Spreadex Ltd v Sekhon

Dr Sekhon made substantial losses on financial spread bets placed with Spreadex, and Spredex sued him to recover the money he owed them. Dr Sekhon defended the claim by making a counterclaim for damages under section 150 of the Financial Services and Markets Act 2000, saying that his losses had been caused by Spreadex’s breach of the Financial Services Authority’s Conduct of Business Rules. In particular, he relied on the “five day rule” (COB 7.10.5 R) which (at the time) required a firm to close a private customer’s open positions if a margin call was not met within five business days.

Mr Justice Morgan held that Spreadex was in breach of the Conduct of Business Rules and Dr Sekhon had suffered loss as a result. Even though Dr Sekhon had wanted Spreadex to keep his positions open, he was entitled to damages which could be set off against the debt he owed to Spreadex. However, the judge found that the losses were largely Dr Sekhon’s own fault, and made a reduction for contributory negligence of 85%.

Mark Vinall acted for Dr Sekhon. Ben Jaffey was also involved at an earlier stage of the proceedings.