The hearing of the Application for an Unless Order and the Variation Application was held remotely via video conferencing due to the Coronavirus but with full written and oral submissions from leading counsel. With thanks to William Dunning at Simmons & Simmons for contributing to this blog. The second and third tranches of the security were funded by Mr Schwarz and Mr Costa, respectively. However, a fund / investment manager is still likely to be subject to an express or implied duty to undertake its services with reasonable care and skill. For example, in the UK, Tyndaris v VWM will go to trial in mid-2020. Past performance is not a guide to future returns. Lewis v Averay [1972] 1 Q.B. Explainability is an increasingly important concept in relation to AI. Omers Administration Corporation & Ors (SL Claimants), Manning & Napier Fund Inc, Exeter Trust Company (MLB Claimants) v Tesco plc High Court, Financial List, 2 Jun 2020, 11 weeks. On 25 February 2020 VWM issued its application for an order that (in substance) unless the claimant made the final payment into court within seven days, the claim would be struck out. In response, Tyndaris claimed approximately US $3 million from VWM in unpaid fees, eventually commencing proceedings in the English High Court. Alternative Dispute Resolution versus having your day in court: another round to ADR. VWM’s notional investment amount reached US $2.5 billion at its peak. The first question for the court is whether the March Order should be varied by reason of a material change in circumstances and in particular whether an order to enforce the March Order and refuse the Variation Application would stifle the claim. As to the second stage, it was submitted that there was good reason for the position in which the claimant found itself. It was submitted for the claimant that the court should dismiss the Application for the Unless Order and grant the Variation Application as there had been a material change in circumstances since the March Order. This means that testing may need to be more extensive as compared with other algorithmic-trading platforms. Between December 2017 and February 2018 Tyndaris traded a managed account for VWM. Duvenage v NSL Ltd UKEATS/0002/20/SS, UKEATS/0003/20/SS, UKEATS/0004/20/SS & UKEATS/0005/20/SS Appeal against the ET’s decisions relating to the strike-out procedure. Gallaher Limited v The Commissioners for HM Revenue and Customs [2020] UKUT 0354 (TCC) The Upper Tribunal Tax and Chancery decision of Mr Justice Miles and … 28. In case of any confusion, feel free to reach out to us.Leave your message here. 31. 1. It is a rare reported Judgment on an unopposed lease renewal and highlights the importance of having the correct expert evidence regarding comparables when it comes to fixing the rent. Defendant: MMWWVWM Limited (VWM): SPV owned by Mr Li By contract, Tyndaris agreed to provide investment management services (i.e. Tyndaris v VWM Limited High Court, Commercial Court, 27 April 2020, four weeks. The fact that the costs of the counterclaim have increased significantly since the matter was before Knowles J does not affect in my view the correctness of the order made in relation to the claimant nor does it amount to a material change of circumstance in relation to the order imposed on the claimant. Given that use of the AI system will (subject to any future regulation) generally be governed by a contract between private parties, the system will need to perform as well as has been contractually bargained for. In the recent case B2C2 Ltd v Quoine Pte Ltd, the Singapore International Commercial Court considered how the law of unilateral mistake should apply when the entity said to have made the mistake was an algorithmic trading system. VWM Wealth is a trading name of VWM Consulting Ltd which is authorised and regulated by the Financial Conduct Authority (Ref No: 401041). The parties are currently engaged in the litigation. The evidence of Mr Costa is that in April 2019 following a press article discussing this litigation, the main investor in the claimant expressed concerns about the reputational damage of being associated with the claimant. Mr Costa's evidence is that he was informed that the investor did not want to continue to invest with the Tyndaris group and he was given an ultimatum to sell the entire Tyndaris group (other than the claimant and its immediate parent) or it would not invest any further capital and would enforce its rights under a convertible loan to force a sale of the group. 17. 2. 34. In other words: “the computer did it”. Before confirming, please ensure that you have thoroughly read and verified the judgment. Tyndaris v VWM Limited First major UK case involving artificial intelligence. Lawyers for Li’s British Virgin Islands vehicle MMWWVWM Ltd., referred to in court as VWM, said the fund lost $20.5 million in a single day on Feb. 14 following other losses in December and January. The recent decision in Calor Gas Ltd v Chorley Bottle Gas Ltd and others (Calor Gas) contains two points of particular significance: The extent to which questions of public interest, and in particular public safety, may be factored into the court’s decision. board level responsibility in understanding how their company is using AI. The fund / investment manager will need to be comfortable that, fundamentally, the AI system is able to make trades in a sufficiently sophisticated manner such that it does not put the fund / investment manager in breach of its principal obligations. Mr Costa also stated that the only significant asset or turnover shown in the 2018 accounts is the fees due from the defendant and that the 2019 accounts were not yet complete but they will not show any further turnover. http://disputeresolutionblog.practicallaw.com/ai-powered-investments-who-if-anyone-is-liable-when-it-goes-wrong-tyndaris-v-vwm">. It was also submitted for the claimant that there had been a material change in circumstances by reason of the "evolution" of the counterclaim. The Tyndariscase According to Tyndaris, K1 system operates as … However it was submitted that Mr Costa had failed to address the current position of the claimant as to cash. Past performance is not a guide to future returns. This is a case where there is no sanction imposed for breach of the March Order. In relation to the latter it was submitted for the claimant that, had the financial situation prevailed at the date of the March Order, a different order would have been made as the court will not make an order for security for costs that a claimant cannot comply with and where the effect would be to stifle a good claim. 16. The new Machine is a SF 3120 SF series machines, with typical VWM products features of rigid structure and high precision, are designed with direct-driven X-Y transmission device and torque enlarger unit on X-axis, increase the X-Y […] Read article. Explainability can cause difficulty because some AI systems are said to operate in a “black box”, such that even those responsible for developing or managing the systems cannot explain how the AI reaches certain decisions. 29. Registered Co No.SC216348. limited number of employees had been permitted access to the whole of this data, which was held in a supposedly secure internal environment created by proprietary software known as “PeopleSoft”. Appeal dismissed. This document should also include details of the AI system’s testing (which should emulate live trading conditions as closely as possible). VWM Wealth is a trading name of VWM Consulting Ltd which is authorised and regulated by the Financial Conduct Authority (Ref No: 401041). 23. WADA denies all liability, arguing that Mr Sakho’s move and any consequent losses were caused by other … Please log in or sign up for a free trial to access this feature. 27. The trial of the action is due to commence on 22 April 2020 and is expected to last approximately three weeks. Tyndaris made payments into court of the first three payments making a total paid of US$487,500. In the context of financial services, the FCA has emphasised that companies should take responsibility for their use of AI, which includes: transparency in their use of AI, so that customers “know when and how machines are involved in decision-making”; having “sufficient interpretability” of the company’s AI systems, so that the company is able to understand and explain how it is using AI; and. Tyndaris v VWM Limited The first major UK case to involve machine learning. Citation. 37. In my view it is clear from the transcript of the hearing before Knowles J and his judgment, that Knowles J heard full written and oral argument before reaching his decision on security for costs. Their pleadings / legal submissions (which we have reviewed) reveal the following issues: Unless the parties settle, the High Court will hear the dispute in mid-2020. 11. The court must be cautious when a defendant suggests that the claimant can raise money from its controlling shareholder - the shareholder's distinct legal personality must be respected and the question should always be can the company raise the money (Goldtrail at [18]). Comment document.getElementById("comment").setAttribute( "id", "516ba6bc2712e73be75092d3d06fc86a" );document.getElementById("61d96ede78").setAttribute( "id", "comment" ); Opinion pieces on issues for litigators, from Practical Law Dispute Resolution and leading practitioners. In my view the claimant has not produced convincing evidence either that the claimant itself does not have the resources to make the final payment or that it does not have access to resources. We predict that insurance of AI systems is likely to become increasingly sought after, as firms seek to pass on potential losses to the insurance market, and underwriters seek to profit from writing valuable policies. VWM quickly suffered losses (approximately US $22 million overall, including a loss of US $20 million on 14 February 2018). Finally in his conclusion (paragraph 33 of his witness statement) Mr Costa states that if the claim is struck out and he has to issue a new claim following a successful defence of the counterclaim, the claimant will find it "challenging" to find the financial resources to do so. 20. In addition to the commercial and legal risks outlined above, there is also increasing regulatory scrutiny of AI systems, particularly in the financial services industry. contains alphabet), England and Wales High Court (Commercial Court). Once you create your profile, you will be able to: Claim the judgments where you have appeared by linking them directly to your profile and maintain a record of your body of work. Board members are unlikely to be able to say “the machine knows best” when asked about their company’s use of AI by a regulator. It was not an offence to own one of these devices, but it was an offence to operate one without a licence. The amount ordered by Knowles J in respect of the claim reflected the small proportion which the claim represents of the overall proceedings. Tyndaris v VWM Limited The first major UK case involving artificial intelligence (AI). To the extent that matters with the third party unfolded as set out in the evidence of Mr Costa, I am prepared to assume that this amounts to a good reason why the payment date was missed (although as discussed above I do not accept that the claimant has established on the evidence that it is unable to make the payment). We will see more cases heard in local courts –this is critical in building out the limited existing body of case law. Dechert and BCLP have negotiated a settlement in what was set to be the UK’s first major case involving machine learning. The solicitors, Dechert LLP, wrote that: 9. The March Order also approved the parties' costs budgets which, in the case of the defendants, was approved in relation to the defence of the claim in the aggregate sum of approximately US$900,000. The claim in these proceedings arose out of a contract dated 29 November 2017 for the provision by the claimant ("Tyndaris") of investment management services to the defendant ("VWM"). 7. Applying the three-stage test in Denton, it was not submitted for the claimant that this was not a serious breach and the claimant through leading counsel and Mr Costa apologised to the court for the failure to make the final payment. To allow the claim to proceed on the lesser amount of security would reduce the security for the costs of the claim from the $750,000 determined by Knowles J to be appropriate to a sum of only $487,500 against an approved budget (in relation to the claim) of approximately $900,000; iii) whilst I accept that the trial of the counterclaim will go ahead in any event, this is not a valid reason why the defendant should now have to accept a significantly lower amount by way of security for the costs of the claim than previously determined by Knowles J and the fact that the trial will go ahead is not a sufficient justification not to give effect to the March Order. Required fields are marked *. How is the system marketed to customers and how is this reflected in the. Did Tyndaris act as a “prudent professional discretionary manner” when using the K1 supercomputer? I accept that this is not a case of a complete failure to comply with an order for security for costs such as to fall within the scenario contemplated by Sales J in Meldex International v Trevillion [2010] EWHC 1342 (Ch). VWM have been in the woodworking industry now for over 30 years, established in 1981 by William Varey. Background In 2017, the claimant, Tyndaris SAM (Tyndaris), a Monaco-based investment manager, signed an agreement with the defendant, MMWWVWM Limited (VWM) under which Tyndaris agreed to manage an account for VWM using an AI-powered system to make investment decisions (the managed account). It was also submitted for the defendant that Mr Costa is a man of "apparent wealth" and reference was made to his superyacht being for sale for $21.9 million and his address in Monte Carlo. In general, we suggest that the topics below are crucial in understanding the legal issues that can arise (including the question of who, if anyone, is liable) when an investor suffers losses in similar circumstances to the Tyndaris case. The Court gave limited separate consideration to the third limb (reasonableness) of the Caparo test, as it was accepted that the issues of proximity and reasonableness tend to run together. A spokeswoman for Tyndaris declined to comment on the court filings before the trial, which is scheduled for April 2020. Who (if anyone) is liable when an artificial intelligence (AI)-powered trading / investment system causes substantial losses for an investor? Mr Costa stated that he did not receive any substantial consideration from the sale and as a result of that sale the claimant "no longer has the benefit of funding from the wider group" and has not been able to transact any other business and generate any other revenue. 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