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The context: discretionary management in question and a lost reinvestment opportunity
A wealthy client sued his banker, complaining that, after liquidating all the financial instruments in his portfolio, the banker had been slow to reinvest the resulting cash, whereas, according to the client, the banker was responsible for managing his assets. For the client, a swift reinvestment would have limited the effects of any adverse market movement as far as possible. In reality, the client complained that the banker had prevented him from benefiting from a rise in share prices that occurred immediately after the liquidation of his portfolio. His claimed loss was around EUR 200,000.
The bank’s position: no liability absent a discretionary management agreement (execution only)
The banker denied any liability, given that the client had terminated the portfolio management agreement binding them, and that the investments made since had been carried out solely on the client’s instructions.
The court’s decision: proof of the management mandate and the client’s orders
The court recalled that, under the combination of Articles 1985 and 1341 of the Civil Code, it was for the client to establish the existence of a discretionary management mandate entrusted to the bank in relation to the criticised transactions. Such proof ran up against the written orders placed by the client after he had terminated the earlier management agreement. One transaction in particular drew attention: it had been placed by telephone and was recorded only in the banker’s order journal and the client’s account statements.
On telephone orders, the court recalled that giving stock-market orders by telephone is customary and not, in itself, open to criticism. The recording of telephone conversations between banker and client was not, at the time, mandatory (it now is, under certain conditions).
Not disputing account statements presumes approval of the transactions they record
On the account statements, the court held that the client’s failure to dispute the data shown several months after their issue presumed his approval. Even though the statements were merely kept available to the client at his branch, he bore the responsibility for consulting them only once a year. The court also stressed that the client had internet-banking access, allowing him to check his accounts and portfolios, and that he was, moreover, no mere layman in the matter.
This article is a translation. Only the French version is authoritative. It is provided for information purposes and does not constitute legal advice.
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