Biannual Banking Litigation Update: October 2019 – April 2020

Welcome to our latest Banking Litigation Update, in which we highlight a number of the most important cases and developments affecting UK financial institutions over the past six months. You can read our full briefing here: Banking Litigation Update.

Publishing this update in April 2020, we must begin with a reference to the COVID-19 pandemic. While it is primarily a humanitarian crisis, it has of course resulted in unprecedented levels of global financial market volatility and the future economic outlook is uncertain. This inevitably exposes financial services institutions to heightened legal risk in relation to their lending and other banking businesses. However these sorts of issues will take time to manifest and either resolve or work their way through the courts system. To date, therefore, the judgments handed down by the UK courts relating to COVID-19 have dealt exclusively with practical and procedural issues. We have included a COVID-19 section in this publication, highlighting the most important judicial developments in this context so far. However, this is an area of rapid change, and so please check out our COVID-19 crisis hub for our latest insights to keep you abreast of legal issues impacting your business now and those you may face next.

The past six months have been a busy period for securities class actions. The most important development in this sector is undoubtedly judgment being handed down in The Lloyds/HBOS Litigation, which was the first securities class action to reach trial in the UK. HSF successfully defended the claim against Lloyds and the judgment provides much needed clarification on some of the most important battlegrounds which arise in shareholder class actions as well as guidance for listed companies and their directors on various key aspects of capital markets and M&A transactions. But other judgments during this period have also helped to shed light on key issues such as reliance (Tesco), whether s.90A of the Financial Services and Markets Act 2000 (FSMA) applies to shares held in dematerialised form (Tesco again), and the liabilities/obligations of commercial litigation funders to put up security for costs (Rowe v Ingenious Media) and/or to pay the other side’s costs when a claim it has funded fails (Chapelgate v Money). In the world of class actions more generally, the latest big news is the decision of the Supreme Court in Morrisons, which held that the corporation was not vicariously liable for the actions of a rogue employee in leaking employee data to a publicly available file-sharing website. From a class actions perspective, it’s clear that data breach class actions are on the rise in the UK and this judgment should be seen as a setback not a roadblock.

The so-called Quincecare duty of care continues to attract judicial scrutiny, with judgment being handed down by the Supreme Court in the very first case in which this duty was found to have been owed and breached (Singularis v Daiwa). As a reminder, this is the duty imposed on a bank where it has reasonable grounds (although not necessarily proof) for believing that a payment mandate by an authorised signatory of its customer is an attempt to misappropriate the funds of its customer. The spate of recent judgments considering this duty has exposed a risk area for financial institutions as to how payment requests are managed and monitored. Judicial clarification is continuing to evolve, which will determine what (if any) changes need to be made to standard practice, and so we are monitoring developments closely.

This update would not be complete without the obligatory ground-breaking decision on disclosure/privilege. In this edition, we have the decision of the Court of Appeal in Jet2, which found in favour of a dominant purpose test for legal advice privilege. The good news, from the perspective of those seeking to obtain the protection of legal advice privilege for lawyer/client communications to seek or obtain legal advice, is that the decision in this case should not significantly narrow down the protection of legal advice privilege as it was previously understood.

Since the last edition of this update, we have seen a noticeable uptick in communications from the UK regulators in relation to the discontinuation of LIBOR by end-2021, a deadline the regulators say they remain committed to notwithstanding the COVID-19 crisis. We continue to monitor these developments and consider the effect they may have on the litigation risks of transition, in particular for “tough” legacy contracts which reference LIBOR and are not moved off LIBOR before the benchmark rate ceases. You can find our most recent publications in the relevant section below. Of particular note is the discussion of the US regulator’s bold move to introduce a legislative fix for LIBOR discontinuation, where we have considered its effect on the litigation and regulatory risks posed by LIBOR transition, and highlighted the potential consequences for UK financial markets.

In the current environment, where the need to multi-task is greater than ever before for many people, our banking litigation podcast series offers an easy way to keep up to date with relevant legal developments. You can find archived podcast episodes here and subscribe for the podcast channel here, to listen to our regular bite-sized broadcasts covering both litigation and regulatory developments for banks and other financial institutions.

We hope you find our update useful and, as ever, please feel free to contact one of us or your usual Herbert Smith Freehills contact if there are any topics which you would like to discuss further.

For more information, please read our Banking Litigation Update.

Rupert Lewis
Rupert Lewis
Partner
+44 20 7466 2517
Chris Bushell
Chris Bushell
Partner
+44 20 7466 2187
Ceri Morgan
Ceri Morgan
Professional Support Lawyer
+44 20 7466 2948

Biannual Banking Litigation Update: April 2019 – October 2019

Welcome to our latest Banking Litigation Update, in which we highlight a number of the most important cases and developments affecting UK financial institutions over the past six months.

During this period, there have been a considerable number of judgments relating to the contractual interpretation of financial services agreements. While the legal principles of contractual construction are well-established, this continues to be an area in which disputes are ripe in the financial services sector (and beyond), with many cases progressing to appellate level. Perhaps this is because rival interpretations are often both arguable, but with commercial outcomes which are starkly opposed. In particular, the courts have considered a number of key decisions looking at the role of the contract in circumstances where there has been suspicion of criminal activity. For example, the contractual discretion of a bank to close a customer account without notice where there is suspicion of money laundering (N v RBS); and the right of a borrower to withhold payment under a facility agreement where there is a risk of US “secondary” sanctions (Lamesa v Cynergy). You can read more about these cases by following the link to the Banking Litigation Update below.

A cause of action which has received significant judicial scrutiny recently is the so-called Quincecare duty of care. This is the duty imposed on a bank where it has reasonable grounds (although not necessarily proof) for believing that a payment mandate by an authorised signatory of its customer is an attempt to misappropriate the funds of its customer. The duty relates to what a bank must/must not do in such circumstances. A case considering whether the defence of illegality can respond to a claim for breach of the Quincecare duty has gone all the way to the Supreme Court and judgment is expected this week (Singularis v Daiwa). In another case, the Court of Appeal has found that the express terms of a depository agreement did not exclude the duty and were not inconsistent with its imposition (JPMorgan v Nigeria). Until a couple of years ago, these arguments had only reached trial in a couple of cases since the early 1990s (when the Quincecare duty was established). Banks looking at the way they respond to payment requests which arouse suspicion would be wise to keep abreast of the judicial clarification which is continuing to evolve in this area.

An important regulatory development to be aware of is the latest EU Prospectus Regulation (EU/2017/1129), which is now in full force and effect and represents the most significant overhaul of European securities law since the Prospectus Directive came into force in 2005. The changes introduced will have a direct impact on securities litigation claims, which we have explored in our blog post: What securities litigators need to know about the new Prospectus Regulation.

Looking to the future, the biggest risk area (aside from Brexit) continues to be the discontinuation of LIBOR (and other IBORs) from 2021. IBOR transition teams across the globe are currently grappling with the difficulties posed by transition from IBOR benchmark rates to risk free rate alternatives. However, given the prevalence of IBORs as interest rate benchmarks in contracts across multiple markets and jurisdictions, the demise of IBORs raises questions about the litigation risks which parties to such contracts may face. In our last Banking Litigation Update, we referred you to our article in the Journal of International Banking Law and Regulation: LIBOR is being overtaken: Will it be a car crash? (2019) 34 J.I.B.L.R.. Since then, the FCA and PRA have published a joint statement setting out their observations from the responses of major banks and insurers in the UK to the Dear CEO letters last year (which asked for details of LIBOR preparedness). This joint statement highlighted that there is real divergence across the market, which we have considered in further detail in our blog post: LIBOR discontinuation – FCA thematic feedback on responses to Dear CEO letter.

In the past few months, we have launched two new products, aimed at keeping in-house lawyers at banks up to date with the latest banking litigation developments. In June 2019, we launched a new banking litigation blog, to which you can subscribe to receive email updates on the latest cases as soon as they are published. Earlier this month, and following the success of our banking litigation podcast series, we also launched a new podcast channel dedicated to financial services litigation and regulation. The purpose of the channel is to make it easy for our clients to subscribe for podcast updates which are specifically relevant to them. You can subscribe for the new channel here.

We hope you find our update useful and, as ever, please feel free to contact one of us or your usual Herbert Smith Freehills contact if there are any topics which you would like to discuss further.

Read our full Banking Litigation Update.

 

Rupert Lewis
Rupert Lewis
Partner
+44 20 7466 2517
Chris Bushell
Chris Bushell
Partner
+44 20 7466 2187
Ceri Morgan
Ceri Morgan
Professional Support Lawyer
+44 20 7466 2948

Bi-annual Banking Litigation Update: October 2018 – April 2019

Welcome to our latest Banking Litigation Update, in which we highlight a number of the most important cases and developments affecting UK financial institutions over the past 6 months.

Privilege decisions have, as ever, dominated the legal development headlines. In our last update, we celebrated the return to the orthodox position on litigation privilege following the Court of Appeal’s decision in SFO v ENRC. However, the good news was short-lived and the trend of decisions continues to be towards a more narrow approach to privilege. The recent case of WH Holding, for example, is likely to lead to difficulties in practice for banks and other corporates discussing commercial proposals for the settlement of disputes at board level (which the Court of Appeal found were not covered by litigation privilege in this case).

On the other hand, the courts have adopted an increasingly broad interpretation of the compulsory disclosure powers exercisable by criminal/regulatory authorities (the KBRdecision is a good example). This highlights the significance of the High Court’s decision to order Tesco to disclose SFO documents in the civil action brought by its shareholders under s.90A of the Financial Services and Markets Act 2000 (“FSMA“). Those documents had been obtained by the SFO from third parties using its powers of compulsion and disclosed by the SFO to Tesco in the course of negotiating Tesco’s deferred prosecution agreement (“DPA“). From a civil litigation perspective, the increased reach of criminal/regulatory authorities to obtain documents may increase the scope of documents ultimately disclosable in civil proceedings. The combined effect of these judgments is therefore a developing area we are monitoring closely.

In the past 6 months we have noticed a decline in judgments relating to mis-selling/misrepresentation, although the High Court’s decision in Marme is notable – being the second civil court trial judgment considering IBOR manipulation (the first being PAG v RBS). Other significant decisions from the perspective of financial institutions include a High Court judgment on the calculation of Loss under the 1992 ISDA Master Agreement (once again arising out of the collapse of Lehman Brothers), and a Court of Appeal decision clarifying the “advice” vs “information” distinction when applying the SAAMCO principle, with the effect that losses flowing from market forces were outside the scope of the defendant professional adviser’s duty.

It would be remiss to publish an update at this time without mentioning Brexit, although to date there has been only one significant Brexit-related judgment with potential relevance in the banking litigation sector. That is the decision in Canary Wharf v European Medicines Agency, illustrating the uphill struggle that is likely to face a party seeking to establish that its contracts are frustrated as a result of the UK’s withdrawal from the EU. Amidst the ongoing uncertainties in relation to both the nature and timing of Brexit, we have published a new decision tree on enforcement of English judgments in the EU27 post-Brexit.

Looking to the future, in another area of uncertainty impacting financial institutions, we have been considering the fact that LIBOR (at least as we know it) will cease to exist from 2021. Given its prevalence as an interest rate benchmark in contracts across multiple markets and jurisdictions, its demise raises questions about the litigation risks which parties to such contracts may face. We have published a banking litigation e-bulletin on the types of litigation which may arise, and some of the legal arguments which might be deployed following LIBOR discontinuation, plus a more detailed article in the Journal of International Banking Law and Regulation: LIBOR is being overtaken: Will it be a car crash? (2019) 34 J.I.B.L.R.

To make it easier for our clients to keep on top of legal developments between e-bulletins, we have launched a banking litigation podcast. Each podcast is a bitesize (10-15 minutes) audio recording of key legal developments. It takes two main forms: (1) a monthly high level summary of key judgments, with a ‘deep dive’ into a particular case of interest (you can listen to our most recent monthly update on SoundCloudiTunes and Spotify); and (2) special edition podcasts focusing on a particular topic of interest in the sector. We have recently released our first special edition of the podcast series, in which the focus is on the litigation risks arising from LIBOR discontinuation (see previous paragraph). The episode is available to download on SoundCloudiTunes and Spotify.

We hope you find our update useful and, as ever, please feel free to contact one of us or your usual Herbert Smith Freehills contact if there are any topics which you would like to discuss further.

Read our full Banking Litigation Update.

 

Rupert Lewis
Rupert Lewis
Partner
+44 20 7466 2517
Kirsten Massey
Kirsten Massey
Partner
+44 20 7466 2218
Ceri Morgan
Ceri Morgan
Professional Support Lawyer
+44 20 7466 2948

Bi-Annual Banking Litigation Update April-October 2018

Welcome to our latest Banking Litigation Update in which we highlight a number of the most important cases and developments affecting UK financial institutions over the past 6 months.

One of the most significant developments during this period is the Court of Appeal’s privilege decision in SFO v ENRC. Financial institutions and their legal advisers alike will breathe a sigh of relief at the return to the orthodox position in respect of litigation privilege. However – in finding itself bound by Three Rivers No 5 – the Court of Appeal has confirmed that the problematic narrow definition of who is the “client” for the purpose of legal advice privilege, is here to stay until the Supreme Court has the opportunity to consider it (which will not happen in this case since the SFO has withdrawn its application for permission to appeal).

Another privilege development, which has received less attention in the legal press but potentially represents a very real erosion of privilege, is the High Court’s decision in FRC v Sports Direct. The decision suggests that, where privileged documents are provided to a regulator for the purposes of an investigation into the conduct of a regulated person – and the privilege belongs to the client of the regulated person – there is no infringement of the client’s privilege. This may have problematic implications for financial institutions (notwithstanding s.413 Financial Services and Markets Act 2000 (“FSMA“)) in circumstances where both the regulated person and its client are regulated by the FCA. Permission to appeal to the Court of Appeal has been granted, and we will be monitoring developments.

A key development in this period relates to so-called ‘basis clauses’, said to define the basis of the parties’ relationship and prevent liability from arising by way of a contractual estoppel, rather than excluding liability, and thereby escaping the scrutiny of the Unfair Contract Terms Act 1977 (“UCTA“). The Court of Appeal’s decision in First Tower (a landlord and tenant case) is the most significant development in this context. The Court of Appeal held that a “non-reliance” clause in a lease excluded liability for misrepresentation and was therefore within the scope of s.3 of the Misrepresentation Act 1967 (“MA“) and subject to the UCTA reasonableness test. It suggested that only clauses delimiting the parties’ primary obligations would be effective to create a contractual estoppel. The Court of Appeal will have another opportunity to consider this issue (in a financial services litigation case) in the Marz Limited v Bank of Scotland plc appeal at the beginning of 2019.

In financial product mis-selling litigation, the courts continue to take a robust approach to creative attempts by claimants to impose wider duties of care and contractual obligations on banks in normal bank-customer relationships. In particular, the Court of Appeal has rejected claims that a bank owed contractual obligations to its customers in the conduct of its past business review into the sale of interest rate hedging products (“IRHPs“). The High Court has also rejected the first IRHP mis-selling claim brought by private persons under s.138D FSMA.

There have been a number of cases on the contractual interpretation of Master Agreements used in financial services (notably, ISDA and GMRA). The ISDA jurisdiction clause has received attention from both the High Court and Court of Appeal. Helpfully contributing to market certainty in this area, the courts have given primacy to ISDA English jurisdiction clauses in circumstances where there have been theoretically competing jurisdiction clauses in separate but related agreements between the parties. It is hoped that the Court of Appeal will maintain this consistency when it has the opportunity to consider this issue again in the forthcoming BNP v TRM appeal.

Looking to the future, a key regulatory development is the possible introduction of a new duty of care for financial services firms, following publication in July 2018 of the FCA paper on its “Approach to Consumers” and accompanying discussion paper (DP18/5). The discussion paper seeks views on whether there is a gap in the existing legal and regulatory framework, or the way the FCA regulates, that could be addressed by introducing a new duty and deliberately leaves open for discussion the nature of any new duty. This has the potential to increase claims against financial institutions and is therefore a development we are monitoring closely.

We hope you find our update useful and, as ever, please feel free to contact one of us or your usual Herbert Smith Freehills contact if there are any topics which you would like to discuss further.

Read our full Banking Litigation Update.

 

MIS-SELLING AND MISREPRESENTATION
 1. High Court rejects unfair relationship claim concerning allegations of breach of an advisory duty, misrepresentation and efficacy of basis clauses
 2. High Court rejects the first mis-selling claim brought by private persons under Section 138D FSMA
 3. Court of Appeal holds no real prospect of success for claim alleging contractual obligations owed by a bank to its customers in the conduct of FCA review
 4. Misrepresentation claim struck out on basis that entire agreement statement excluded liability
 5. Court of Appeal holds that non-reliance clause was exclusion clause in respect of Misrepresentation Act claim, and therefore subject to UCTA
ISDA MASTER AGREEMENT / GMRA
 6. High Court holds ISDA jurisdiction clause trumps competing jurisdiction clause in separate but related agreement
 7. Court of Appeal finds ISDA jurisdiction clause trumps ‘theoretically competing’ clause in separate agreement governing wider relationship
 8. Court of Appeal confirms wide discretion afforded to a non-Defaulting Party when determining “fair market value” of securities under the GMRA (2000 version)
 9. Commercial Court finds that ‘negative interest’ is not payable on cash collateral posted in accordance with the standard form ISDA Credit Support Annex
CONTRACTUAL CONSTRUCTION
10. High Court strikes out claim alleging an implied overarching ‘Customer Agreement’ requiring the parties to “cooperate with each other and act in good faith
11. High Court finds bank unreasonably withheld consent to sale of secured property where sale would not have satisfied the secured liability in full
12. Supreme Court breathes new life into “no oral modification” clauses
13. Court of Appeal gives guidance on anti-set off provisions in security documentation
LOSS
14. Supreme Court decision clarifies basis for the award of Wrotham Park damages
15. High Court applies SAAMCO principle to find no assumption of responsibility for losses flowing from market forces
16. Court of Appeal finds non-shareholder creditor’s claim barred by rule against reflective loss
DISCLOSURE AND PRIVILEGE
17. Court of Appeal overturns decision granting very broad non-party access to court documents
18. Court of Appeal decision in ENRC: orthodoxy restored on litigation privilege, but narrow interpretation of “client” remains for now
19. Privilege no defence to notice requiring production of client’s privileged documents to regulator
GOVERNING LAW AND JURISDICTION
20. West Tankers principle unaffected by Recast Brussels Regulation; mandatory foreign jurisdictional rules do not encroach on scope of widely worded arbitration clause
COSTS AND FUNDING
21. Awarding costs in group litigation: Court of Appeal says “who receives the cheque” does not determine success.
22. Court of Appeal overturns non-party costs order due to a “failure to warn
OTHER SIGNIFICANT DEVELOPMENTS
23. Court of Appeal confirms Morrisons vicariously liable for employee’s deliberate actions in first successful UK class action for data breach
24. Commercial Court clarifies scope of standard undertaking not to enforce worldwide freezing order abroad without court’s permission
25. High Court confirms potential liability of creditors for breaches of duty by administrators
26. Supreme Court provides clear guidance on liability to third parties for bankers’ references: clarifying the circumstances where banks will be liable for incorrect information
27. Court of Appeal confirms offer relating to proposed claim by amendment was not valid Part 36 offer
28. Court of Appeal rules on the availability of judicial review of a private entity
29. Do we need a new duty of care in financial services?
30. Herbert Smith Freehills LLP edits and contributes chapters to Getting the Deal Through – Financial Services Litigation 2018

 

Rupert Lewis
Rupert Lewis
Partner
+44 20 7466 2517
 
Donny Surtani
Donny Surtani
Partner
+44 20 7466 2216
Ceri Morgan
Ceri Morgan
Professional Support Lawyer
+44 20 7466 2948

Banking Litigation Update

Welcome to our latest Banking Litigation Update in which we highlight a number of the most important cases and developments affecting UK financial institutions over the past 12 months. As you will see, it has been a busy year with many important decisions for banks.

As was the case last year, there have been a number of decisions relating to the mis-selling of interest rate hedging products (“IRHPs“), including the first substantive decision (as opposed to interlocutory skirmish) to reach the Court of Appeal: PAG v RBS. In this significant decision, the claimant’s IRHP mis-selling and LIBOR manipulation claims were dismissed in full, with the Court of Appeal providing helpful guidance that there is no “mezzanine” or intermediate duty of care owed by banks to their customers, a point on which there had been a number of conflicting High Court decisions. More widely, the news is generally positive for banks, with creative attempts by claimants to surmount the legal obstacles being quashed by the courts (including various attempts to rely on an alleged failure by banks to conduct properly their FCA past business reviews into the sale of IRHPs, and assertions that banks should have disclosed their contingent liabilities at the time of entering into IRHPs). Taken as a whole, these decisions are likely to make the IRHP mis-selling environment a more challenging one for claimants.

One of the more noteworthy decisions of the past year is Golden Belt, in which the High Court found that a bank arranging a publicly listed issue of debt securities owed a tortious duty of care to investors and that it breached that duty. Until that decision, those advising on such transactions had operated on the basis that – while there was a risk that an arranging bank may owe a tortious duty to investors (which has typically been addressed by appropriately worded disclaimers) – this risk was relatively low in the absence of a precedent holding that such a duty existed. A precedent now exists, at least for the time being. The High Court has granted permission for the bank to appeal the decision. Another significant decision was the Court of Appeal’s refusal to allow the claimant permission to appeal in the LIA v GSI case, in which this firm acted for the defendant bank.

This period of review has brought a number of significant decisions on privilege, in particular two potentially conflicting High Court decisions on the approach to litigation privilege in the context of investigations. In one case (SFO v ENRC) the court applied a strict approach to litigation privilege in the context of criminal proceedings (finding that litigation was not in reasonable contemplation, even though a criminal investigation by the SFO was reasonably contemplated). Yet in another case (Bilta v RBS), the court found that documents prepared by the defendant in the course of an investigation into allegations by HMRC were protected by litigation privilege. This apparent conflict will hopefully be resolved by the Court of Appeal during 2018, the SFO v ENRC decision having been appealed.

Our update also includes a number of decisions on contractual construction (including guidance on interpretation of the ISDA Master Agreement); governing law and jurisdiction (in particular the location of a debt due under a letter of credit, and the effect of Sharia non-compliance on the enforceability of an English law agreement in an Islamic finance structure); and costs and funding (with clarification of when parties may depart from costs budgets and Court of Appeal guidance as to the extent to which an ATE insurance policy is relevant when considering security for costs).

The next 12 months should see resolution of whether we can return to what might be considered a more orthodox view of litigation privilege, when the Court of Appeal considers the appeal in SFO v ENRC. The appeal in Golden Belt should also be heard within this period, and it remains to be seen whether there will be an appeal to the Supreme Court in PAG v RBS. 2018 will also feature the re-listed appeal in the Holmcroft Properties v KMPGjudicial review of the independent reviewer’s assessment of redress under the FCA scheme in relation to IRHPs, the outcome of which will be keenly monitored by banks across the industry.

We hope you find our update useful and, as ever, please feel free to contact one of us or your usual Herbert Smith Freehills contact if there are any topics which you would like to discuss further.

Read our full Banking Litigation Update.

Rupert Lewis
Rupert Lewis
Partner
+44 20 7466 2517
 
John Corrie
John Corrie
Partner
+44 20 7466 2763
 
Ceri Morgan
Ceri Morgan
Professional Support Lawyer
+44 20 7466 2948

Banking Litigation Update

Welcome to our latest Banking Litigation update in which we highlight a number of the most important cases and developments affecting UK financial institutions over the last six months or so.

Once again, a number of the judgments coming out of the English Courts relate to misselling claims against banks and consist of both the outcome of the main actions and interlocutory skirmishes such as permission to amend claims and early strike-outs. In an interesting variation on the misselling theme, one of the judgments handed down over the last six months was a claim brought under a cause of action which was almost entirely novel in the context of a relationship between an investor and its bank since it relied on the rarely used concepts of undue influence and unconscionable bargain (LIA v GSI). The last six months has also brought significant decisions on privilege, including confirmation at first instance of the position set out in Three Rivers (No. 5) concerning the interpretation of “client” for the purposes of legal advice privilege. This decision has important implications for the conduct of both litigation and regulatory and other investigations which all disputes lawyers will need to be aware of.

Our update also includes a number of decisions on jurisdiction as well as significant clarification from the Court of Appeal about the scope of liability under the Misrepresentation Act 1967 for secondary market purchases of debt capital markets instruments.

Looking forward to the next six months, the courts continue to hear the main actions in a number of significant misselling claims and banks will be monitoring the approaches taken by the courts in those cases on an on-going basis. Appeals are listed to be heard over the coming months in the Holmcroft Properties v KMPG judicial review of the independent reviewers assessment of redress under the FCA scheme, the outcome of which will be keenly monitored by banks across the industry as well as permission to appeal being considered in the LIA v GSI case and the PAG v RBS LIBOR case.

2017 will also feature significant cases which had been working their way through the courts over the years since the financial crisis, the outcome of which will be of interest to both equity and debt capital market practitioners, disputes lawyers across the financial services industry and other stakeholders in the London disputes market (such as litigation funders).

We hope you find our update useful and, as ever, please feel free to contact one of us or your usual Herbert Smith Freehills contact if there are any topics which you would like to discuss further.

MIS-SELLING CLAIMS

  • High Court strikes out claims relating to the mis-selling of interest rate hedging products
  • Court of Appeal refuses permission for addition of claims regarding LIBOR manipulation
  • High Court dismisses mis-selling claim and clarifies standard of care required of financial advisors
  • High Court rejects claim that dealings between bank and client went beyond an ordinary arm’s length bank-client relationship

CONTRACTUAL CONSTRUCTION

  • Supreme Court on contractual interpretation – striking a balance between the language used and the commercial implications
  • Court of Appeal clarifies interpretation of default interest provisions under commercial mortgage backed securitisation documentation

DISCLOSURE AND PRIVILEGE

  • No appeal against controversial decision in RBS case applying narrow interpretation of “client” for purposes of legal advice privilege
  • Court of Appeal finds settlement offer not subject to “without prejudice” protection as it amounted to an unambiguously improper threat

JURISDICTION

  • Court of Appeal gives further guidance on how jurisdiction rules apply in economic tort claim
  • Commercial Court finds “torpedo” action ineffective where parties agreed asymmetric jurisdiction clause
  • Court of Appeal upholds summary judgment for breach of jurisdiction clauses
  • Article published on when jurisdiction clause in prospectus will bind secondary purchaser of securities

OTHER SIGNIFICANT DEVELOPMENTS

  • Court of Appeal finds third party who conspired with defendant to breach freezing order could be liable for tort of conspiracy to injure by unlawful means
  • Court of Appeal clarifies scope of potential liability under the Misrepresentation Act 1967
  • Employers may owe duty of care to employees in conduct and settlement of claims
  • Herbert Smith Freehills sponsors and contributes chapters to the recently published First Edition of Getting the Deal Through – Financial Services Litigation 2016
  • Party permitted to change experts on condition it disclosed previous expert’s notes setting out substance of views

Click here to read the Update.

Banking Litigation Update

We have published our latest Banking Litigation Update, summarising some of the more important cases and developments affecting UK financial institutions over the past six months, including:

MIS-SELLING CLAIMS

  • Property Alliance Group v RBS transferred to the Financial List: top tips for parties wishing to successfully transfer proceedings
  • Suresh Sivagnanam v Barclays Bank: High Court limits shareholders seeking a second bite of the cherry in IRHP mis-selling cases
  • Deutsche bank AG v Unitech: borrowers seeking rescission for alleged LIBOR manipulation must be prepared to pay the full loan amount outstanding before trial
  • CGL Group v RBS: No Suremime-type duty of care owed directly to customer in connection with past business review
  • Qadir v Barclays: High Court gives helpful guidance on limitation periods in IRHP mis-selling litigation

CONTRACTUAL CONSTRUCTION

  • Windermere VII: Financial List provides guidance of wider market significance on the rights attaching to Class X notes in a CMBS structure
  • Alexander v West Bromwich Mortgage Company Ltd: when can lenders rely on contradictory mortgage conditions?
  • UCTA reasonableness test may apply even where contract is only partly on standard terms
  • Court of Appeal confirms exclusion clauses should be construed narrowly if necessary to resolve ambiguity

DISCLOSURE AND PRIVILEGE

  • Court of Appeal clarifies when court will allow inspection of documents mentioned in witness statement or statement of case
  • The price of changing experts: disclosure of privileged report

JURISDICTION

  • Commercial court decision suggests “torpedo” actions may not be effective where parties have agreed unilateral jurisdiction clause
  • Court of Appeal decision confirms stay may be granted despite forum non conveniens waiver clause but precise basis uncertain

OTHER SIGNIFICANT DECISIONS

  • Court of Appeal gives guidance for bankers’ references: what to include in a request for reference and the circumstances in which liability may be avoided
  • Commercial court finds commitment letter unsigned by one party to be legally binding
  • Supreme Court holds that a settlement may be set aside for fraud even if fraud was suspected
  • Supreme Court reformulates test for when a claim will fail due to illegality
  • Predictive coding ordered despite party’s objections
  • Courts taking tough line on disproportionate costs
  • Herbert Smith Freehills LLP contributes chapters to the recently published First Edition of Getting the Deal Through – Financial Services Litigation 2016
  • Herbert Smith Freehills LLP contributes chapters to the recently published Second Edition of The Securities Litigation Review
  • Guide to Dispute Resolution in Asia Pacific – A multi-jurisdictional review
  • Arbitrating disputes under the ISDA Master Agreement

Click here to read the Update.

Banking Litigation Update

We have published our latest Banking Litigation Update, summarising some of the more important cases and developments affecting UK financial institutions over the past 6 months, including:

MIS-SELLING CLAIMS

  1. Confirmation of the Court’s current approach to IRHP mis-selling claims is good news for financial institutions
  2. High Court dismisses application in swaps mis-selling case for specific disclosure of similar complaints against the defendant bank
  3. High Court finds no continuing contractual duty to correct investment advice 
  4. FCA past business reviews: what duties, if any, do financial institutions owe directly to customers? High Court finds no contractual obligations, but tortious duties are arguable 
  5. High Court strikes out claim for mis-selling of an interest rate hedging product on the basis of a pre-existing settlement agreement which was binding and precluded such claim
  6. Regulatory standards found to be relevant to the sale of an unregulated product
  7. Court of Appeal grants permission to appeal question of whether a company falls within the definition of “private person” at section 138D FSMA and therefore has a right of action for breach of COBS

CONTRACTUAL CONSTRUCTION

  1. Court of Appeal resolves redemption dispute concerning £3.3bn “CoCo” notes by reference to their commercial purpose 
  2. Supreme Court clarifies test for implying terms into a contract 
  3. High Court applies key principles of contractual interpretation to CMBS documentation
  4. Court of Appeal considers limitations on the principle of business common sense as an aid to contractual interpretation

DISCLOSURE & PRIVILEGE

  1. No litigation privilege where witnesses were deceived as to true purpose of meetings 
  2. High Court confirms legal advice privilege can include lawyer’s summary of facts
  3. Court orders disclosure of confidential SFO and client documents 
  4. High Court refuses order requiring a party to comply with data subject access request

JURISDICTION

  1. Court refuses jurisdiction challenge in respect of a claim for declaratory relief for breach of a jurisdiction clause (and grants summary judgment at the same hearing) 
  2. Commercial Court protects express choice of jurisdiction under Article 25 of the Recast Brussels Regulation, finding no trespass on the administrative acts of another state

OTHER SIGNIFICANT DECISIONS

  1. Directors’ duties owed to company not shareholders when seeking shareholder approval for transaction 
  2. Application of the SAAMCo principle to negligent valuations in information memoranda 
  3. Supreme Court rewrites English law rule on penalties
  4. Court casts doubt on the use of Norwich Pharmacal orders to require recipient banks to identify customers receiving mistaken payments
  5. FCA uses Court proceedings for the first time to obtain both financial penalties and permanent injunctions against a firm in a case of alleged market abuse

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