Deutsche Bank AG and Others v Unitech Global Ltd and Another

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeMr Justice Cooke
Judgment Date28 February 2013
Neutral Citation[2013] EWHC 471 (Comm)
Date28 February 2013
Docket NumberCase No: 2011 Folio 1199; 2012 Folio 464

[2013] EWHC 471 (Comm)




Rolls Building

Fetter Lane, London EC4A 1NL


Mr Justice Cooke

Case No: 2011 Folio 1199; 2012 Folio 464

(1) Deutsche Bank AG
(2) DBS Bank Limited
(3) BBK B.S.C.
(4) Shinhan Bank
(5) Liref (Singapore) Pte. Ltd.
(6) Pt. Bank Negara Indonesia (Persero) TBK, Tokyo Branch
(7) BMI Bank Bsc (c)
(8) DB International (Asia) Limited
(9) Axis Specialty Limited
(10) DB Trustees (Hong Kong) Limited
(1) Unitech Global Limited
(2) Unitech Limited
Deutsche Bank AG
Unitech Limited

Richard Handyside QC and Adam Zellick Instructed by Allen & Overy LLP, on behalf of the Claimant in the Lenders' Action (Claim No. 2011 Folio 1199)

Mark Hapgood QC, Timothy Howe QC and Adam Sher Instructed by Freshfields Bruckhaus Deringer LLP, on behalf of the Claimant in the Swap Action (Claim No. 2012 Folio 464)

John Brisby QC, Alastair Tomson and Michael D'Arcy Instructed by Stephenson Harwood LLP on behalf of the Defendants:

Hearing date: 28th February 2013

Mr Justice Cooke

In these two actions, the swap action and the lenders' action, the defendants, UGL and Unitech, seek permission to amend their statements of case, the defence and counterclaim in each action. The claimants in each action resist on the basis that the case raised by the proposed amendments has no realistic prospect of success.


The proposed amendments arise at this stage because of the publicity given to allegations of manipulation of LIBOR by a number of banks, including the first claimant, DB AG. Material obtained from investigations into this alleged manipulation and press cuttings have been garnered by the defendants which suggest that DB AG was involved in the manipulation of the yen LIBOR rate and possibly other LIBOR rates at some stage in the period between 2005 and 2011. The allegations are denied and there are factual issues raised which cannot be determined by the court at an interlocutory stage, as all the parties recognise. The claimants say, however, that the case, as prospectively pleaded, cannot succeed regardless of any issues of fact which arise in relation to the manipulation of such rates.


In the lenders' action, the claimants claim against UGL under a credit facility agreement of 24 September 2007 as amended by a term sheet dated 22 October 2010 and against Unitech as UGL's parent company guarantor. $150 million was advanced and, as a result of various alleged failures to pay instalments due, or other events of default, repayment was accelerated so that the total is allegedly due to the lenders. The second to ninth claimants are said to have acceded to the credit facility agreement by virtue of an assignment or transfer of rights or novation pursuant to clause 29 of that agreement.


DB AG claims $11 million, approximately, from Unitech under the same guarantee of UGL's obligations in respect of an interest rate swap agreement, which incorporated the terms of the ISDA master agreement and the 2000 terms. The defendants' case is that this swap agreement was proposed by DB AG as a hedge for UGL against interest rate fluctuations and that the credit facility agreement and the swap agreement were part of a package deal. Unitech and UGL contend that the swap agreement was represented and recommended as suitable for UGL when it was not, particularly by reference to the terms of the credit facility agreement itself. It is alleged that the misrepresentations induced the two agreements and were made in breach of a duty of care owed by DB AG.


The credit facility agreement provided for payment of interest by reference to LIBOR, which was defined in the definitions section by reference to the applicable screen rate as displayed for the relevant currency and term, or overdue amount, on the appropriate page of the Reuters or Telerate screens.


Under the interest rate swap confirmation, the obligations under the floating rate payment provisions were determined by reference to the six month US dollar LIBOR rate, as set out in the annex to ISDA 2000:

"The rate for a reset date will be the rate for deposits in US dollars for a period of the designated maturity, which appears on the Telerate, page 3750, as of 11.00 am London time on the day that is two London banking days preceding that recent date. If such rate does not appear on the Telerate page 3750 the rate for that reset date will be determined as if the parties had specified US dollar LIBOR reference banks as the applicable floating rate option."


The evidence produced to the court by DB AG includes the following in a statement of Ms Eastwood, paragraph 6:

"The Defendant's proposed amendments rely upon the allegation that DB was itself involved in the manipulation of LIBOR and knew that other panel banks were also involved in LIBOR manipulation.

9. LIBOR refers to a series of benchmark reference rates published each trading day by Thomson Reuters on behalf of the British Bankers' Association. Other, similar but distinct, benchmarks exist and are administered by other banking organisations, such as Euribor and Tibor.

10. There are currently LIBOR reference rates for ten different currencies. For each currency there is a rate for each of 15 different maturity periods (or 'tenors') ranging from overnight to one year. There are, therefore, 150 different LIBOR rates in total.

11. The only LIBOR rate specifically referenced in and relevant to the swap is the six month USD LIBOR rate.

12. The LIBOR rate is used across the world in relation to a wide range of financial products. There is no comprehensive data available on the extent of LIBOR's use but the Wheatley Review of LIBOR published in September 2012 considered a number of sources and estimated that contracts with a notional value in excess of $300 trillion use the LIBOR rate (including $10 trillion of syndicated loans and $165 to $230 trillion of interest rate swaps). The Wheatley Review also recognised that some estimates put the true figure as high as $800 trillion.

13. Prior to February 2011, the USD LIBOR panel consisted of 16 contributor banks and the USD LIBOR rates were calculated in the following manner:

(1) Each contributor bank would submit its USD LIBOR submissions to Thomson Reuters based on the following question: 'at what rate could you borrow funds, were you to do so by asking for and then accepting inter-bank offers in a reasonable market size just prior to 11 am?

(2) Upon receiving submissions from the contributor banks, Thomson Reuters would exclude the four highest and the four lowest rates. The remaining (eight) rates were, arithmetically averaged to produce the USD LIBOR rates.

(3) Accordingly, higher and low 'outlying' submissions were excluded from the published LIBOR rates.

14. In 2009, the BBA published a two page set of guidelines 'intended to provide a reference for contributing banks' … As the 2009 BBA guidelines state, a 'bank's LIBOR submissions are its own perception of where it could take funds' in a reasonable market size. LIBOR submissions are therefore a subjective assessment of inter-bank borrowing by a panel bank."


The proposed amendments in both actions consist of the same essential allegations against DB AG with additional allegations in the lenders' action against each of the second to ninth claimants, who are said to be successors to DB AG's rights. As appears hereafter, there is a significant difference between DB AG's position and the other claims inasmuch as Deutsche Bank participated in LIBOR panels but none of the other claimants did.


The new common allegations to both actions consist of four misrepresentations which are said to have induced UGL to enter into the credit facility agreement and the swap agreement. Now, for convenience they have been labelled as A to D and they were entitled by UGL and Unitech as "The LIBOR Representations". If UGL and Unitech had been aware of the falsity of these representations, it is said that the transactions would not have been concluded. Alternatively, it is said that the LIBOR representations were made negligently, in breach of a duty of care and dishonestly; and that in making the LIBOR representations, DB AG:

"… gave an implied warranty that the representations were true."

There were, thus, claims under the Misrepresentation Act, claims under Hedley Byrne and claims for breach of contractual warranty.


The new plea of the LIBOR misrepresentations is founded upon two paragraphs in each pleading which refer, first, to the part played by DB AG in the assessment of LIBOR, and then to the reference to LIBOR in the credit facility agreement and swap agreement. Thus in the lenders' action the following appears, under the heading "The LIBOR Misrepresentations":

"5GA. At all material times the First Claimant [that is DB AG] was a member of the panel of banks ('the Panel') which reports rates to Thomson Reuters on behalf of the British Banking Association … which are used in setting the published London Inter-Bank Offered Rates. LIBOR is determined by a daily poll carried out on behalf of the BBA that asks banks on the Panel to estimate how much it would cost them to borrow from each other in a reasonable market size shortly before 11 am London time on that day for different periods and in different currencies.

5GB. Pursuant to clause 8.1 of the Credit Agreement the First Defendant's liability to pay interest on the Loan was determined by reference to LIBOR. Further, the basis of the First Claimant's obligations under the Swap, being the Floating Rate Option as set out in the Long Form Confirmation, was determined by reference to USD-LIBOR-BBA."


The pleas of the LIBOR misrepresentations followed the words "in the premises" which appear at the very beginning of clause 5GC in the lenders' action. DB...

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