Cameron Developments (UK) Ltd v National Westminster Bank Plc and Another
| Jurisdiction | England & Wales |
| Judge | Hhj Moulder |
| Judgment Date | 26 July 2017 |
| Neutral Citation | [2017] EWHC 1884 (QB) |
| Court | Queen's Bench Division |
| Date | 26 July 2017 |
| Docket Number | Case No: C40MA0014 |
[2017] EWHC 1884 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
MANCHESTER DISTRICT REGISTRY
MERCANTILE COURT
Manchester Civil Justice Centre
HHJ Moulder
Case No: C40MA0014
Richard Edwards Q.C. and Steven McGarry (instructed by Slater and Gordon Lawyers LLP) for the Claimant
John Odgers QC and Christopher Bond (instructed by DLA Piper UK LLP) for the Defendants
Hearing dates: 10 July 2017
Judgment Approved
This is the judgment following the hearing on the defendants' application dated 1 June 2017 for strikeout or summary judgment. The defendants seek strikeout/summary judgment of the claims asserted in respect of the review carried out by the defendants into a swap sold by the first defendant to the claimant on the basis that any such claims were compromised by a settlement agreement.
In the alternative the defendants seek strikeout or summary judgment in respect of the contractual claim brought in respect of breach of the alleged contract between the parties to assess the claimant's consequential loss claim in respect of the swap.
In support of the application I have witness statements dated 1 June 2017 and 4 July 2017 of Paul Smith and Barney Connell, respectively, both of the firm DLA Piper UK LLP, solicitors for the defendants in the action and in reply a witness statement of Craig McAdam dated 22 June 2017, of Slater and Gordon Lawyers LLP, solicitors for the Claimant.
Background
The claimant is a property development and letting business which has brought a mis-selling claim against the Bank relating to an interest rate swap entered into by the claimant and the Bank on 10 March 2010. In this judgment references to the "Bank" are to the relevant defendant. References in [ ] are to relevant page of the bundle used at the hearing.
It is common ground that in June 2012 the Financial Services Authority (the "FSA") (now the Financial Conduct Authority) was concerned about the manner in which a number of banks had sold interest rate hedging products to small businesses and sought to take action to ensure that such businesses were granted speedy and appropriate redress. Publishing its pilot findings in March 2013, the FSA said that the review in 2012 found "serious failings" in the sale of interest rate hedging products to small businesses and as a result the FSA reached agreement with the banks over the action the banks would take according to the type of product which had been sold: in the case of the claimant the agreement was to review the sale of the swap as a non-sophisticated customer to determine whether redress was due. Each bank entered into an agreement with the FSA although it is the claimant's case that this did not preclude the existence of an agreement directly between the Bank and the claimant in relation to the carrying out of the review.
The rationale for the review was explained in the press release issued by the FSA on 29 June 2012 [7/51], the material part of which read:
"the FSA has today announced that it has found serious failings in the sale of interest rate hedging products to some small and medium-sized businesses. We believe that this has resulted in a severe impact on a large number of these businesses. In order to provide as swift a solution to this problem as possible we have today confirmed that we have reached agreement with Barclays, HSBC, Lloyds and RBS to provide appropriate redress where mis-selling has occurred.
…
Not all businesses will be owed redress but for those that are, the exact redress will vary from customer to customer, but could include a mixture of cancelling or replacing existing products, together with partial or full refunds of the costs of those products. This exercise will be scrutinised by an independent reviewer at each bank appointed under the FSA's powers.
Martin Wheatley, managing director of the Conduct Business Unit, said:
"For many businesses this has been a difficult and distressing experience with many people's livelihoods affected. Our work has focused on ensuring a swift outcome for these businesses…
I am pleased that [the banks] have agreed to do the right thing by the customers and offer redress or review of past sales.…
I am particularly pleased that the CEOs… have provided a personal assurance that they will have responsibility for oversight of this work and will ensure that complainants are treated fairly…""
The agreement entered into between the Bank and the FSA was originally confidential but has now been made public. It provided for the Bank to give an undertaking to the FSA to carry out a review in accordance with the terms set out. The relevant provisions, so far as the claimant is concerned, were that the Bank undertook to carry out a past business review of sales taking account of the evidence and individual circumstances of the customer and if a breach of the regulatory requirements had occurred, determining and if relevant, providing appropriate redress on the basis of what was fair and reasonable in the circumstances.
The agreement with the FSA contained a provision that a person who was not a party to the agreement had no rights under the Contracts (Rights of Third Parties) Act 1999 or otherwise to enforce any term of the agreement.
As to the process for the review which applied in the case of the claimant, it is common ground that the review was split into two phases. The first phase was a determination as to whether an offer would be made to provide "basic redress," that is the difference between the actual payments made on the swap and those that the customer would have made if the breaches of relevant regulatory requirements had not occurred [14/183]. The basic redress amount would attract interest at 8% per annum to reflect opportunity costs. The second phase was to determine whether an offer would be made to provide redress to compensate the customer for any additional loss including consequential losses.
In the case of the claimant a letter was sent to the claimant on 30 July 2014 [12/105] by the Bank which set out the outcome of the review, identified that the sale may not have complied fully with the standards agreed with the FCA and that based on the information held by the Bank, the Bank believed it was reasonable to conclude that redress was owed to the claimant. The offer was to cancel the existing swap and replace it with a vanilla cap and in addition to refund the difference between the net payments made on the existing swap and those that the claimant would have made had it purchased the cap. The provisional redress payment also included interest at 8% per annum which as explained in appendix 3 to that letter, incorporated compensation for loss of profit or loss of opportunity. The letter stated that the offer did not include redress for any additional losses which the claimant may have incurred as a result of the swap which it was sold and that where the claimant wished to provide further information in relation to additional losses these should be submitted within 28 days of the date of the letter and the final redress payment would take into account the Bank's assessment of any claim for additional losses.
The letter of 30 July 2014 did not require any action to accept the offer but a letter was sent on 29 September 2014 which made an (updated) offer to the claimant and this offer was capable of acceptance by returning an acceptance form.
The letter of 29 September stated in material part:
"Subject to your agreement, our Offer is to cancel the existing IRHP and replace it with a vanilla cap. In addition, we will refund the difference between net payments made on the existing IRHP and those that you would have made had you purchased the proposed alternative IRHP.…
If you wish to accept this Offer, please sign and return the attached Offer acceptance form…
Additional losses not included in the Offer
The Offer shown above includes interest but no redress in relation to any additional losses you may have incurred as a result of the IRHP you were sold. Where you have already provided information in relation to any additional losses you may have incurred as a result of the IRHP you were sold, we will consider it… where you would like to provide further information in relation to additional losses, you may have incurred as a result of the IRHP you were sold, we set out at appendix 3 generic guidance for all customers… for you to read, after which you will need to let us know if you wish to make a claim.…
Please submit details in writing and within 28 days of the date of this letter. Any information that you provide will also be assessed by the independent reviewer. The final redress payment will take into account our assessment of any claims for additional losses you may have.…
If you decide to accept the Offer, subject to the New Bank entering into an agreement to both cancel the future cash flows on the existing IRHP and replace them with those of the proposed alternative product, and to the qualifications contained in the tax and additional loss sections above permitting you to claim for (1) additional losses incurred as a result of a difference in your tax position… and (2) consequential losses you have incurred as a result of the IRHP you were sold, this will represent full and final settlement of any claims, actions, liabilities, costs or demands that you may have against the us (sic) and the New Bank arising under or in any way connected with the sale of this IRHP as identified above. For the avoidance of doubt this applies to any past, present or future claims, actions, liabilities, costs or demands, regardless of whether or not you are aware of them at the date of this letter. However, there are some...
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