CJ and LK Perks Partnership v Natwest Markets Plc (formerly The Royal Bank of Scotland Plc)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Jacobs |
| Judgment Date | 29 March 2022 |
| Neutral Citation | [2022] EWHC 726 (Comm) |
| Docket Number | Case No: CL-2016-000037 |
| Year | 2022 |
| Court | Queen's Bench Division (Commercial Court) |
Mr Justice Jacobs
Case No: CL-2016-000037
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Duncan Macpherson (instructed on a direct access basis) for the Claimants
Paul Sinclair QC and Laurie Brock (instructed by TLT LLP) for the Defendant
Hearing dates: 17 th – 18 th, 22 nd November, 14 th–16 th December 2021, 17 th–18 th January 2022
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This judgment was handed down by the judge remotely for circulation to parties' representatives by email. The date of hand—down is deemed to be 29 th March 2022
Index
| Section | Para. Number |
| A: The Parties, the background and the claims | 1 |
| A1: The parties | 1 |
| A2: The three claims | 16 |
| A3: The proceedings and the trial | 35 |
| B: The witnesses | 41 |
| B1: Dr Perks | 41 |
| B2: RBS witnesses | 66 |
| B3: Witnesses not called by the Claimants | 67 |
| B4: Witnesses not called by RBS | 71 |
| C: The 2007 swap | 84 |
| C1: The facts leading to the conclusion of the 2007 swap | 85 |
| C2: Misrepresentation | 150 |
| C3: Failure to explain the risks of the 2007 swap – the common law claim | 181 |
| C4: Failure to explain the risks of the 2007 swap – the COBS claim | 238 |
| C5: The claim for failure to advise properly in respect of the 2007 swap | 268 |
| C6: Limitation | 302 |
| D: The 2009 swap | 334 |
| D1: Introduction to the issues and the parties' argument | 334 |
| D2: The facts (including the background) relating to the 2009 swap | 346 |
| D3: Failure to explain key risks — discussion | 391 |
| D4: Failure to advise | 403 |
| E: The claim in conspiracy | 419 |
| E1: Factual background and findings | 419 |
| E2: Legal principles | 475 |
| E3: The parties' arguments | 477 |
| E4: Discussion | 479 |
| Conclusion | 499 |
A: The parties, the background and the claims
A1: The parties
The Claimants
The Claimants bring proceedings in relation to a number of aspects of their dealings with the Royal Bank of Scotland PLC (“RBS” or “the Bank”), now called Natwest Markets PLC, between 2007 and 2011.
The first Claimant is a husband & wife partnership (“the Partnership”) in whose name a number of contracts with RBS were concluded. Its partners are the second Claimant (“Dr Perks”) and his wife Mrs Leanne Perks, the third Claimant (“Mrs Perks”). One issue in the case is whether, as RBS contends, the Partnership had a separate legal existence from its two partners, because it was a Scottish partnership.
Dr Clayton Perks is a chiropractor. Chiropractors use their hands in order to deal with problems with muscles, bones and joints. In the United Kingdom, chiropractic is regarded as a form of complementary or alternative medicine, and it is not widely available on the NHS. Its registered practitioners, such as Dr Perks, have undergone training, but are not medically qualified physicians. They are, however, entitled to use the title “Dr”, and I shall use that title in this judgment. Mrs Perks is a homemaker.
Dr & Mrs Perks were originally from Australia. In 1997, they started buying property in Glasgow, from which Dr Perks ran chiropractic clinics. In 2004, Dr & Mrs Perks established a company, Glasgow Chiropractic Limited (“GCL”), to operate clinics in Scotland from premises which, by the time of the events with which I am concerned, were rented mostly from the Partnership. In 2007, Dr & Mrs Perks established Newcastle Chiropractic Limited (“NCL”) to operate clinics initially in Newcastle from premises rented from third parties. I shall refer to GCL and NCL as the “Companies”.
Legally and contractually, the Companies and the Partnership (whether Scottish or not) were different. The function of the Partnership was essentially to own property, which Dr Perks hoped would prove to be a good investment and provide a nest-egg on eventual retirement. By contrast, the Companies were the operating chiropractic businesses. There was, however, a close connection between them. In particular, the income of the Partnership, which was required in order to service loans made for the purpose of acquiring properties, was derived from rents paid by GCL. To some extent, therefore, it could be said that there was an overall business, and it is therefore convenient to refer, as did the parties in various contexts, to the “Perks business” as encompassing all aspects of the commercial dealings of the Partnership and the Companies.
A number of other individuals played some role in the relevant events. The most important individual was Ian Fordyce, an in-house accountant to GCL, NCL and the Partnership. He was closely involved in the discussions which led to the Partnership entering into swap contracts in 2007 and 2009. Other individuals were: Matthew Small, the Managing Director of GCL until 4 December 2009, and Hooman Zahedi, a former chiropractor and former shareholder in GCL. Mrs Perks played no significant part in the business or in the events giving rise to the litigation.
Dr Perks was the only witness who gave evidence for the Claimants. It will be apparent from my description of events below that Mr Fordyce would have been a potentially important witness. It was, however, accepted by RBS that there was a reasonable explanation as to why he had not been called and I was not invited to draw any adverse inference from the fact that he was not called.
RBS
RBS became principal bankers to the Partnership and the Companies in around 1999. It funded the purchase of properties with 100% debt and gave the two Companies substantial overdrafts with which they established new clinics and occasionally purchased existing clinics. The business grew quickly so that by 2006 there were 16 clinics around Glasgow. During that time, Dr Perks' principal contact at RBS was Ms Jane McGuigan, who acted as his “Relationship Manager”.
Ms McGuigan was one of a large number of RBS individuals who became involved, one way or another, in the banking relationship with the Perks business. She worked as the “Relationship Manager” from 2006 to late 2008 within “Commercial Banking”. This was the business banking division of RBS. She was based in Glasgow and the Commercial Banking unit where she worked was called “Glasgow Commercial”. This unit had a number of relationship managers for clients, who were referred to as “connections”. The Relationship Manager or “RM” is the first point of call for a client within Commercial Banking. In due course, Ms McGuigan was succeeded as RM by Mr Robert Clark from late 2008 to November 2009, at which point the relationship was effectively transferred to the Global Restructuring Group or “GRG”.
There were a number of other units within RBS, apart from Commercial Banking, which had a significant involvement in the events giving rise to the litigation, principally: (i) Credit Risk Management; (ii) “Commercial Risk Solutions”, later known as “Global Banking and Markets”; (iii) GRG; and (iv) Portfolio Management Unit.
Credit Risk Management was the Credit division of the Bank, of which UKCB Credit Scotland formed part. I shall refer to this division simply as “Credit”. The approval or “sanction” of Credit was required for the additional borrowings relevant to the present litigation. The individuals within Credit involved from time to time included Katherine Jenkins, Christine Jones and Eric Livingstone.
Commercial Risk Solutions (later Global Banking and Markets and sometimes known as “Treasury Solutions”) was the investment banking division of RBS, responsible for the sale of an Interest Rate Hedging Product (“IRHP”). Three individuals from that division played a part in the relevant events:
i) In 2007, Angela Fullerton sold the first swap to the Partnership. Ms Fullerton subsequently married and became Angela McPartlin;
ii) Kevan Munro, a Director of the RBS Commercial Risk Solutions Division, corresponded by e-mail and telephone with Dr Perks and Mr Fordyce in 2009, in the lead up to the second swap;
iii) David Tweedie, a colleague of Mr Munro, who executed the second swap. His involvement was briefer and less significant than that of Ms Fullerton and Mr Munro.
Global Restructuring Group or GRG was, as its name suggests, a unit which dealt with businesses which had encountered problems and where restructuring was a possibility. Business Restructuring Group or BRG was a division within GRG. The relationship management of the Perks business was transferred into GRG in late 2009, where it was initially dealt with by Mr David McCall under the supervision of Mr Neil Graham who was the head of BRG Scotland. Mr McCall's role was to act as the RM for the Companies and the Partnership on the transfer of their management relationship to GRG/ BRG in November 2009. He remained the RM until 2011 when he was succeeded by Euan Campbell.
Portfolio Management was a unit at RBS which, amongst other things, carried out desktop property valuations. Such valuations were relevant because the Partnership's principal assets comprised the properties which it had acquired. Mr Alisdair Hillis worked for that unit.
At trial, RBS called only two employees who had been involved in the events giving rise to the litigation: Mr McCall and Mr Graham from BRG/ GRG. Their involvement had started in early November 2009. I did not therefore hear from the principal individuals (Ms McGuigan and Ms Fullerton) who were involved in the events leading to the first (2007) swap, nor from the individuals (principally Kevan Munro) involved in...
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