The Supreme Court has refused permission to appeal from two recent Court of Appeal judgments involving high-profile mis-selling claims against banks. The result of the Supreme Court decisions is to put an end to one of the claims but to allow the other to proceed to trial in the High Court.
LIBOR claims – Unitech v Deutsche Bank
We have previously reported on the progress of two pending cases in the High Court (Graiseley Properties v Barclays Bank and Deutsche Bank v Unitech Global) that have been widely viewed as test cases on the potential for private claims by customers who entered into LIBOR referenced products with LIBOR panel banks. The claims were brought in the wake of various regulatory investigations into and findings of misconduct with respect to the setting of LIBOR by certain of the panel banks. A key issue has been whether the Claimants should be allowed to pursue allegations that, when entering into the LIBOR referenced product, the banks made implied representations to them relating to the integrity of LIBOR.
Following two first instance decisions on that question, the Court of Appeal in November 2013 held that the allegations of implied representations relating to the integrity of LIBOR were sufficiently arguable as to have a real prospect of success, and therefore the allegations should be allowed to proceed to trial (read our report ‘Court of Appeal allows LIBOR claims to proceed’).
The Graiseley proceedings have since settled (on confidential terms) and will therefore now not proceed to trial.
However, Deutsche Bank in the Unitech proceedings sought permission from the Supreme Court to appeal the Court of Appeal’s ruling. That permission has now been refused by Lords Neuberger, Clarke and Sumption. The published reasons for the refusal are limited to: “..the applications do not raise an arguable point of law. It is not normally appropriate for the Supreme Court to entertain appeals on an issue which the Court of Appeal has simply held to be arguable and this is not an exception” …
Accordingly, Unitech’s LIBOR allegations will now proceed to trial in the High Court and will be closely watched. No hearing date has yet been allocated.
It is important to note that the Supreme Court’s decision appears to have been based primarily on deference to the Court of Appeal’s judgment and (particularly without any detailed reasons for the decision) should not be viewed as an endorsement of the merits of the claims. Similarly, as we previously noted, the Court of Appeal’s finding that the claims were sufficiently arguable to be allowed to proceed to trial only required it to apply a relatively low threshold. Whilst Unitech will be allowed to plead and argue the LIBOR allegations, it is likely to face significant hurdles at trial (as detailed in our earlier briefing following the first instance decisions ‘Private LIBOR claims – an uphill battle for claimants’).
Interest rate swaps – Green & Rowley v RBS
The Green & Rowley v RBS proceedings in the High Court were the first interest rate swap mis-selling case to come before the English courts since June 2012 when the (then) FSA announced its review into the sales of interest rate hedging products.
The trial judge fully rejected the various claims brought by the Claimants against RBS. These claims included a common law claim for negligent misstatement (described as a duty “not to misstate”) in respect of the information provided to the Claimants in relation to the swap.
The Claimants’ appeal to the Court of Appeal focused on a narrow but important point of law regarding this negligent misstatement claim. The Claimants asserted that, although the trial judge had held the transaction to have been non-advised and this finding was not appealed, RBS’ common law duty not to misstate still incorporated all its duties under the relevant Conduct of Business (COB) Rules. The Court of Appeal roundly rejected that suggestion. Although it agreed that the COB rules would have informed the relevant common law duty had the transaction been conducted on an advisory basis, that was not the case for an execution-only transaction (as was the case here). In particular, the common law duty not to misstate did not require a bank to take reasonable care to ensure that a customer understood the risks involved in entering a transaction (read our report ‘Appeal related to alleged misselling of interest rate swaps dismissed‘).
The Supreme Court has now refused the Claimants permission to appeal.
The reasons for that decision have not been published, beyond the conclusion that there was ‘no arguable point of law’ requiring the Court’s attention. However, the Supreme Court’s apparent refusal to re-open the line of argument run in the Court of Appeal is to be welcomed for banks, as it further closes down an attempt effectively to broaden the category of individuals which can bring claims for breach of the COB (or replacement COBS) Rules, beyond those who qualify as ‘private persons’ for the purposes of the statutory cause of action in s.150 (now s.138D) FSMA 2000. The Court of Appeal was very clear that to import all of the relevant COB duties into the common law duty of care would be to “drive a coach and horses through the intention of Parliament to confer a private law cause of action upon a limited class”.
The development will also be welcomed by banks in that it will leave undisturbed the sensible approach adopted by the trial judge (detailed in our earlier briefing) regarding both the non-existence of an advisory relationship and the adequacy of RBS’ disclosure regarding the swap’s break costs.