The High Court has awarded James Haughey €2,099,621 after finding that stockbroker J&E Davy trading as Davy negligently advised him on contracts for difference (CFDs) and failed to provide the advisory service he had paid for.
In a judgment delivered on 10 April 2014, Mr Justice Peter Charleton found that Davy had not properly established Haughey’s financial circumstances, investment knowledge, objectives or attitude to risk, or kept those matters under review. The court held that CFDs were unsuitable for him and that their risks and consequences had never been properly explained.
Haughey began dealing with Davy in August 2005, aged 20, after going to the firm intending to buy shares in the Jurys Doyle hotel group. He said he left with a leveraged CFD position without understanding the product. Davy’s employee gave a different account, saying the risks and available account types had been explained. The judge accepted that Haughey was encouraged towards CFD trading and found serious failings in the firm’s client checks and internal controls.
The judgment describes the client forms as substantially incomplete and records that a later suitability approval was signed despite missing information and no agreed exposure limit. The court found that the firm failed to conduct an adequate review when the CFD provider changed in 2006 and as Haughey’s trading continued. It also found that Davy encouraged him to raise loans against inherited property to fund the account. The court rejected Davy’s account of the advice and warnings given in several records, while accepting one documented warning in July 2006.
Haughey’s claim included negligence and breach of contract. Davy argued that poor investment decisions were his own and raised a limitation defence. The court found the obligation to know the client was continuing and had never been met, so the claim was not barred by the limitation argument. It also rejected Davy’s argument that the discontinued case against Bank of Ireland prevented recovery from Davy under the Civil Liability Act. The action against the bank had been discontinued, with a judgment for more than €3 million entered against Haughey; the court said it had not determined any liability by the bank.
For damages, the court assessed the position as if the CFD trades had not taken place. It accepted net trading losses of €1,250,475, non-recoverable capital gains tax of €487,066 and funding interest totalling €362,080. The resulting decree was for €2,099,621. The judgment does not specify a separate costs order.