which could have resulted in a recovery of some (or perhaps all) of her losses. However, Ms Field explained that by this point, quite apart from the advice which she had received from Mr Van Amelsvoort and Mr Temple, she simply did not feel able to continue in any form of relationship with Barber Asia. Mr Green also commented on Ms Field's decision to close out her investments and effectively endorsed it, saying that in his view, there was little clear upside to her in staying in, and by closing out, she eliminated the possibility of any further losses. He considered that on the whole, closing out the entire position was the less risky option to take, and that it was therefore a reasonable one.

145. Having set out the facts as I find them to be, and the reasons for my findings, in some detail above, it will, I think, be possible to resolve the issues which I identified at the beginning of my judgment reasonably briefly.

Was There a Contract Between the Parties?

146. I turn first to the question of whether or not Barber Asia owed any duties to Ms Field as a matter of contract, and if so, what the scope of those duties were. This raises the issue of whether there was any contract at all between Ms Field and Barber Asia. It is only if there was a contract between them that the scope of any duties owed pursuant to it will arise for consideration.

147. Mr Barber submitted that there was no contract between Ms Field and Barber Asia. He drew attention to the fact that although he had explained the different services available, in particular the discretionary and advisory client services offered by Barber Asia, Ms Field ultimately opted for neither of these. He stressed also that at no time during the period in which Ms Field had dealings with Barber Asia did Ms Field pay any fees directly to Barber Asia for its services. Barber Asia was, as he pointed out, remunerated by the commissions and payments that it received from the companies whose products Ms Field acquired through Barber Asia. Mr Barber also pointed to the fact that all contracts in relation to the investments which Ms Field acquired, and in respect of the loan from Rothschild, were made between Ms Field and the company concerned.

148. Mr Maurellet, however, submitted that the evidence (particularly some of the application forms filled in for Ms Field by Mr Barber, and other information provided by Mr Barber to parties such as Rothschild and Scottish Life, in which he described himself and Barber Asia as Ms Field's financial adviser) disclosed a relationship of adviser and advisee, and that this, coupled with the fact that Barber Asia earned commissions, or were enabled to do so, was sufficient to give rise to an implied contract between Ms Field and Barber Asia.

149. It seems to me that the evidence clearly indicates that Mr Barber and Barber Asia considered themselves to be financial advisers to Ms Field. I do not think the fact that the actual investment or loan contracts were entered into by Ms Field in her own right would negative, or be inconsistent with, the existence of a contract between her and Barber Asia. It seems to me that even if there were such a contract (certainly if it were a contract to provide an advisory service, and perhaps also if it were one for the provision of a discretionary service), it would still be necessary for investments to be acquired by Ms Field herself (in the absence of some form of nominee arrangements).

150. That said however, in my view, the relationship between Ms Field and Barber Asia was not a contractual one. In order for a contract between them to have existed, apart from the provision and acceptance of services in the nature of investment, it would be necessary for there to be some consideration passing between the parties. It is not difficult to see consideration passing from Barber Asia, in the form of provision of services. However, in my view, Ms Field provided no consideration to Barber Asia for its services. She did not herself agree to remunerate Barber Asia for its services. The fact that Barber Asia earned remuneration from other sources as a result of Ms Field's acting on its advice does not, in my view, amount to consideration moving from her. The position might have been different had there been an obligation on Ms Field's part to make her investments through Barber Asia, or even to take advice from Barber Asia exclusively, but it was not suggested that either of these situations was the case here.

151. I therefore conclude that there was no contractual relationship between Ms Field and Barber Asia. In the light of this conclusion, I do not propose to consider what duties might have arisen on the part of Barber Asia by way of contract had a contract existed. In particular, it is not, I think, necessary to consider whether any of the implied terms pleaded in the Amended Statement of Claim arose.

Was There a Duty of Care in Tort?

152. I turn to consider whether Barber Asia owed Ms Field a duty of care in tort, to act with reasonable care and skill in relation to the advice which they gave her from time to time. It is well established that a tortious duty of care can arise irrespective of the existence or otherwise of a contract between the parties (although the existence of a contract may, in some cases, negative or restrict the scope of any duty of care that might otherwise arise).

153. Mr Barber sought, I think, to suggest that Barber Asia was under no relevant duty in the circumstances of this case. As I understood his argument, he submitted that having regard to the regulatory framework applying to the financial services industry in Hong Kong, the obligations applicable to persons providing financial advice were governed by the codes of conduct imposed by the Securities & Futures Commission, in the case of investments in securities, and by the Confederation of Insurance Brokers, in the case of investments in insurance products. Mr Barber explained that Barber Asia would be subject to the Confederation of Insurance Brokers' code of practice in relation to the selling of the Old Mutual and Scottish Life policies, and subject to the Securities & Futures Commission code in relation to the selection of securities or funds into which the investment was to be channelled under the Old Mutual policy. So far as the loan from Rothschild was concerned, however, Mr Barber indicated that this would not be covered by either code of conduct, since it was a loan, and not a securities or insurance investment.

154. This may well be correct in terms of the applicability or otherwise of the different codes of conduct, and may be one of the reasons why Ms Field's complaint to the Securities & Futures Commission came to nothing. However, it does not, in my view, exclude the possibility of a tortious duty of care arising, since such a duty is one which is imposed as a matter of law, in the light of the relationship between the parties.

155. The principle on which liability in tort in respect of advice given, whether by an investment adviser or some other professional, is now quite well established. In general, where a defendant assumes the responsibility of providing advice to a plaintiff, and knows or ought to know that the plaintiff is likely to rely on that advice, a duty of care is likely to arise. Pertinent factors to take into account will also include the relative skill and knowledge of the parties, the context in which the advice is given, whether the giver of the advice is doing so completely gratuitously or is getting a reward, whether in some direct or indirect form, and whether or not there are any express disclaimers of responsibility (which would negative any assumption of responsibility by a defendant).

156. A recent statement of the principle may be found in the speech of Lord Goff in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 at 180C-181D, where Lord Goff had this to say, when discussing the effect of the decision of the House of Lords in Hedley Byrne & Co. Ltd v Heller & Partners Ltd [1964] AC 465, which is the starting point when considering the principle underlying liability for negligent advice or misstatement:-

"... We can see that it rests upon a relationship between the parties, which may be general or specific to the particular transaction, and which may or may not be contractural in nature. All of their Lordships spoke in terms of one party having assumed or undertaken a responsibility towards the other. On this point, Lord Devlin spoke in particularly clear terms ... Further, Lord Morris spoke of that party being possessed of a "special Skill" which he undertakes to "apply for the assistance of another who relies upon such skill". But the facts of Hedley Byrne itself, which was concerned with the liability of a banker to the recipient for negligence in the provision of a reference gratuitously supplied, show that the concept of a "special skill" must be understood broadly, certainly broadly enough to include special knowledge. ... although, in the case of the provision of information and advice, reliance upon it by the other party will be necessary to establish a cause of action (because otherwise the negligence will have no causative effect), nevertheless there may be other circumstances in which there will be the necessary reliance to give rise to the application of the principle. ...

"... Furthermore, especially in a context concerned with a liability which may arise under a contract or in a situation "equivalent to contract", it must be expected that an objective test will be applied when asking the question whether, in a particular case, responsibility should be held to have been assumed by the defendant to the plaintiff. ... In addition, the concept provides its own explanation as to why there is no problem in cases of this kind about liability for pure economic loss; for if a person assumes responsibility to another in respect of certain services, there is no reason why he should not be liable in damages to that other in respect of economic loss which flows from the negligent performance of those services. It follows that, once the case is identified as falling within the Hedley Byrne principle, there should be no need to embark upon any further enquiry whether it is "fair, just and reasonable" to impose liability for economic loss ..."

157. Applying these principles, it seems to me clear that in this case, there was the necessary voluntary assumption of responsibility by Barber Asia. There can be no doubt that Barber Asia, as professional investment advisers, were in possession of special skills or knowledge which Ms Field, a wholly inexperienced investor, did not have. Further, the circumstances in which Barber Asia, through Mr Barber, provided investment and financial advice to Ms Field negative the possibility that such advice was provided in a social or other setting that might indicate that there was no assumption of responsibility on their part. The advice was clearly provided as part of their business, and it was, I think, clearly in Barber Asia's contemplation that it would be rewarded for those services, although not by Ms Field, by being put in a position to earn fees and commissions from the investment products which Ms Field would acquire as a result of following its advice. There were not, so far as I can see, any express disclaimers of responsibility by Barber Asia in respect of the advice rendered to Ms Field. In these circumstances, I have no doubt that looked at objectively, Barber Asia should be regarded as having assumed responsibility to provide Ms Field with financial advice.

158. Moreover, it seems to me just as clear that Barber Asia realised, or must have realised, that Ms Field would rely on its advice. From Barber Asia's point of view, it was undoubtedly the expectation that Ms Field would rely on the advice tendered by accepting it and acquiring the investment products which had been recommended, as this was the means by which Barber Asia would be enabled to earn fees and commissions from the suppliers of such investment products. Quite apart from this, it must have been clear to Barber Asia that Ms Field was seeking its advice with a view to entering into an investment strategy on which to employ her savings. It seems to me also that the various references in the documents and application forms in which Barber Asia described itself as Ms Field's financial adviser are a recognition by Barber Asia that it was acting in that capacity vis-a-vis Ms Field, a capacity which to my mind inevitably suggests that the advisee is likely to rely upon the advice of the adviser.

159. I therefore have little hesitation in concluding that Barber Asia's relationship with Ms Field was one which imposed upon it a duty of care in her favour.

Were Barber Asia Negligent?

160. This leads on to the question of whether or not, on the facts of this case, that duty has been breached. In other words, did Barber Asia fall short of the standard of care which is to be expected of a reasonably competent financial adviser, advising a person in the position of Ms Field.

161. In considering this, it is necessary to bear in mind Ms Field's inexperience in investing, her personal (and particularly financial) circumstances, and the objectives which she had communicated to Barber Asia.

162. I have already found that Ms Field was, at the time she approached Barber Asia, an inexperienced investor. It seems to me that Mr Barber knew, or ought to have known this. I have rejected the suggestion that Ms Field was, by reason of her having held a bank account with multi-currency deposit facilities, to be regarded as a sophisticated investor. Much more pertinent is her apparently total lack of experience in investment in stocks, shares, bonds, unit trusts, mortgages, or other forms of investment, a matter which was either known to Mr Barber (no such investments having been recorded in his notes of his initial meeting with Ms Field), or which would have been known to him had he but asked (as Mr Green pointed out that a competent financial adviser should have done).

163. Further, so far as Ms Field's financial position is concerned, I have found that she told Mr Barber, as was the case, that the investment which she was proposing to make in about March 1998 represented virtually the whole of her available assets for investment, leaving only a relatively small amount over for emergencies or contingencies. This is, I think, something that it was incumbent on Mr Barber to have in mind in advising Ms Field as to an investment strategy. Mr Barber indicated that he took account also of the value of Ms Field's business in assessing her overall worth. So far as this is concerned, Ms Field said, and Mr Barber agreed, that there was no actual discussion of the valuation of her business. The approach which Mr Barber took was to value the business at twice its annual turnover. It seems to me that this is at best a rough and ready, and rather unscientific approach to the valuation of a business, so that any valuation made on this basis, without a closer examination of the nature of the business and the factors affecting its valuation can only be of very limited value. Moreover, it seems to me that it is also important to have regard to the undoubted fact that the nature of Ms Field's business was such that her personal involvement in it was likely to be responsible for a significant part of its value, as her clients were likely to deal with her company on the basis that she was there to execute and manage their media management and public relations plans. To realise the value of the business might therefore require some commitment on the part of Ms Field to continue to operate it for some period of time. It does not seem that Mr Barber took this into account. Finally, it is important to bear in mind that, if Mr Barber was considering Ms Field's overall worth with a view to ascertaining her ability to carry an investment strategy involving gearing through to its conclusion, it would (as Mr Green pointed out) have been incumbent on him to have regard to Ms Field's available or readily realisable assets, since it is likely that at times when additional security or funding is required, it is likely to be required to be provided promptly in order to stave off adverse action being taken by a lender. Viewed from this perspective, it does not seem to me to be appropriate or reasonable to place much, if any, weight on the valuation of a business being run by the investor, since such a business is rarely likely to be readily realisable, and will often prove to be a questionable source of additional funding, whether by loans secured against it, or some other means. For all of these reasons, I do not consider that a reasonably competent financial advisor would have set much store by a valuation of Ms Field's business, and insofar as Mr Barber did so, it is my view that he fell short of the standard to be expected of him.

164. So far as Ms Field's objectives are concerned, I have found that throughout her relationship with Barber Asia, she had made it known to Barber Asia that she desired a conservative investment strategy. I do not think that it makes much difference for present purposes whether this is described as conservative, low to medium risk, or conservative/medium risk. It seems to me that any level of risk of loss of capital that went beyond the lower end of the medium risk band would not accord with Ms Field's stated objectives. I have also found, on the basis of the evidence to which I have referred above (and in particular Mr Barber's own correspondence, and his failure to suggest that Ms Field had changed her objectives to a higher risk and non-conservative strategy when complaints were made as to the strategy adopted on a number of occasions in late 1999), that Mr Barber was throughout aware of this.

165. Against this background, I turn to consider the allegations of breach of the duty of care which are pleaded in paragraph 37 of the Amended Statement of Claim.

166. The first allegation (paragraph 37(1)) is that Barber Asia failed sufficiently to heed Ms Field's stated desire to invest in conservative investments. This is clearly something to which a reasonably competent investment advisor would have had regard. Having regard to my findings as to Ms Field's instructions to invest in conservative or conservative/medium risk strategies, it seems to me that simply on the basis of Mr Barber's acceptance that the strategy using the Scheme was a medium to high risk strategy, it would be open to me to find this allegation proved. However, I would go further, and hold that the strategy using the Scheme was in fact, as Mr Green opined, a high risk strategy that could not be described as conservative, for the reasons which I have given, and I therefore consider that this allegation is made out, as I cannot see any basis on which a reasonably competent investment adviser could properly give advice which was or should have been known to be inconsistent with an advisee's stated desires or objectives. I am satisfied that a reasonably competent investment adviser would have realised that the investment structure into which Ms Field was recommended to enter involved a high level of risk, and could not properly be described as conservative. Mr Green has suggested that Mr Barber may have been influenced by the prospect of higher commissions being earned by Barber Asia through this structure. As I indicate below, I am not persuaded that this is necessarily correct. However, it may be that Mr Barber, having (in my view, negligently) concluded that the investment structure was of medium to high risk, thought that this was nonetheless a suitable investment for Ms Field, given that he appears to have thought it unlikely that the Yen would appreciate significantly against Sterling.

167. The second complaint (paragraphs 37(2) and (3)) is effectively that no sufficient consideration was given to the fact that Ms Field was investing the whole of her available capital. This, too, is something that I consider that a reasonably competent investment adviser would have borne in mind. Although Ms Field accepted that she had some modest reserves left over after making the initial investment with Barber Asia in the Old Mutual product, I think that it is fair to say that she had invested the whole or substantially the whole of her available capital. On this basis, it seems to me that this complaint too is made out, in that the fact that what was being invested was substantially the whole of her capital made the geared investment under the scheme one which was incompatible with Ms Field's instructions, and unsuitable for her, since it gave rise to a significant risk of loss of her capital in the event of a call being made (as it was) by Rothschild for further security to be provided.

168. The third area of complaint (paragraphs 37(4) and (5)) relates to the currency risk involved in the mismatch of currencies between the loan and the investment, which was also to serve as security for it. It seems to me that it is clear that Barber Asia appreciated that there was a currency risk involved in the structure which they were recommending. They sought to assess the level of that risk. Mr Green did not criticise (although he did not accept the correctness of) the assessment of the volatility of the Yen, which was part of the assessment of the currency risk. He did, however, criticise the manner in which Barber Asia assessed the sufficiency of the cushion of collateral available to cover this risk. In my view, while there are legitimate criticisms to be made of Barber Asia's assessment of the level of cushion that was available, it seems to me that on balance the existence of this risk was adverted to by Barber Asia, and I therefore do not think that the complaint in paragraph 37(4) is established.

169. I find, however, that Barber Asia (acting through Mr Barber) did not in fact sufficiently warn Ms Field of the existence or nature of this risk, as it should have done, had it acted with reasonable care and skill. As I have stated, I have accepted Ms Field's account of the meeting on 10 July 1998, and therefore accept that Mr Barber dealt with the question of risks associated with currencies at best in a cursory fashion, by referring to the possibility of a switch in the currency of the loan. I do not think that this was sufficient to bring to Ms Field's attention the risks associated with the currency mismatch, which it was incumbent on Mr Barber to do if he were to deviate (as he did) from Ms Field's instructions to provide her with a conservative or conservative/medium risk investment strategy. The obligation to warn of particular risks is, I think one which a reasonably prudent investment advisor would be expected to comply with (see e.g. NMFM Property Pty Ltd v Citibank Ltd (No. 10) (2001) 186 ALR 442, at paras 423 to 443 of the judgment).

170. The fourth area of complaint relates to the collateral risk inherent in the currency mismatch (paragraphs 37(6) and (7)). In my view, given the miscalculations by Mr Barber of the amount of security cover actually available, there was a failure on the part of Barber Asia to appreciate the extent of the collateral risk involved in the currency mismatch. On balance, I think that the errors made were such as would not have been made by a reasonable investment adviser. The miscalculation of the minimum collateral cover percentage (which Mr Barber put at 115% instead of 117.6%) was a straightforward arithmetic error, which should not have been made had reasonable care been exercised. The errors in relation to the assumed costs in respect of the investments are also surprising, but perhaps not as signficant. The major problem, however, was the failure to factor in surrender values. It seems to me that a reasonably careful investment adviser would have read through and obtained an understanding of the terms and conditions of the Rothschild loan, and having done so, would have appreciated that security valuations would be based on surrender values. I have rejected Mr Barber's suggestion that Rothschild had "moved the goalposts" in this regard. I do not regard the fact that Rothschild appear to have miscalculated the amount of cover when indicating the level of loan that might be available, or in the early stages of monitoring the loan as excusing this. The fact that Rothschild, who were unfamiliar with the Scottish Life product, may have made such an error does not, to my mind, excuse Barber Asia for doing so, particularly when, according to Mr Barber, it was Barber Asia who were seeking to persuade Rothschild to accept the product as security. It seems to me that in these circumstances, Barber Asia could be expected to have a better understanding of the product than Rothschilds. Further, an error on Rothschild's part could not, in my view, justify Barber Asia in thinking that Rothschild were intending to vary the terms and conditions of the loan without at least making enquiries to ascertain that this was what was intended. I therefore consider that the complaint in paragraph 37(6) is made out.

171. So far as paragraph 37(7) is concerned, having accepted Ms Field's account of the circumstances in which she embarked upon the investment strategy using the Rothschild loan, it follows that I am satisfied that Mr Barber did not warn Ms Field as to this risk, as he should have done, and accordingly I find this complaint to be established. Ms Field also gave evidence, which I accept, that had the nature of the risks to which she was exposed been explained to her so that she understood that there was a risk of loss of her capital, she would not have gone ahead with this investment strategy.

172. Paragraph 37(8) was not explored to any great extent during the course of the trial, and I therefore decline to make any findings in respect of the complaint there set out.

173. Having regard to the findings which I have made above, it follows that the complaint in paragraph 37(9) that Ms Field was advised to invest in a manner which was attended by inappropriate risks is made out. Like the first two complaints, this is, I think, in essence an allegation that the investment was unsuitable for Ms Field, and should not have been recommended to her. I accept that the recommendation of an investment which is or should be known to be unsuitable for the prospective investor will amount to a breach of the duty of care owed by an investment adviser to those to whom he gives advice (see e.g. Martin v Brittania Life Ltd [2000] Lloyds Rep PN 412; NMFM Property Pty Ltd v Citibank Ltd (No. 10) (supra) at paras 444 et seq. of the judgment).

174. The complaints pleaded in paragraphs 37(10) to (19) are predicated largely on the terms of the Securities and Futures Commission's Code of Conduct applicable to investment advisers regulated by that body. As I have noted, although accepting that Barber Asia was subject to regulation by that body, Mr Barber contended that the Code of Conduct did not apply in this case, since the loan from Rothschild (which underpins Ms Field's complaints) was not something that fell within the purview of the Securities & Futures Commission. That may well be right. However, insofar as the complaints reflect standards to be expected of a reasonably competent investment adviser, it seems to me to be permissible to have regard to them, and for Ms Field to frame her claims by reference to them, so far as appropriate. I therefore turn to consider these further complaints.

175. I do not think that the allegation in paragraph 37(10), that Barber Asia failed to act fairly and in the best interests of the Plaintiff adds a great deal to the allegations which I have already considered. It will be apparent from my conclusions that I consider that Barber Asia did not, in all the circumstances, give Ms Field advice that was in her best interests. However, to the extent that there is a suggestion that there was some unfairness in the way that Barber Asia dealt with Ms Field, it was not entirely clear to me how the Plaintiff's case was being put, and I therefore make no finding in that respect.

176. I do not think that the complaint in paragraph 37(11) is made out. It is clear from the evidence that Mr Barber did obtain information from Ms Field about her financial situation, investment experience and investment objectives. The complaint is that he failed to take appropriate account of her objectives, and failed to have sufficient regard to relevant features of her financial situation and investment experience (although there might be some room for criticism of his appraisal of these matters).

177. I did not understand the complaints in paragraphs 37(12) and (13) to be pressed, and make no findings in respect of them.

178. The complaint in paragraph 37(14) appears to be broadly similar to that in paragraph 37(9), relating as it does to the suitability of the investment for the investor. Accordingly, I find that this allegation is made out.

179. Having regard to my findings as to what Mr Barber knew or should have known about Ms Field's financial position, and my finding that he did not sufficiently explain to her the risks involved in gearing her investments with a currency mismatch, I conclude that the complaint in paragraph 37(15) is made out.

180. The allegations in paragraphs 37(16) and (17) concerning failure to enter into a client agreement are, in my view, inappropriate to a claim in tort, and I therefore do not consider that Barber Asia were negligent in failing to enter into a client agreement with Ms Field. This was not, it seems to me, something that they could have insisted on Ms Field doing.

181. The complaint about failure to provide quarterly statements (paragraph 37(18)) is also, to my mind, one which is inapt for a negligence claim. Absent some obligation to do so, I can see no reason why Barber Asia should have provided such quarterly statements to Ms Field, with whom they did not stand in a contractual relationship. Moreover, I have some difficulty in seeing how, even if established, this allegation would have caused Ms Field loss. I therefore decline to make any finding against Barber Asia in this respect.

182. Finally, the complaint in paragraph 37(19) alleges that Barber Asia acted in conflict of interest. This appears to be based on the fact that Barber Asia stood to earn significantly higher commissions and fees from the investment structure which Ms Field entered into on 10 July 1998 than they would have earned from the investment with Old Mutual. It is undoubtedly true that Barber Asia stood to earn significantly higher fees as a result of the change in investment strategy (as much as in excess of ￡40,000, as compared to just under ￡10,000, over a period of five years). However, Mr Barber strenuously denied that the advice he gave Ms Field was motivated by this factor. Although Mr Green was of the view that the level of commissions might have been a motivating factor in Barber Asia recommending the Scheme to Ms Field, and was, at any rate, something that should have been disclosed to Ms Field, the complaint is, as pleaded, one of actually acting in conflict of interest rather than non-disclosure of matters that might suggest the existence of a conflict of interest. On balance, I am not persuaded that this allegation to be established.

183. In conclusion therefore, I find that Barber Asia did fall short of the standard of care to be expected of them in a number of significant respects. In principle, therefore, the losses which Ms Field suffered as a result of the investment advice rendered to her by Barber Asia would be recoverable by her as damages for their negligence.

Causation and Contributory Negligence

184. Before considering the quantum of loss, however, it is necessary to deal with two further matters - one raises questions of causation, and the other issues of contributory negligence.

185. So far as causation is concerned, paragraphs 32 and 34(2)(b) of Barber Asia's Amended Defence alleges, in effect, that Ms Field's losses were caused, not by any negligence on their part, but by her decision to close out her investments in December 1999. It is true that that decision resulted in the crystallisation of the losses which might hitherto be regarded as paper losses, since it involved the realisation of the investments in order to pay off the Rothschild loan, which had by that point been redenominated into Sterling. However, it seems to me that so long as the decision was one which was reasonably made, in the light of the circumstances then prevailing, Barber Asia can have no cause for complaint.

186. In my view, the decision on Ms Field's part to close out her position was a reasonable one, for the reasons which she gave. I accept that there was no certainty that the position would have improved in the future, and that having regard to her experiences to that point, it was reasonable for her to wish to terminate her relationship with Barber Asia, rather than to try to continue dealing with them in the hope of recouping her losses.

187. I would also add that given the redenomination of the loan into Sterling, it would seem that the currency loss was already crystallised, and in that sense incurred. So long as the loan remained in Sterling, the only way for Ms Field's losses to be reduced would be by achieving gains on her investments. However, had there been such gains, but no currency loss, the effect of the gains would have been to enhance her returns, so that she would have had greater profits. I therefore tend to think that the substantial cause of Ms Field's losses was the currency loss occasioned when the loan was switched to Sterling by Rothschild. The only way this currency loss could have been reversed would have been to secure a switching of the loan back into Yen, in the hope that there would be a significant weakening of the Yen in future. However, it seems to me that it would not have been reasonable to expect Ms Field to have taken such a course, as it would have involved a fresh assumption of the various risks which I have already concluded were incompatible with her investment objectives.

188. I therefore reject the contention that Ms Field's decision to close out her position in December 1998 severed the causal connection between Barber Asia's negligence and her losses.

189. I should not leave the topic of causation without briefly commenting on some points which Mr Barber made in his closing submissions, which appeared to me to be directed to an argument that Ms Field did not in fact rely on Barber Asia's advice to her. This is also, I think, an argument of causation, since it is the reliance on the negligent advice which provides the causal link between the advice and the damage which is suffered.

190. Mr Barber made the point that it appeared from the evidence that Ms Field was in fact conducting her own research, and obtaining and acting on the advice of others, such as Mr Van Amelsvoort and Mr Temple. He also referred to various pieces of evidence which he said suggested that she was making her own decisions as to how to deal with the situation. With respect, I do not see that this is relevant, particularly since all of the evidence to which Mr Barber referred related to the period after the investment strategy complained of had been embarked upon.

191. Equally, I do not think that the fact that Barber Asia were only providing advice to Ms Field, which she could accept or reject as she chose, is indicative of a lack of reliance on her part. There can be little doubt that Ms Field relied on Barber Asia's advice. As I have indicated, there is no suggestion that Ms Field would have entered into the investments and investment strategy which she undertook had it not been for Barber Asia's advice. Further, as I have noted, there is no evidence that Ms Field was at the material time in receipt of advice from any other advisers, or that she ever rejected any suggestions for investments which were tendered to her by Mr Barber. Given that Barber Asia was dependent on her accepting (and thus relying on) its advice in order to earn fees and commissions from the insurance companies and banks whose products they had recommended, it lies ill in its mouth to suggest that Ms Field did not in fact rely on such advice, and I reject any such suggestion.

192. I turn now to deal with an allegation of contributory negligence that I permitted to be made by a re-amendment to Barber Asia's Amended Defence shortly before closing submissions at the trial. It had become apparent that Mr Barber was complaining that Ms Field had failed to take legal advice, and had failed to pay sufficient regard to the acknowledgments of risk which she made when signing the Rothschild loan application form. As these matters had been explored in the evidence, and as Mr Barber was unrepresented, I thought it right to draw to his attention the possibility that a plea of contributory negligence on Ms Field's part might be open to him. Mr Maurellet very properly did not object to the amendment proferred by Mr Barber, and I accordingly gave leave for it to be made on the usual terms as to costs - that Barber Asia should pay to Ms Field the costs thrown away by the amendment (which were likely, in any event, to be slight, limited effectively to the cost of the amendment.

193. The amendment raised a number of different points, which I shall deal with in turn.

194. The first three points made relate to the entering into of the Rothschild loan agreement. It is suggested that Ms Field agreed to the terms of the loan, that she fully understood the risks involved, and that (to the extent that she did not) she failed to ask any questions which would have brought the risks to her attention. In my view, each of these points is without foundation. It is of course true that Ms Field agreed to the terms of the loan - that is the basis of her complaint. Had it not been for Barber Asia's advice and recommendation that she should do so, she would not have done so. I have rejected the suggestion that Ms Field was fully aware of the risks that she was undertaking. Even if it might be said that in signing the Rothschild Agreement Form, she acknowledged the existence of risk, this has, I think, to be looked at in the context of her reliance on the advice of Barber Asia that this was an appropriate investment structure for her to enter into. In other words, there was, to my mind, no reason for her to think that the risks that she was undertaking were inconsistent with the investment objectives which she had communicated to Barber Asia. For the same reason, I see no substance in the suggestion that she should have asked questions if she did not understand anything - given the confidence which, at that stage, she reposed in Mr Barber, it is not surprising that she did not ask many questions.

195. It is next suggested that Ms Field is partly to blame for her own losses because she did not cede full control of her investments to Barber Asia. I fail to see how this argument can be made good. There is nothing to suggest that had she done so, Barber Asia would not have caused her to enter into the investment complained of. To the extent that this is a suggestion that she did not fully trust, and therefore did not rely on, Barber Asia, I reject it for reasons which I have already explained.

196. It is then suggested that Ms Field should have had regard to the prominent recommendation to take legal advice on the front of the Rothschild Application Form. Ms Field readily admitted that she did not do this, but thought that since the question was one of suitability of the investment rather than the legality of the contract, there was little reason for her to do so. To my mind, it is perhaps unfortunate that Ms Field did not heed this recommendation, since I think it very likely that had she done so, her attention would have been drawn to the risks which I have found that Barber Asia should have, but did not, bring to her attention. That said, however, I have come to the conclusion that in all the circumstances, particularly having regard to the confidence which Ms Field reposed in Mr Barber at that time, it would be harsh to fault her for this failure. I therefore conclude that it would not be right for me to find her guilty of contributory negligence for failing to seek independent legal advice in relation to the Rothschild loan.

197. Mr Barber then suggests that Ms Field should have re-read the documents in the period between signing the loan agreement and the drawdown of the loan. While Ms Field said when asked about this that perhaps she should have done, I think that this does not amount to contributory negligence on her part, for much the same reasons as I have given in relation to the preceding paragraph.

198. It is next suggested that Ms Field failed to give clear and concise instructions to Barber Asia about her investment objectives. I reject this allegation - on the findings which I have made, Ms Field in fact gave clear instructions about this vital topic, which were not adhered to by Barber Asia.

199. The final three numbered paragraphs of the amendment are, to my mind, somewhat inconsistent with each other, as Mr Barber complains both that Ms Field stayed in the investment structure at the time of the first margin call and thereafter, and that she chose ultimately to close out her position. Be that as it may, I can see no basis for complaint by Barber Asia in relation to Ms Field's decision to stay invested in the Scheme at the time of the first margin call, particularly since it is clear that this was Mr Barbers recommendation to her, as is apparent from the terms of his memorandum to her of 3 March 1999. Thereafter, there would appear to have been no particular reason for her to close out her position before the second demand by Rothschild for further security. So far as the complaint about liquidating her investments is concerned, I have already rejected the suggestion that she was at fault in doing so when dealing with Barber Asia's case on causation, and for the same reasons, I reject the suggestion that this decision should be viewed as contributory negligence on her part.

200. The second page of the document handed up as containing the amendments make the following further points:-

(1) That there were also unforeseeable factors which contributed to the market events (viz. the strengthening of the Yen) which caused or increased Ms Field's losses;

(2) That Ms Field herself chose to increase her risk by entering upon this investment strategy, well aware of the limitations on her resources; and

(3) That failure to sign a client agreement was not a contributing factor in relation to her losses.

201. I do not consider that the first of these points is a good one. While there may have been unforeseen market events that affected the relevant exchange rate (and I note again that Ms Field does not suggest that Barber Asia are to be held liable for failing to foresee the extent to which the Yen strengthened against Sterling), this does not, to my mind, excuse Barber Asia in relation to the various respects in which I have found that they fell short of the standards to be expected of them. The second point is in my view devoid of merit, in the light of the findings which I have made. Finally, although the third point is, I think, correct, it does not assist Barber Asia in any way.

202. I therefore conclude that no deduction should be made to the damages to be awarded to Ms Field by reason of contributory negligence on her part.

Quantum

203. I turn finally to the quantum of the loss suffered by Ms Field. This is dealt with in Mr Green's report at paragraphs 7.01 to 7.05. The quantum of loss was not, I think, seriously in dispute, apart from one point to which I shall refer below. Although Mr Green put forward three alternative bases on which her loss might be calculated, only the first of these is pleaded in Ms Field's Amended Statement of Claim. This is a net loss of ￡219,890.25, arrived at by taking the total amount spent by Ms Field of ￡264,042.61, made up of:-

(1) The original investment in the Old Mutual policy of ￡182,541.35;

(2) The further sum of ￡76,801.27 put up by way of top up security in March 1999;

(3) The costs of the HSBC loan and other loan obtained to provide such top up security, including interest and annual fee, totalling ￡4,699.99

from which is to be deducted the sum of ￡44,152.36 recovered on about 21 December 1999 after surrendering the Old Mutual and Scottish Life policies and terminating the cash deposit with Rothschild.

204. It seems to me that this method of quantifying Ms Field's loss is appropriate. There can be no quarrel with including her original investment with Old Mutual. So far as the amount of top up security and the costs involved in providing it are concerned, it seems to me that these, too, are properly recoverable, particularly having regard to the fact that the risk of having to put up further security is a necessary part of a geared investment, and also that it was reasonable for Ms Field to have incurred these further amounts of investment or expenditure, given that it was Mr Barber's advice that she should do so. So far as the amounts recovered at the end of the day, it is obviously appropriate for credit to be given for these.

205. I should mention, finally, one point that arose in the course of Mr Green's evidence. As a result of a suggestion by Mr Green (at paragraph 7.04 of his report, but which was not pleaded and which I have therefore not had regard to) that it might be appropriate to have regard to the fact that the Old Mutual policy had increased in value at the time when Ms Field entered into the new investment strategy on 10 July 1998, I enquired whether it might not be relevant to have regard to what the position would have been had the new investment strategy never been embarked on. Although the parties endeavoured to ascertain the value at various points in time of the original Old Mutual portfolio, it proved impossible to do this fully, since some of the funds in which Ms Field had invested were no longer in operation. On reflection, I am satisfied that it would not be appropriate to attempt such an inquiry, since it would involve an attempt to ascertain what Ms Field would have been advised to do, or would have done, over a considerable period of time, during which there were many changes in the various markets in which such investments were made, which would inevitably render the attempt to do so speculative.

Conclusion

206. Accordingly, I award Ms Field damages in the sum of ￡219,890.25 against Barber Asia. I also award interest pursuant to section 48 of the Supreme Court Ordinance (Cap. 4) at a commercial rate (of say 1% above HSBC's prime lending rate from time to time) from 21 December 1999, when the losses were crystallised, down to the date of judgment, and interest at the judgment rate thereafter. I also make an order nisi that Barber Asia should pay Ms Field her costs of this action, to be taxed on the party and party basis if not agreed.