Shareholder class actions – new webinar and “handy client guide”

Herbert Smith Freehills has today released the third in our series of webinars on class actions in England and Wales, looking at shareholder class actions. In the presentation Simon ClarkeHarry Edwards and Kirsten Massey discuss the outlook for shareholder group actions in England and Wales, the types of claims (eg under sections 90 and 90A FSMA) and remedies likely to be pursued by shareholder group claimants, and some challenges in bringing and defending these actions. Clients and contacts of the firm can register to access the archived version by contacting Prudence Heidemans.

The webinar is accompanied by the fourth in our series of short guides to class actions in England and Wales, Shareholder class actions, which has been published here (together with our first three editions: (i) Overview of class actions in the English courts; (ii) Group Litigation Orders; and (iii) Data breach class actions).

Simon Clarke
Simon Clarke
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Harry Edwards
Harry Edwards
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Kirsten Massey
Kirsten Massey
Partner
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PAG v RBS: Court of Appeal dismisses IRHP mis-selling and LIBOR manipulation claim

The Court of Appeal has dismissed the entirety of the long-awaited appeal in Property Alliance Group v The Royal Bank of Scotland [2018] EWCA Civ 355. The result is that all claims against the defendant bank have failed. This is the first substantive decision involving allegations of LIBOR manipulation and interest rate hedging product (“IRHP”) mis-selling to reach the Court of Appeal, and it offers a number of points of binding authority, which are helpful from the perspective of financial institutions.

In this executive summary, we highlight the key legal and factual points decided by the Court of Appeal which are likely to have wider application to claims involving alleged mis-selling of financial products, together with potential commercial implications.

We have prepared a more detailed case analysis in our banking litigation e-briefing, which can be accessed via the hyperlink.

  1. The Court of Appeal has confirmed that the expression ‘mezzanine’ or intermediate duty of care is best avoided. There is no “continuous spectrum of duty, stretching from not misleading, at one end, to full advice, at the other end”. Absent an advisory relationship or special circumstances in which a specific broader duty is established, a financial institution owes no duty to explain the nature or effect of a proposed arrangement to a prospective customer. This restates the orthodox position, from which earlier cases had seemed to depart.
  2. The extent of the duty owed in a non-advised sale of financial products will therefore typically be a duty not to misstate (Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465). In order to establish a specific broader duty of care, claimants will need to satisfy one of the traditional tests for establishing a duty of care (as set out in Customs and Excise Commissioners v Barclays Bank plc [2006] UKHL 28). Further, claimants will need to distinguish the instant case, in which no such broader duty of care was found on the facts.
  3. Of particular interest was the decision of the lower court (flowing from the point above) that, absent special circumstances, there was no positive duty on the defendant bank when selling the IRHPs to disclose to the claimant the bank’s internal contingent liability figure for the IRHP. The Court of Appeal noted that several first instance judgments had reached the same conclusion and could find no basis for interfering with the High Court’s decision on this point. Absent special circumstances, this decision – along with the previous decision of the Privy Council in Deslauriers and Anor v Guardian Asset Management Limited (Trinidad and Tobago) [2017] UKPC 34 (see our e-bulletin) – means that it will be extremely difficult for claimants to argue that these figures ought to have been provided (indeed, the Court of Appeal noted that it remains the defendant bank’s practice not to do so).
  4. This case should therefore help focus the issues in ‘mezzanine’ duty claims. It may be appropriate for defendant banks to review the scope of any more onerous information-related duties which have been alleged, and make clear in correspondence that the burden is on the claimant to prove the existence of a specific duty of care (and this burden is likely to be reasonably onerous). Such claims may be amenable to strike out and/or summary judgment. Addressing such issues early in proceedings may help reduce the scope of disclosure and the evidence to be served, ultimately reducing time and cost.
  5. Departing from the judgment of the High Court, the Court of Appeal did find that in selling GBP LIBOR linked products, the bank made the narrow implied representation (at the time of entering into the IRHPs) that it was not itself seeking to manipulate GBP LIBOR and did not intend to do so in the future. However, on the current facts, the claimant could not prove that the representation (concerning GBP LIBOR) was false. The Court of Appeal held that falsity will need to be specifically proven; it would not be sufficient to invite the court to draw inferences on the basis of conduct relating to other benchmarks (such as LIBOR in a different currency) or indeed findings of the regulator. It is thus likely that claimants will continue to face significant hurdles to succeed in such claims. In particular, proving reliance on any representations (which is likely to be fact specific) and that the representations were in fact false, will be onerous.
  6. Although the Court of Appeal did not overturn the High Court’s decision, it emphasised a point likely to arise in other cases involving an exercise of a contractual discretion – namely that such a contractual power needs to be exercised for legitimate commercial aims and not used maliciously. In the current case, the bank exercised a power in the relevant loan agreement to instruct a valuer to prepare a valuation of the claimant’s assets which were charged to it. The claimant argued that the bank had no reason to do so and thus the exercise of the power was wrongful. On the facts, the Court of Appeal disagreed. However, the rule may be of wider application.

For a more detailed analysis of the decision, read our banking litigation e-briefing.

John Corrie
John Corrie
Partner
+44 20 7466 2763
Ceri Morgan
Ceri Morgan
Professional Support Lawyer
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Ajay Malhotra
Ajay Malhotra
Senior Associate
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Nic Patmore
Nic Patmore
Associate
+44 20 7466 2298

High Court rejects another interest rate hedging product mis-selling claim: key points of general application

London Executive Aviation Ltd v The Royal Bank of Scotland PLC [2018] EHWC 74 (Ch) is the latest in the line of unsuccessful claims against financial institutions based on allegations of mis-selling interest rate hedging products (“IRHPs”). The bulk of the reported cases in this field to date are interlocutory decisions, so the full reasoned judgment in this case provides a helpful summary of the current law and the court’s approach. Key points of general application to note are as follows:

  • It is well-established that banks do not generally owe any duty to advise on the merits of investments. However, if it is alleged that a bank actively agreed to give advice in relation to the investment and therefore took on the duty to advise with reasonable care and skill, a claimant must be “able to identify words of advice”.
  • If advice has been given by a bank, the claimant must still prove that there was a relationship of proximity between the parties giving rise to a duty of care on the part of the bank. Factors pointing against such a duty in the instant case included the fact that there was no written agreement to advise (the bank would only be remunerated for its time and effort if the customer in fact purchased an IRHP) and the sophistication of the claimant.
  • Significantly, the court endorsed the formulation of the ‘mezzanine’ duty articulated in Property Alliance Group v Royal Bank of Scotland EWHC 3342 (Ch): the potential duty of care under consideration is wider than a duty not to misstate, is fact dependent and is a duty “falling on the advisory spectrum”; thus a bank salesperson is not always under a duty to explain fully the products he/she wishes to sell. In the instant case, the court did not expressly decide whether the so-called mezzanine duty existed, because it found that there was no potential breach on the facts. There are conflicting first instance decisions as to whether or not the so-called mezzanine duty may arise in this context, the trend has been to find against such a duty (see our recent e-bulletin), but the issue is likely to need to be resolved at appellate level.
  • The court will be alive to the fact that witness evidence may be affected by hindsight and is prepared to make inferences from the contemporaneous correspondence and documentation, even where this contradicts oral testimony at trial.

Against the growing body of authority in favour of the banks, claimants have been creative in their attempts to get around the legal obstacles. An argument recently adopted by claimants concerns the alleged failure by banks to disclose internal credit liabilities at the time the IRHP was sold. Claimants allege that if the magnitude of the credit liability had been disclosed, they would have recognised that the IRHP was too risky and effectively wiped out any benefit. This argument was made in the current case on two different footings. Firstly, the claimant alleged that the bank had breached its so-called mezzanine duty by failing to disclose the bank’s contingent liability for the IRHPs in question (known in the defendant bank as the credit line utilisation (“CLU”)). Secondly, the claimant alleged that the bank had fraudulently or negligently misrepresented the benefits of entering into the IRHPs, in particular by failing to disclose the CLU.

Both arguments failed on the facts, with the court emphasising that a claimant must be able to show that an appreciation of the contingent liability (the CLU) would have made a difference to how the claimant would have proceeded with the transaction. This firm stance in relation to contingent liabilities follows a recent decision of the Privy Council, which confirmed that in a commercial relationship between experienced lenders and borrowers, the lender will not ordinarily owe a duty of care to disclose information about its internal lending policies or its approach to evaluating loan applications (see Deslauriers and another v Guardian Asset Management Limited (Trinidad and Tobago) [2017] UKPC 34, read our e-bulletin).

BACKGROUND

The parties

London Executive Aviation Ltd (“LEA”) was a small private aircraft chartering business with annual profits of circa £1 million. In 2007 and 2008, it took out two loans (the “Loans”) with Lombard North Central plc, part of the Royal Bank of Scotland group, for a total of £12.9 million to purchase more aircraft to expand the business. Under the Loans, interest was calculated at a variable rate (subject to a minimum base), but LEA paid fixed monthly instalments with a single balloon payment at maturity. The size of the balloon payment was dependent on whether interest rates fell or rose through the term of each Loan. If interest rates rose, the fixed payments would pay off less capital and more interest and the balloon payment would be higher. If rates fell, the balloon payment would be smaller as the fixed payments would service more of the capital.

LEA was introduced to an FSA authorised IRHP adviser at one of the companies in the Royal Bank of Scotland group (the “Bank”), Mr Brindley, to discuss hedging the original Loan in July 2007, to mitigate the risk of a large balloon payment. Mr Brindley had extensive communications with LEA’s directors (including Mr Margetson-Rushmore) in 2007 and then again in 2008, which included hedging the second Loan. Mr Margetson-Rushmore’s wife was also party to those discussions. She was a qualified solicitor (having trained at Linklaters) with a subsequent 15-year banking career, including working in the field of Eurobonds and heading the UK leveraged finance team at UBS AG. However, she had not been involved with banking or financial services since 2004 and had no direct experience of IRHPs.

The Swaps

In February 2008, LEA entered into two relatively complex IRHPs (together, the “Swaps”):

  1. A 10-year ‘dual rate swap’ under which LEA paid a fixed rate of interest of 4.69% if the floating rate stayed between a floor of 4% and a ceiling of 6.25%. If the floating rate fell below the floor or above the ceiling, LEA paid 5.35%. The notional amount of capital was £4 million for years 0-5 and £6 million for years 6-10. It was cancellable by the Bank after five years and quarterly thereafter.
  2. A 10-year ‘value collar’, again for an initial notional amount of £4 million and then £6 million and cancellable by the Bank on the fifth anniversary only. Under the value collar:
  • If the floating rate fell below a floor of 3.75% LEA paid the difference between that rate and 5.49%.
  • If the floating rate rose above 5.75% (the ceiling), the Bank paid LEA the difference between that base rate and 5.75% (effectively capping LEA’s rate at 5.75%).
  • If the floating rate remained between 3.75% and 5.75%, neither party made payment.

At the time LEA entered into the Swaps, circa £7.1 million remained outstanding under the Loans. Subsequently, interest rates fell to unprecedented levels, with an adverse impact on demand for private aircraft charters. While the fall in rates facilitated an early repayment of the Loans by LEA (the fixed monthly payments paying off more capital), it also meant that LEA was significantly out of the money on the Swaps (paying the higher rate under both Swaps, being 5.35% under the dual rate Swap and 5.49% under the value collar Swap).

The claim

LEA brought proceedings against the Bank alleging that Mr Brindley, on behalf of the Bank:

  1. Negligently advised LEA to enter into the Swaps which were unsuitable (the advice claim).
  2. Negligently provided information about the Swaps because the information provided was inadequate to enable LEA to make an informed decision (in particular, in relation to the risks if interest rates fell and the potential magnitude of break costs) (the mezzanine claim).
  3. Misrepresented the benefits of entering into the Swaps, either fraudulently (in the tort of deceit) or negligently (in the tort of negligent misstatement or under the Misrepresentation Act 1967) (the deceit and misrepresentation claims). In particular, this claim focussed on an allegation that Bank failed to disclose that it had attributed a contingent liability of £1.6 million to the Swaps (the CLU).

DECISION

The court dismissed the claims in full. A summary of its detailed reasoning now follows.

The advice claim

The court dismissed LEA’s claim that advice was given or that any advisory duty arose on the facts.

The court recited the well-established proposition that banks do not generally owe any duty to advise on the merits of investments, but that if they choose to do so in the course of business, they owe a duty to advise with reasonable care and skill. The first issue to consider was therefore whether any of the statements alleged by LEA amounted to advice. The court had sympathy with the Bank’s complaint that it was not clear precisely what advice was alleged to have been given to LEA by Mr Brindley, noting that LEA had failed to identify any advisory language from Mr Brindley’s discussions of the merits of the Swaps. The court commented that, while background and context are important, they “cannot be a substitute for being able to identify words of advice”, without which “it makes the claim almost impossible for a defendant to contest”.

The court proceeded to consider the instances of advice in the particulars of claim which seemed to have the most potential to count as advice, but again found that there was no evidence to support the allegation. It also considered LEA’s allegation that Mr Brindley gave advice about the likely future course of interest rates, in particular by expressing his view that interest rates were unlikely to drop below 5%. The court held that this did not constitute advice that interest rates were bound to rise.

In case it had been wrong to find that no advice had been given, the court considered briefly whether (had the Bank given advice about the Swaps) there was a relationship of proximity between the parties giving rise to a duty of care on the part of the Bank (Standard Chartered v Ceylon Petroleum [2011] EWHC 1785 (Comm)). The court held it was clear from the absence of a written advisory agreement that no advisory relationship existed. In particular, the parties had agreed that the Bank would only be remunerated if the customer in fact purchased an IRHP; that incentive meant that the Bank’s interests to some extent diverged from LEA’s. In any event, there were no indicia of an advisory relationship and no objective evidence that LEA treated Mr Brindley as someone who was advising them on whether or not to enter into the Swaps.

LEA’s sophistication also pointed against an advisory relationship: Mrs Margetson-Rushmore was “keen to convey [that she] could drive a hard bargain”. She had requested a ‘live’ spreadsheet so as to stress test the proposed IRHPs in different interest rate scenarios. She also requested various forward curves and then discussed with the Bank the significance of those being inverted. Part of LEA’s case was that the Swaps contained features which made them entirely unsuitable for LEA’s business and the fact LEA had agreed to enter into such products must mean that they were not sophisticated enough to assess whether the products were appropriate. It was in this context that Mrs Margetson-Rushmore’s sophistication was most relevant, the court finding that each element of the IRHPs offered by Mr Brindley was in response to her desire to reduce the floor of the range in each of the trades as low as possible.

However, even though the court found that there was no cause of action based on the unsuitability of the Swaps, it went on to consider LEA’s complaints about various features of the Swaps, because these complaints appeared to be at the heart of LEA’s claim. In this regard, the court noted:

  • The specific terms of the Swaps that favoured the Bank, in particular its callable feature, were the quid pro quo for achieving a lower floor rate. The notional amount of the overhedge also allowed LEA to benefit from a lower floor. These features did not make the Swaps unsuitable.
  • While not critical of LEA’s witnesses, the court found their evidence to have been affected by hindsight and the impact of low interest rates on LEA – had interest rates risen, LEA would have benefited from the Bank being bound by the Swaps. As such, the alleged inflexibility of the Swaps did not make them unsuitable.

The court therefore concluded that the negligent advice claim failed. Accordingly, the court did not have to opine on whether or not contractual terms estopped LEA from claiming advice was given.

The mezzanine claim

Under this head, LEA claimed that the Bank was negligent in providing information about the Swaps because the information that had been provided was inadequate to enable it to make an informed decision. LEA’s argument was based on the proposition that a bank that undertakes to explain the nature and effect of a transaction owes a duty to take reasonable care to do so, even if what is said does not equate to advice to enter into the transaction.

The court endorsed the formulation of the so-called ‘mezzanine’ duty articulated by Asplin J (as she then was) in PAG v RBS:

The potential duty of care under consideration is wider than a duty not to misstate, is fact dependent and is a duty “falling on the advisory spectrum”. [Asplin J] rejected a formulation of the duty which suggests that once information is provided by a bank, a salesman is always under a duty to explain fully the products he wishes to sell even where no broader advisory relationship has arisen. I agree with Asplin J’s comment that to take such an approach is to blur the line between a salesman and an advisor.”

The court did not expressly accept that a mezzanine duty applied on the facts of the instant case. It approached the claim by considering the three categories of information which LEA claimed that Mr Brindley had failed to fully and properly explain. Again, without accepting the existence of the duty on the facts of the case, the court held that there was no potential breach of the so-called mezzanine duty in relation to any of the three categories of information, as explained below.

1. Failure to explain what would happen if interest rates fell

The allegation was that Mr Brindley failed to explain what would happen if interest rates fell and the Bank chose not to exercise the call option. The court held that this allegation lacked substance, since it was common sense that if the Swaps were not cancelled then they would continue until they expired after 10 years. Mr Brindley said nothing unfair or inaccurate in his discussions with LEA regarding the callable feature.

2. Failure to explain the full terms of the ISDA agreement

The court held that while Mr Brindley’s description of the governing ISDA was wrong, LEA received the agreement well in advance of the trades and Mrs Margetson-Rushmore was clearly familiar with ISDA from her banking experience. There was no evidence that anyone at LEA was influenced by what Mr Brindley said. In fact, Mr Margetson-Rushmore’s evidence was that he did not rely on the statement – contrary to LEA’s pleaded case.

3. Failure to disclose the CLU or otherwise explain potential breakage costs and other risks

LEA submitted that one of the poor sales practices identified by the then FSA in its 2012 investigation into mis-selling of IRHPs, was a failure to explain the potential magnitude of breakage costs, and one way in which the Bank could have done this would have been to disclose the CLU. However, as a matter of fact, the court held that the Bank had provided numerous qualitative written and oral warnings about the potential for break costs, whose magnitude was in part dependent on market conditions. The court commented that it was not “complicated or surprising” that a customer may have to compensate the bank if it terminated a contract early. Nor would it be surprising if the size of that payment was greater if the deal was profitable for the bank.

LEA also alleged that if it had known that the risk of the CLU (calculated by the Bank at £1.65 million) was greater than the risk of the increased balloon payment under the Loans, it would not have entered into the Swaps. The court noted that LEA had put this part of the case very high, alleging that Mr Brindley was dishonest and misleading by failing to identify the risks.

The court did not accept that an appreciation by LEA of either the value of the CLU or more generally the potential breakage costs would have made any difference. Mrs Margetson-Rushmore had made calculations showing the potential for a £1.7 million exposure under the Swaps. In any event, even if Mr Brindley had laboured the point about breakage costs, the court found that this would not have affected LEA’s decision, as at that point LEA was not contemplating breaking the contracts before maturity.

The deceit and misrepresentation claims

LEA’s “core allegation” under this head was that the Bank had fraudulently or negligently misrepresented to LEA the benefits of entering into the Swaps. The most important aspect of this was the allegation relating to the CLU. The evidence showed that Mr Brindley had told LEA that the Loans’ balloon payment might be £1.6 million higher than expected, based on a 95% worst case scenario prediction. However, the Bank did not disclose that it had allocated a contingent liability of £1.65 million (the CLU) to the Swaps. LEA argued that, while the Swaps were presented as ways to avoid the potential £1.6 million balloon liability, the Swaps themselves created a potential liability of equal value. LEA submitted that Mr Brindley acted dishonestly and deceitfully (or alternatively negligently) in failing to tell LEA about the CLU.

No express misrepresentation was alleged and therefore the court had to consider whether or not there was an implied representation. The court opined that the only implied representation that could be in play was that the balloon payment was “more than [LEA] might ever have to pay under the hedging products if interest rates went down very substantially”.

Applying the established principles summarised in Cassa di Risparmio della Repubblica di San Marino SpA v Barclays Bank Ltd [2011] EWHC 484 (Comm), the court found no such implied representation had been made. No reasonable person would infer that a statement about the potential balloon liability was saying anything about the size of break costs that LEA might face if it decided to terminate the Swaps early when interest rates had fallen. The balloon payment was a liability that LEA was tied into. By contrast, break costs were not something that LEA was bound to make under the Swaps and LEA was not, at that time, contemplating breaking before maturity. There was also a lack of evidence that any of LEA’s witnesses understood Mr Brindley to be saying that the risk LEA faced under the Loans was greater than the risk it faced under the Swaps. The implied misrepresentation claim could therefore not succeed.

Accordingly, the court dismissed all claims.

COMMENT

The judgment provides a helpful overview in relation to the law applicable to IRHP mis-selling claims. Key points of general application are set out in the introduction.

John Corrie
John Corrie
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Ceri Morgan
Ceri Morgan
Professional Support Lawyer
+44 20 7466 2948
 
Joseph Duggin
Joseph Duggin
Associate
+44 20 7466 2747

 

 

Latest IRHP “Mis-selling judgment confirms no “mezzanine” duty of care owed by banks

A recent decision of the High Court has, consistent with previous authorities, found in favour of the bank in relation to allegations of interest rate hedging product (“IRHP“) mis-selling: Marz Limited v Bank of Scotland plc. However, the judgment helps to clarify some previously unclear points.

The decision represents a useful summary of the key legal issues arising in IRHP mis-selling litigation, and highlights the challenges for claimant customers hoping to widen the scope of duties owed by financial institutions.

In particular, the court in the current claim refused to extend in a non-advisory relationship the imposition of an “intermediate” or “mezzanine” duty – i.e. a duty to provide adequate information to enable the recipient to make an informed decision (for example, as to the suitability of a product bought and sold). In other words, the duty in such transactions remains a duty not to mis-state information provided by the bank and not a “duty to speak“. This particular issue is now likely to need to be resolved at appellate level due to conflicting decisions at first instance. The judgment also helpfully confirms that a bank’s internal assessments, income and credit lines should not ordinarily be disclosable to customers.

Marz has been granted permission to appeal.

Background

The claimant, Marz Limited (“Marz“), was a catering business and its director was Mr Raja Adil (the “Director“), the main principal and a qualified solicitor. Marz brought a claim against Bank of Scotland plc (“BoS“) in connection with the sale of an interest rate swap executed in June 2008 (the “Swap“), following a period of negotiation with BoS in relation to Marz’s banking facilities.

As part of the proposed lending facilities with BoS, Marz agreed to a hedging condition, which provided that Marz would enter into either a 5-year interest rate swap or an interest rate cap over a minimum notional amount of £12.5m. There was a period of communication between BoS’s treasury team, the Director and Marz’s third party advisers in relation to potential interest rate hedging products.

Prior to Marz’s entry into the Swap, BoS sent the Director copies of its Terms of Business for retail clients (the “Terms of Business“), which contained the following:

(a)   BoS “will advise and deal with you on the basis that we are meeting your objective to manage risk“; and

(b)   where BoS makes “a recommendation or suggestion to [Marz], [BoS] will take reasonable steps to assess whether such services are suitable for [Marz]”.

The Terms of Business also provided that in “the event of any conflict between these Terms of Business and any other agreement between us relating to a particular transaction or series of transactions (for example an ISDA agreement) the terms of that other agreement shall prevail“.

Subsequently, BoS also sent to the Director an ISDA Master Agreement, which contained a standard non-reliance clause (which has previously been the subject of judicial comment). Pursuant to this clause, each party represented that it was acting for its own account, making its independent decision to enter into the Swap, based on its own judgment and it was not relying on any communication of the other party as investment advice or as a recommendation to enter into the Swap (“Part 5(2) of the ISDA“).

This ‘non-reliance’ provision was commonly used by banks in relation to IRHP transactions around this time. In accordance with prevailing practice, after Marz entered into the Swap, BoS sent a written trade confirmation letter, which contained terms and representations in materially identical terms to those included in Part 5(2) of the ISDA.

The claim

The effect of the global financial crash in late 2008 and subsequent fall in interest rates to historical lows was that Marz ended up paying interest rates considerably above base rate. It subsequently claimed that the Swap was unsuitable and that BoS has mis-sold the product to it. Broadly, the case turned upon whether in explaining the available hedging products and providing the Swap to Marz, BoS owed and breached its duties to Marz by way of:

(a)   express contractual duties under its Terms of Business to take reasonable steps to ensure that it was suitable (which arose where the sale was an advised one); and/or

(b)   common law duties to take care in allegedly advising and/or providing information and/or explaining the options so as to enable Marz to make an informed decision.

Decision

The court dismissed the claim in full. The case raised similar issues to those seen in other IRHP claims and the key issues are set out below.

(1)   Advisory duty

The court dismissed the claim that BoS had owed and breached a duty to Marz to advise it in relation to its entry into the Swap.

The court started from the basis that banks do not ordinarily owe any duty to advise customers as to the prudence of taking out a particular loan, or the soundness of the transaction that they propose to finance. The court acknowledged that bank salesmen frequently offer statements of opinion and ‘advice’ without assuming legal responsibility for such advice.

Marz was therefore required to prove that BoS had assumed responsibility as an adviser in respect of the choice and terms of the Swap. In finding that there was no such advisory duty in this case, the court made the following observations:

  • The contractual documentation (specifically the ‘non-reliance’ ISDA wording) set out above weighed against the existence of an advisory duty.
  • Marz was not assisted by: (a) the regulated status of BoS’s salespeople; or (b) the fact that the Terms of Business and internal bank policies contemplated the sales people at BoS assessing whether the transactions were suitable.
  • The content of pre-contractual information, in the form of product profiles and updates on pricing and products was inconsistent with the existence of an advisory relationship. In particular, the non-contractual disclaimers contained within the product profile were consistent with the court’s overall assessment of the relationship between the parties as not giving rise to a duty of care to advise.
  • The absence of a written advisory agreement and the absence of payment of an advisory fee to BoS also weighed against an advisory duty. In fact, the evidence suggested that Marz was in receipt of advice from its third party (unregulated) advisers, rather than BoS, in relation to hedging.

(2)   Intermediate duty to provide information

The court also added further weight to the notion that there is no intermediate information-related duty (referred to in some commentary as a “mezzanine” duty, sitting somewhere between an information duty and a duty to advise). In particular, the court commented that in the absence of an advisory relationship, a salesman providing information does not have to explain fully the products he wishes to sell, including alternatives and comparisons. The salesman’s duty is a more limited duty not to misstate.

In this regard, the court expressly noted the reasoning in Property Alliance Group Limited v Royal Bank of Scotland plc [2016] EWHC 3342 (Ch) and Thornbridge Ltd v Barclays Bank plc[2015] EWHC 3430 (QB). This was in contrast to the judgment in Crestsign Limited v National Westminster Bank plc [2015] 2 All ER, which found that the bank “came under a duty to explain fully and accurately the nature and effect of the products in respect of which [it] chose to volunteer an explanation“.

(3)   Estoppel

The estoppel defence related to whether, pursuant to Part 5(2) of the ISDA, the parties should be taken as having agreed that their relationship was not an advisory one and the bank should not be taken to have provided advice relied upon by the customer so as to assume any duty of care. The court held that it was bound by Springwell Navigation Corporation v JP Morgan Chase Bank and others [2010] EWCA Civ 1221. The court noted that the Court of Appeal in Springwell appeared to endorse in this context the doctrine of so-called contractual estoppel, under which the parties to a contact are bound by agreeing that a certain state of affairs should form the basis for a transaction, whether that state of affairs was in fact the case or not, and could not deny the existence of the state of affairs upon which they agreed.

However, the court in the instant case commented that it regarded Part 5(2) of the ISDA and the wording set out in the trade confirmation letter as “more a matter of contract rather than estoppel“.

(4)   Basis clause or exclusion clause?

Consistent with previous authority, the court found that Part 5(2) of the ISDA defined the parties’ relationship, rights and duties, as a matter of contract – it was therefore a basis rather than exclusion clause (and therefore not subject to any test of reasonableness under the Unfair Contract Terms Act 1977 (“UCTA“)). However, the court nevertheless subjected Part 5(2) to the UCTA reasonableness test and held it to be reasonable. The court commented that Part 5(2) is enshrined in the industry standard ISDA and was well known to Marz’s Director.

(5)   Alternative arrangement

Marz alleged that the Swap was unsuitable and instead that properly advised by BoS, Marz would have entered into an alternative arrangement, namely an interest swap of £5 million and amortising interest rate cap of £7.5 million with the premium payable in deferred instalments (the “Alternative Arrangement“).

The court rejected these arguments and in particular found that the main factual obstacle for Marz on this issue was that the Alternative Arrangement did not comply with the hedging condition to which Marz had agreed as part of the proposed banking facilities. Accordingly, this counterfactual was not persuasive, as Marz was required to enter into a hedging product in order to satisfy the hedging condition.

Marz attempted to amend its counterfactual to meet the condition after conclusion of the trial, but this was rejected by the court as it would have required reopening the matters subject to investigation which would have been a “wholly inappropriate procedural course“.

(6)   Credit line/income/metric of internal assessment

The court also rejected Marz’s submission that that BoS’s credit line should have been disclosed to Marz. The court cited Crestsign, in which the experts agreed that a credit line was “an internal measure not normally disclosed to a bank’s customers“. In addition as per Thornbridge and Property Alliance Group: there is no obligation on a salesperson to explain either the amount of income, or to provide information about the mechanics of its internal risk assessment of the transaction.

This is consistent with the reasoning provided in the recent Privy Council case of Deslauriers and another (Appellants) v Guardian Asset Management Limited (Respondent) (Trinidad and Tobago) [2017] UKPC 34 (see our e-bulletin) in which the bank was found not to have owed a duty to disclose internal lending policies to the customer.

(7)   Break costs

Marz’s claim that BoS failed to explain the risk of break costs in entering into a swap was found to be contradicted by the evidence. The documents provided to Marz’s Director by BoS included explanations and warnings about the risk of break costs, including the risk of “significant” costs in the event of an early termination. These disclosures were held to be sufficient in the circumstances.

(8)   Causation and quantum

The court rejected Marz’s primary submission that properly advised Marz would not have entered into any hedging transaction (and the hedging condition would have been “abandoned“) – holding this to be an unrealistic proposition.

The court also rejected Marz’s secondary submission that BoS would have agreed to amend the hedging condition to enable Marz to enter into the Alternative Arrangement. The court was not persuaded that BoS would have agreed, retrospectively, to vary the hedging condition to accept the Alternative Arrangement.

John Corrie
John Corrie
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Nic Patmore
Nic Patmore
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Shameem Ahmad
Shameem Ahmad
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Ceri Morgan
Ceri Morgan
Professional Support Lawyer
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Privy Council: No duty of care owed by a lender to disclose lending policies

A recent judgment handed down by the Privy Council is likely to have wide application to mis-selling claims generally: Deslauriers and another (Appellants) v Guardian Asset Management Limited (Respondent) (Trinidad and Tobago) [2017] UKPC 34. In this decision, the Privy Council has confirmed that in a commercial relationship between experienced lenders and borrowers, the lender will not ordinarily owe a duty of care to disclose information about its internal lending policies or its approach to evaluating loan applications. Nor will it be under a duty to alert a customer to any external influences on its ability to lend further sums, for example regulatory constraints. This will be the case even where a disappointed borrower has made it clear from the outset that it hopes to extend the loan in due course.

The decision will be welcomed by banks and other lenders as limiting the scope of the duty of to provide information. In the instant decision, the context was a loan agreement, but the principle could equally apply to agreements relating to other financial products, such as interest rate hedging products. It may be a helpful antidote to claims brought by customers seeking to expand the duty to provide information to include novel categories of information.

Background

The dispute arose out of a commercial loan transaction for TT$18.6 million (Trinidad and Tobago dollars) advanced by Guardian Asset Management (“GAM”) to Mr and Mrs Deslauriers (the “Borrrowers”), who were property developers engaged in a project known as “Hevron Heights”. The Borrowers gave promissory notes for repayment, and the loan was secured by a demand mortgage over parcels of land belonging to them.

The Borrowers defaulted on their repayment obligations and GAM brought proceedings in Trinidad and Tobago to recover the amount owed. The Borrowers did not dispute the loan or its non-payment, but counterclaimed for losses they said they had suffered as a result of GAM’s failure to make further loans to finance the later stages of Hevron Heights. When the Borrowers sought further lending to complete the Hevron Heights project, GAM refused their application and indicated that there were lending limits which an additional loan would exceed. In consequence, the Borrowers alleged that they were unable to complete Hevron Heights and suffered loss of profits of TT$24 million. The Borrowers contended (amongst other things) that: (a) GAM’s failure to disclose any lending limits to which it was subject amounted to a misrepresentation; and (b) GAM was under a duty of care to inform the Borrowers of any lending limit, and failure to do so amounted to a negligent misstatement.

The Borrowers were unsuccessful at first instance before the High Court of Trinidad and Tobago, and an enforcement order in favour of GAM was made against a property owned by one of the Borrowers. Having unsuccessfully appealed to the Court of Appeal of Trinidad and Tobago, the Borrowers then appealed to the Privy Council.

Decision

The Board of the Judicial Committee of the Privy Council dismissed the appeals in relation to both liability and enforcement.

(1) Misrepresentation

On the facts, the Board had little hesitation dismissing the Borrowers’ claim under the Misrepresentation Act of Trinidad and Tobago (modelled closely on the English Misrepresentation Act 1967). The trial judge, Court of Appeal and the Board all found there was no discussion between the Borrowers and GAM about whether GAM would fund the rest of the Hevron Heights project before the loan was entered into. That finding was fatal to the claim in misrepresentation as any lending limits which affected GAM were simply irrelevant. Silence could not amount to a materially partial or misleading statement and there was no occasion to disclose the lending limits.

There was, further, no evidence before the trial judge that the Borrowers would in fact have been able to complete the Hevron Heights project had the alleged misrepresentation not been made. This was an additional reason why the misrepresentation claim could not succeed.

(2) Negligent misstatement

The Board went on to consider the claim in negligent misstatement, based on an alleged duty of care to inform the Borrowers of any lending limit.

It first set out the parameters of the evidence upon which the Borrowers would be entitled to rely (if a proper basis for a negligent misstatement claim could be made out). The Board noted that, in contrast to the misrepresentation claim (for which only correspondence prior to completion was considered), the Borrowers could rely on correspondence sent and received after the conclusion of the contract. This was because the duty of care (if it existed) would be capable of continuing. This was important to the Borrowers’ claim, because after the loan contract was made, there was correspondence in which it became apparent that the Borrowers were looking for further finance from somewhere. The complaint was that GAM failed to inform the Borrowers as to its lending policies in the course of such discussions.

To establish whether or not there was a duty of care, the Board referred to the principles set down in Hedley Byrne & Co Ltd v Heller & Partners[1964] A.C. 465. The Board held that the duty of care postulated depended upon the relationship between the parties giving rise to an assumption of responsibility by GAM for giving professional advice to the Borrowers. However, the relationship between the parties was between a commercial lender and its highly experienced commercial borrower. It was an arm’s length relationship, in which each sought to further its own commercial interests. It was not a relationship of adviser and client. Accordingly, GAM had no duty to disclose to the Borrowers the lending limits to which it was subject.

In reaching this conclusion, the Board made some important observations about the nature of the relationship between a commercial lender and experienced commercial borrower which are likely to be of wider application:

  • It would be very unusual for such a non-advised relationship to give rise to a duty on the part of the lender to advise the borrower about its internal lending policies or approaches to loan applications, still less about any external influences, regulatory or otherwise, which applied to it.
  • It would be extremely difficult to envisage such a duty arising, even if the borrower indicated from the beginning that it hoped to borrow more in the future.
  • Where the court had found that no such discussions had in fact taken place between the parties, it was quite impossible to construct the duty of care contended for.

(3) Enforcement

The Board also dismissed the appeal against the order for the sale of the property owned by one of the Borrowers, rejecting an argument that the Borrower in question had effectively divested herself of the beneficial interest in the property by way of a Deed of Settlement.

Comment

Whilst this Privy Council decision was on appeal from Trinidad and Tobago, it is likely to have application in English law cases considering whether or not a duty of care can be established in similar circumstances, given the similarities of the two systems. Although Privy Council decisions are technically not binding on English courts, they carry great weight and persuasive value (see our litigation post clarifying the status of Privy Council decisions). One legal point to note is that the Board applied Hedley Byrne, and concentrated on the “assumption of responsibility” principle to establish whether a duty of care existed. It did not refer to the three-fold test (foreseeability, proximity and fairness) or the incremental approach. However, whichever test is applied should produce the same result, and given the Board’s decision regarding the lack of a special relationship between the parties, consideration of the other limbs of the 3-fold test would have been unnecessary in any event.

This decision will therefore be of interest to lenders, borrowers and litigators, most particularly in view of the clarification it gives on the limited scope of a lender’s duty of care to disclose its internal lending policies.

John Corrie
John Corrie
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Catherine Emanuel
Catherine Emanuel
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Ceri Morgan
Ceri Morgan
Professional Support Lawyer
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High Court confirms narrow application of duty established by the Court of Appeal in So v HSBC

The Court has recently revisited the question of whether a bank providing a reference owes a duty to a third party relying on that reference: Chudley v Clydesdale [2017] EWHC 2177 (Comm).

The facts in Chudley were very similar to the notable Court of Appeal decision in So v HSBC Bank plc & Anor[2009] EWCA Civ 296. In both cases, the Court held that letters produced by the respective banks setting out an intention to open and operate segregated client accounts amounted to false representations. And in both cases, third party investors transferred monies to the banks which – not being held in a segregated client account – were removed without the investors’ knowledge. Yet in So, the Court of Appeal found that a duty of care was owed by HSBC Bank plc (“HSBC“) to third party investors, whereas in Chudley, the High Court held that such a duty of care could not be imposed on Clydesdale Bank plc (“Clydesdale“) for lack of proximity.

Chudley follows established principles and is not in that sense new law. However, it helpfully confirms the narrow application of the (potentially problematic) duty of care found in So, which is positive news from the perspective of banking institutions. The case demonstrates that finding a bank owes a duty of care to third parties relying on a bank reference is finely balanced in practice, and it follows the trend to apply the duty narrowly: Playboy Club London Ltd & Ors v Banca Nazionale Del Lavoro SPA [2016] EWCA Civ 457 (see our e-bulletin here).

This e-bulletin considers the critical distinction between Chudley and So, and the implications for future cases of this type.

Factual background

The relevant facts in Chudley v Clydesdale and So v HSBC are near identical. In both cases:

  • The bank received and acknowledged a letter of instruction (“LOI“) to open and operate a segregated client account for third party investors’ monies.
  • The bank took no steps to open the segregated account referred to in the LOI.
  • The bank also signed a letter of reference in favour of the customer, making reference to the segregated account having been opened by the bank and providing reassurance as to the customer’s character.
  • Third party investors deposited monies in an account operated by the bank, but which was not a segregated account. These investors were defrauded of their funds by the bank’s customer.
  • The Court found that the bank’s letters amounted to false representations about its intention to open and operate a segregated client account.

Decision

In both So and Chudley, the Court applied the three-fold test of foreseeability, proximity and fairness, required for a duty of care to exist in cases of economic loss (established by the House of Lords in Caparo Industries v Dickman [1990] 2 WLR 358). In both cases, the Court found that it was reasonably foreseeable that the letters would be shown to third parties for the purpose of investing the funds, which resulted in the third party investors’ losses.

However, the reason a duty of care was not established in Chudley, but was in So, turned on the “notoriously elusive” concept of proximity. In Chudley, Clydesdale had no details of the proposed investment, and in terms of the third party investors, “did not know their identity“. While the Court considered that the letters might be shown to any potential investors (i.e. the world at large) this did not create a sufficiently special relationship between Clydesdale and those potential investors to establish a duty of care in negligence. Whereas in So, the necessary proximity was created because the third party investors (Mr So and Mrs Lu) and their proposed investment of US$ 30 million were named in the documents.

Accordingly, the negligent misstatement claim failed in Chudley as the claimants were unable to establish that Clydesdale owed them a duty of care. Despite establishing such a duty of care in So, the claim still failed on the basis of reliance: the negligent misstatement did not actually cause the loss, because the claimants relied on the fraudsters’ assurances rather than the bank’s representations.

Conclusion

The implication for future claims in negligent misstatement in the context of bank references, is that a bank is unlikely to owe a duty of care at large to a host of potential investors who might place reliance on its statements, without more being done to identify those customers (and also possibly details of the investment itself).

Damien Byrne Hill
Damien Byrne Hill
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Celina McGregor
Celina McGregor
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Ceri Morgan
Ceri Morgan
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Interest rate hedging product claims – the current landscape

1.  The FSA review

In 2012, the Financial Services Authority (FSA) announced the findings of its review into interest rate hedging products (IRHPs) sold to small and medium sized firms and in June and July 2012, the FSA agreed with eleven banks that they would conduct a proactive redress exercise and past business review in relation to their sales of IRHPs on or after 1 December 2001.

Specifically, the FSA has agreed with the banks that, for sales to customers categorised under the FSA’s rules as either ‘private customers’ (in respect of sales before 31 October 2007) or ‘retail clients’ (in respect of sales from 1 November 2007), the banks will:

  • Provide appropriate redress to non-sophisticated customers sold structured collars;
  • Review sales of other IRHPs (except caps and structured collars) to non-sophisticated customers and provide redress where appropriate; and
  • Review the sale of caps to non-sophisticated customers in cases where a complaint is made by the customer and provide redress where appropriate.

In each case, a customer will be regarded as ‘non-sophisticated’ if it does not meet the FSA’s ‘sophistication test’ and any redress provided is to be by reference to what is fair and reasonable in all the circumstances. The exercise for each bank will be scrutinised by an independent reviewer and overseen by the FSA.

Each bank was asked to undertake a pilot review of a small sample of more complex cases before beginning the full review.  On 31 January 2013, the FSA published a report on its findings from its review of the pilot exercise conducted by Barclays, HSBC, Lloyds and RBS and confirmed that those banks would commence their full reviews in accordance with the approach set out in that report. The FSA has said that it expects those banks to aim to complete their full reviews within 6 months, although the FSA accepts that for banks with larger review populations this may take up to 12 months.

On 14 February 2013, the FSA also confirmed that the remaining banks (apart from the Irish Bank Resolution Corporation, which went into special liquidation on 7 February 2013)  had also agreed to proceed with their full reviews in line with the same approach set out in the  FSA’s 31 January 2013 report.

2.  FOS decisions

Although the FSA initially considered the establishment of a scheme effectively extending the FOS’s jurisdiction to deal with IRHP complaints, it has recently been confirmed that this will not be put in place.  However, customers meeting the existing FOS eligibility criteria will remain able to refer their complaint to the FOS if they are not satisfied with the redress offered within the review process.

It appears that a number of customers have already complained to the FOS. Indeed, during 2012 two provisional FOS decisions involving the sale of IRHPs were issued –  W Family v Bank E and Business H v Bank S.  The relevant parties in each case were requested to submit further representations before the FOS finalises its determinations. We set out further detail below.

The W Family v Bank E

In July 2007, the W Family took out a variable rate 14 year loan in order to expand their business. At the same time, the family took out a multi-callable swap for a period of 15 years, with an initial two year discounted rate. After two years, a higher fixed rate was payable for the remaining period of the swap. The interest rate payments under the swap were tied to LIBOR, as opposed to Bank E’s base rate, on which the loan was based (i.e. there was an element of mismatch).

The Ombudsman found that:

  • although the documentation was “unclear and contradictory about whether or not advice was given“, the actions of  the bank did in all the circumstances amount to professional investment advice in respect of the swap;
  • the bank recommended a swap that was not suitable to the W Family. The Ombudsman described the swap as being “a one-sided deal”, which allowed the bank to terminate the swap after two years if rates rose at any time, thereby leaving the customer unhedged against rising rates (although he did not directly consider the impact of including the call feature on the discounted rate offered on the transaction). The swap also did not amortise, even though it was expected that the W Family would start making capital repayments against the loan after the first two years, and the swap also lasted a year longer than the loan itself;
  • the bank also failed to explain the potentially onerous cancellation costs associated with the swap.

Business H v Bank S

Business H took out a variable interest rate loan and also bought a “base rate collar” in connection with the loan. (The bank later said that the hedging was a condition of the loan and the lending would not have been granted unless a hedging transaction arrangement had been agreed). The collar was set to cover a sum of £356,000, had a 20 year term and was set to amortise.

The Ombudsman found that:

  • the bank’s actions in connection with the swap amounted to investment advice;
  • the notion of a collar was not inherently unsuitable for Business H in its circumstances, given its desire to minimise the premium for this arrangement. However, a floor of 20 years with the possibility of significant cancellation charges was not suitable overall for the needs of Business H, which was a small operation; and
  • the bank also failed to highlight adequately or to explain the potential cancellation charges.

It is interesting to note that in both cases the Ombudsman did not make any formal findings on redress. Instead, he invited both parties to discuss how best an award could be agreed and, to facilitate those discussions,  set out the principles he would take into account if he were to make a formal award.

3.  Court decisions

Grant Estates Limited v Royal Bank of Scotland2

This is a Scottish case and the first reported judgment on the subject of IRHP mis-selling. In 2007, Grant Estates and RBS entered into a 5 year loan agreement for £775,000 and a swap transaction for the same notional amount. Grant Estates alleged that RBS mis-sold the swap agreement and that, instead of protecting Grant Estates from a rise in interest rates, the swap fixed rates too high and became such a burden on the company that it defaulted on the loan agreement with RBS and fell into administration. The Court rejected the claim on the following grounds:

  • Grant Estates was not a “private person” for the purposes of s.150 of the Financial Services and Markets Act 2000 (“FSMA”) and therefore had no direct remedy under that provision;
  • there was no implied collateral agreement for the bank to advise Grant Estates and consequently no breach of such a contract. This finding was based heavily on the Court’s conclusion that there was a written contract setting out what RBS was to undertake and expressly warning Grant Estates that it should obtain its own independent, legal and tax advice; and
  • the acts of the bank employees were consistent with a contractual regime in which the customer had agreed that it would not treat any views that the bank expressed in bringing about the derivative transaction as advice on which it was entitled to rely.

Green & Rowley v RBS3

In this first reported English IRHP case, the customers alleged that in May 2005, RBS mis-sold to them an interest rate swap as a form of hedge against their existing loan liabilities to the bank. They alleged that:

  • the bank had made various negligent misstatements regarding the operation of the swap, including understating the costs if they chose to break the swap early and inaccurately indicating that the swap transaction fixed not only the base rate but also the margin; and
  • the bank owed them advisory duties in respect of the swap because it had positively recommended the transactions and that those duties had been breached because the swaps were not suitable for them (principally because they allegedly required a transaction that fixed not only the base rate but also the margin).

Originally there were also claims for breach of statutory duty under s.150 of FSMA but it was accepted that those claims were time-barred.  Nevertheless, the customers alleged that at least some of the relevant FSA Conduct of Business Rules (the ‘COB Rules’) informed the scope of the bank’s common law duties for the purposes of both the negligent misstatement and the negligent advice claims.

The claims failed in their entirety, with the Court finding that there was no negligent misstatement and that no advisory duty had arisen (and that, in any event, there had been no breach of any such advisory duty).

This case was highly fact-sensitive and the Court’s findings turned largely on what was said at a meeting between the claimants and employees of the bank at which information regarding the swap and other similar products was provided. However, as in Grant Estates(above), the contractual documents contained helpful provisions clearly confirming that no advice was being given and the judge cited Grant Estates in finding that such provisions can be invoked to negate or delineate the ambit of any duty of care.

The judge also noted, with respect to the relevance of the COB Rules, that the scope of the duty in a common law action for negligent misstatement (as distinct from an advisory duty) is narrower than and does not necessarily encompass the COB Rules to the extent that the COB Rules include (i) duties to take reasonable steps to communicate clearly or fairly (COB 2.1.3) and (ii) duties to take reasonable steps to ensure that a counterparty understands the nature of its risks (COB 5.4.3).

Whilst future decisions could of course take a different approach depending on the specific facts (including particularly the content of a bank’s written terms), these first two IRHP judgments have been welcomed by the financial services industry.

4.  Potential for ‘top up’ of FOS decisions through court action

The manner in which IRHP claims are pursued may also potentially be influenced by a recent  High Court decision holding that a party who had accepted a favourable FOS decision and been paid the statutory maximum award (then £100,000, now £150,000) by the firm could nevertheless subsequently bring a damages claim for the balance of the full loss they had allegedly suffered, over and above the FOS award: Clark & anor v In Focus Asset Management & Tax Solutions Ltd [2012] EWHC 3669.

The decision departs from previous authority on this issue and, unsurprisingly, permission to appeal has been sought.  If the High Court’s decision is upheld, this may have the effect of encouraging potential litigants to seek to fund subsequent court action through a FOS award.  Complainants may also seek to adduce the FOS judgment in support of their court case, particularly given that it is quite common for the FOS to recommend a higher award than its statutory limit (albeit that the test for liability applied by the courts is of course materially different from the test adopted by the FOS).

Read our full briefing on the decision.

5.  LIBOR allegations in IRHP claims

A claim currently pending in the High Court has also raised the possibility of the IRHP claims landscape being overlaid with claims in respect of LIBOR (London interbank offered rate).

The claimants in that action have brought a claim in relation to loans made to them with an associated interest rate swap and interest rate collar agreement, payments under which were set by reference to 3 month Sterling LIBOR.  In a judgment delivered on 29 October 2012, the Court permitted the claimants to amend their pleadings to add claims based on alleged implied representations by the defendant bank (and/or implied contractual terms) as to the integrity of the LIBOR rates. The allegations in this respect rely heavily on regulatory findings against the relevant bank in respect of LIBOR:  Graiseley Properties Limited & ors  v Barclays Bank Plc [2012] EWHC 3093

It is important to note that the Court did not make any considered determination of the LIBOR allegations and was only required to consider whether the points raised reached the threshold of being sufficiently arguable to proceed to trial and be tested. However, this is now an important test case and the trial (listed in October 2013) will be watched closely both by claimants considering bringing similar claims and defendant banks.

 

1 Grant Estates Ltd v The Royal Bank of Scotland Plc [2012] CSOH 133.
2 John Green and Paul Rowley v The Royal Bank of Scotland [2012] EWHC 3661.

Damien Byrne-Hill
Damien Byrne-Hill
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Simon Clarke
Simon Clarke
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Rupert Lewis
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