N – Negligence and mis-selling
7/4/20
FINE CARE HOMES LTD v NATWEST MARKETS PLC [2020] EWHC 874 (Ch)
Explains arrangements made for a hearing by Skype [5]. The bank was ordered to disclose its file papers relating to its review of the mis-selling of an interest rate hedging product. The documents were likely to be relevant to the issue of the skill and care expected of a reasonably competent financial adviser [31]. The documents were also admissible [36]. Emphasises the need for parties to liaise with a view to defining and narrowing issues on applications for specific disclosure [56]. Considers principles for the grant of permission to adduce expert evidence in IRHP mis-selling claims [61]. The court was likely to be assisted by expert evidence and permission was therefore granted.
27/1/20
MORLEY v THE ROYAL BANK OF SCOTLAND PLC [2020] EWHC 88 (Ch)
A bank has a duty of reasonable care in providing lending services. Compliance with regulatory standards is relevant to whether the duty is breached, but compliance with the bank’s internal policies may not be [156-7]. An ordinary loan facility is not a relational contract [159]. In demanding repayment a bank exercises a right, not a discretionary power. Powers to require security to be re-valued and to charge default interest were discretionary but had not been exercised for improper purposes or maliciously [160]. A threat to appoint receivers to sell the security to a subsidiary of the bank might have been an unlawful threat defectively to perform the bank’s duties as mortgagee. But the threat was not “unequivocally unlawful” because the court might not have restrained the sale had an injunction been sought at the time. Claims of economic duress and intimidation therefore failed. In any event, the agreements entered into had been affirmed by the claimant.
27/11/15
THORNBRIDGE LTD v BARCLAYS BANK PLC [2015] EWHC 3430 (QB)
A claim for damages for mis-selling an interest rate hedge was dismissed. Considers when a bank assumes an advisory relationship [25]. On the facts the bank had given information not advice. A letter stating that the bank may from time to time provide advice did not amount to notification that it was advising. Even if advice was given, the bank assumed no advisory duty. The fact that the bank’s representative was said to be a Corporate Risk Adviser was not of significance. Disclaimers in the bank’s documentation prevented any advisory duty arising, were not exclusion clauses and were in any event not unreasonable contrary to UCTA. Any other duty was limited to ensuring that information given was not misleading [118]. Reference in the bank’s terms of business to the agreement being subject to FSA Rules did not incorporate those rules into the terms. Nor on the facts could the bank be criticised for failing to give more information about break costs. The swap did what it was supposed to do and had not been unsuitable. The court was not satisfied that a cap would have been taken even if it had been offered so the case also failed for lack of causation.
8/10/15
WORTHING v LLOYDS BANK PLC [2015] EWHC 2836 (QB)
Investment advice given by the bank in relation to the claimant’s investment portfolio had not been negligent or given in breach of the COBS rules.
30/7/15
SUREMIME LTD v BARCLAYS BANK PLC [2015] EWHC 2277 (QB)
The claimant applied for permission to amend its claim for swap mis-selling to plead an alternative claim in contract and tort that the bank had owed it a duty of care to implement properly the swap review process which the bank was required by the Financial Conduct Authority to undertake. The claim in contract was disallowed for lack of consideration. The claim in tort merited argument at trial, especially because if a duty of care did not exist, customers who had not sued pending the review, might otherwise be out of time to sue when the outcome of the review produced an unacceptable offer of redress.
26/9/14
CRESTSIGN LTD v NATIONAL WESTMINSTER BANK PLC [2014] EWHC 3043 (Ch)
On the facts the bank had given advice, not merely information, to the claimant about interest rate swaps, and that advice had steered the claimant to taking a fixed interest rate swap. The relationship between the parties also satisfied the requirements of Hedley Byrne v Heller for a duty of care to arise. But the bank had successfully disclaimed responsibility for its advice in contract documents drawn to the claimant’s attention before the swap was concluded so the claim failed. The bank’s terms of business contemplated the bank giving advice if this was specifically agreed, but for such an agreement to arise there had to be something more than merely the giving of advice. The clauses on which the bank relied were not exclusion clauses, rather they defined the basis on which the bank was acting. Had they been exclusion clauses they would have been unreasonable contrary to UCTA 1977, especially because expert advice had not been readily available to the claimant. Had the bank not disclaimed responsibility, it would also have been held in breach of duty by recommending an unsuitable product especially because the swap had been for 10 years but the loan had a 5 year term and high break costs were payable to terminate the swap early. A cap should have been considered. Although the bank had a duty to ensure that the explanation it gave was not misleading that duty only required the bank to explain the products it was willing to sell, not other products. The bank had discharged its limited duty in that respect.
27/8/14
BAILEY v BARCLAYS BANK PLC [2014] EWHC 2882 (QB)
The bank informed an individual borrower that substantial breakage fees would be payable if he terminated a swap agreement early but that he could avoid that liability by novating the swap to a company associated with him. This was done. The company brought proceedings against the bank for mis-selling the swap. On cross-applications the court refused the company for permission to amend, and granted the bank summary judgment dismissing the claim. Any claim to rescind the swap for misrepresentation made when the borrower took it out could not be asserted after the novation, because the novation was a new agreement. The bank had not breached the FSA Conduct of Business Rules in connection with the novation. It had acted in a non-advisory capacity without making any personal recommendation. The Company had understood what was involved in the swap and knew the risks by the time of the novation. The Company could not assert a cause of action under s 150 FSMA 2000 because it was not a private person. The COBS rules had not been incorporated in the contract between the bank and the company and the bank had not engaged in duress or other unconscionable conduct.
16/4/14
FIGURASIN v CENTRAL CAPITAL LTD [2014] EWCA Civ 504
In selling a PPI policy with a loan, the lender failed to explain that the entire PPI premium was to be paid in advance. The borrower was misled into thinking that the premium was merely paid over the term of the loan and did not give rise to additional borrowing. The lender had therefore acted in breach of the requirement of ICOB 2.2.3(1)R to communicate in a way that is fair, clear and not misleading. The fact that the loan documentation did make the position clear was not enough to break the chain of causation because the misleading explanation had caused the borrower not to bother to read the detail in the documents which followed the misleading explanation.
8/4/14
BARCLAYS BANK PLC v SVIZERA HOLDINGS BV [2014] EWHC 1020 (Comm)
The relationship between the parties as defined in agreed facility documents excluded any advisory relationship or fiduciary duty on the part of the bank and gave rise to a contractual estoppel precluding the defendant from alleging that it had relied on any advice from the bank [70]. No assumption of responsibility could be inferred. The defendant had entered into the agreement on the basis of its own judgment. On the evidence the bank had not been required to obtain a currency swap for the defendant as a condition precedent to the facility agreement, the bank had not made any representation that it would obtain the swap and the defendant had not relied on any such representation. Nor had there been any collateral warranty that the swap would be obtained.
15/11/13
GESTMIN SGPS SA v CREDIT SUISSE (UK) LTD [2013] EWHC 3560 (Comm)
An investment company had purchased a high-risk investment because it had confidence in the skill and judgment of its investment adviser. It had deliberately chosen to proceed with the investment and could not be said to have been sold an unsuitable product. A claim that the investment had been induced by misrepresentation also failed. The correct approach in commercial cases is to place little if any reliance at all on witnesses’ recollections of what was said in meetings and conversations and to base factual findings on inferences drawn from the documentary evidence and known or probable facts [16-23].
9/10/13
GREEN v ROYAL BANK OF SCOTLAND PLC [2013] EWCA Civ 1197
When selling an interest rate swap the bank had a statutory duty under the FSA Handbook Conduct of Business Rules to take reasonable steps to ensure that the customers understood the risks involved. But a claim for breach of statutory duty was admitted to be time-bared and no concurrent duty existed at common law because the bank had not crossed the line between providing information and giving advice.
SEPTEMBER 2013
Contains recent FOS case studies involving mis-selling of interest rate hedging products and packaged bank accounts.
JUNE/JULY 2013
Contains recent FOS case studies involving negligent investment advice.
1/3/13
AL SULAIMAN v CREDIT SUISSE SECURITIES (EUROPE) LTD [2013] EWHC 400 (Comm)
A claimant who had borrowed to invest in structured notes failed to satisfy the court that the transaction and its risks had not been sufficiently explained. The claimant would have invested in any event, and her loss had been caused by her refusal to provide additional collateral by way of margin when it had been required.
1/2/13
ZAKI v CREDIT SUISSE (UK) LTD [2013] EWCA Civ 14
A bank had arranged credit for the claimant in connection with designated investment business within COB 7.9.3R although the loan had been made by an associated company. To comply with COB 7.9.3R, suitability of the loan had to be considered not just at the outset but each time the loan was drawn. Failure to make an assessment of a customer’s financial standing within COB 7.3.9R was a matter of process and did not necessarily mean the bank had not taken reasonable steps to ensure suitability. The same applies under COB 5.3.5R in relation to suitability of advice. But the test of suitability under COB 7.9.3R is narrower than under 5.3.5R because the latter only applies when a personal recommendation has been made. A lending arrangement could be suitable even if a personal recommendation was not. On the facts the lending arrangements were suitable so the claim failed. Even if the lending should not have taken place, that would not necessarily have made the bank liable for all the claimant’s losses.
21/12/12
GREEN v THE ROYAL BANK OF SCOTLAND PLC [2012] EWHC 3661 (QB)
It had been sufficient for a bank, when providing information about a swap, to tell the customer that if a swap was taken out and terminated early there would be a cost or benefit depending on market conditions at the time. That explanation was not negligent, misleading, unclear or unfair and was sufficient to explain the risks. It had been open to the customer to ask for details of the costs, but the customer had not done so. The risk that the costs would be as high as they turned out to be had been theoretical at the time and was not one which had needed to be positively stated. The bank had given information, not advice, and had not in any event breached any advisory duty.
21/8/12
GRANT ESTATES LIMITED v THE ROYAL BANK OF SCOTLAND PLC [2012] CSOH 133 (Outer House, Court of Session Scotland)
A company which entered into an interest rate swap was not a private person within the meaning of s 150 FSMA 2000 and therefore had no statutory right of action against a bank for breaches of FSA rules. The fact that the bank’s terms of business were expressed to be subject to the applicable FSA rules in the event of any conflict did not incorporate the applicable FSA rules by reference. Terms providing that the bank would act on an execution-only basis, would not advise on the merits of a transaction, and the customer would not rely on it as doing so, precluded any implied contract for the bank to advise the company, and also prevented the relationship of the parties giving rise to any duty of care in tort for the bank to do so. The terms defined the scope of the service and were not exclusions of liability within the scope of the Unfair Contract Terms Act 1977.
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