Jonathan Edward Marsden v Barclays Bank Plc
| Jurisdiction | England & Wales |
| Judge | Mr Justice Phillips |
| Judgment Date | 05 July 2016 |
| Neutral Citation | [2016] EWHC 1601 (QB) |
| Docket Number | Case No: LM-2015-000166 |
| Court | Queen's Bench Division |
| Date | 05 July 2016 |
[2016] EWHC 1601 (QB)
Mr Justice Phillips
Case No: LM-2015-000166
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
LONDON MERCANTILE COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Brian Hurst (directly instructed) for the Claimant
David Pope (instructed by Dentons UKMEA LLP) for the Defendant
Hearing date: 16 May 2016
Approved Judgment
The defendant ("the Bank") applies for summary judgment against the claimant ("Mr Marsden") or, alternatively, for an order that the claim be struck out.
Mr Marsden's claim is that he was mis-sold two vanilla interest-rate swaps in the amortising amounts of £1.4m and £850,000, entered between Mr Marsden and the Bank on 10 September 2007 ("the Swaps") and cancelled on 16 March 2011. Mr Marsden further claims that the Bank, in conducting a review of the sale of the Swaps in 2013 and 2014 (pursuant to the Bank's agreement with the FSA/FCA to review such sales to non-sophisticated customers), breached alleged contractual duties owed to Mr Marsden, in particular in failing to allow him further time to make a claim for consequential loss.
The Bank's primary contention is that all causes of action in relation to the Swaps were fully and finally compromised by a written settlement agreement signed by Mr Marsden on 3 March 2011 ("the Settlement Agreement"), so that the claim has no prospect of success. Mr Marsden accepts that he signed the document in question, but contends that it is arguable that (i) there was no valid consideration for the alleged compromise of his claim; (ii) his signature was procured by economic duress; and/or (iii) the agreement does not compromise claims in relation to the Bank's alleged fraud or other misconduct prior to the entry of Swaps, nor claims in relation to the subsequent review.
The Bank further contends that, even if not compromised, certain of the causes of action pleaded by Mr Marsden are unarguable and should be struck out, further arguing that the Particulars of Claim are, taken as a whole, both prolix and deficient in proper particulars.
It is common ground that the test on an application for summary judgment by a defendant is whether the claim has a realistic as opposed to a fanciful prospect of success, that is, one which carries some degree of conviction. It is open to the court to conclude that there is no real substance in factual assertions made by the claimant, but the court should not conduct a mini-trial. If the court has all the evidence necessary for the proper determination of a point, it should decide it.
The background facts
(a) Mr Marsden's business and previous swap transaction
Between 1985 and 2012 Mr Marsden was in the business of purchasing, restoring and then selling public houses and small hotels, largely financed by loans from the Bank. Although certain of Mr Marsden's business was conducted through companies in his control, his dealings with the Bank described below were in his personal capacity.
Mr Marsden first entered into an interest-rate swap with the Bank on 31 July 2006 as a hedge against the interest rate risk in respect of variable-rate loans of £750,000 and £850,000 advanced to him by the Bank to assist with the purchase of public houses in Suffolk and Derby respectively. That swap, in the amount of £1,592,113.17, was at a fixed rate of 5.15%. Mr Marsden terminated the swap on 19 July 2007, receiving a cancellation fee of £30,000 as interest rates had risen and were forecast to remain above the fixed rate.
(b) The Swaps
In May 2007 Mr Marsden sold the Suffolk property and repaid the £750,000 loan. The Bank then lent a further £1.4 million (in addition to the existing loan of £850,000) to assist in the purchase of another public house in Shropshire. The Swaps were entered as a hedge against the interest rate risk under the two outstanding loans, at the fixed rate of 5.63%. The terms of the Swaps were set out in confirmations dated 11 September 2007, countersigned by Mr Marsden on 17 September 2007.
As interest rates fell in 2008, particularly after September, Mr Marsden was obliged to make payments to the Bank under the terms of the Swaps and his future exposure increased (as, correspondingly, did the cost of breaking the Swaps).
(c) Mr Marsden's cashflow problems
In 2009 Mr Marsden's business experienced significant cash flow problems, which Mr Marsden now attributes to having to fund the Swaps. Accountants jointly instructed by the Bank and Mr Marsden reported that Mr Marsden was unable to meet interest or capital payments due to the Bank as a result of the underperformance and high gearing of the business, although the report was hampered by the business' poor accounting records. In February 2010 the Bank agreed to suspend repayments on Mr Marsden's loans until August 2010.
(d) The complaint to the Financial Ombudsman Service ("the FOS")
In the meantime, on 10 August 2009, Mr Marsden (unknown to the Bank) had made a complaint to the FOS alleging that the Bank had mis-sold the Swaps to him by telling him that entering the Swaps was a condition of the Bank's lending to him. In that document Mr Marsden asserted that he had first raised the complaint with the Bank in April 2008, although emails at about that time reveal no complaint, but demonstrate that Mr Marsden's concern about the Swaps was the exposure of his estate if he died, a concern he addressed by obtaining life insurance of £400,000 1.
As there was no evidence of a complaint to the Bank, the FOS returned the papers to Mr Marsden and informed him they would notify the Bank of the complaint. For reasons which are unclear, it appears that the FOS did not write to the Bank in respect of the complaint until 28 May 2010. The Bank met Mr Marsden and Clive Nurse (Mr Marsden's former solicitor, by then retired and assisting Mr Marsden as his agent), on 14 July 2010 to discuss the complaint, but rejected it in a detailed letter dated 16 July 2010.
At the meeting on 14 July 2010 there was also discussion of a restructuring of Mr Marsden's indebtedness. In a letter dated 26 July 2010, Mr Nurse recorded that the Bank had stated that it would not agree to a restructuring whilst the complaint to the FOS remained unresolved. Mr Nurse asserted that this was economic duress. He
concluded the letter by stating that Mr Marsden would only withdraw his complaint once the Bank's restructuring offer had been made and accepted.Mr Marsden repeated that he was prepared to drop his complaint on the basis that the Bank restructure his indebtedness in a phone call with Duncan Thompson of the Bank on 3 September 2010.
On 20 September 2010 the FOS adjudicator wrote to Mr Marsden's solicitor informing him that the adjudicator was unable to recommend that the complaint be upheld, but reminding him of the right to ask an ombudsman to review the case. On 30 September 2010 Mr Marsden's solicitor informed both the Bank and the FOS that Mr Marsden was withdrawing the complaint and would not be pursuing it further with the FOS.
(e) The restructuring of Mr Marsden's indebtedness
By email to Mr Marsden dated 25 November 2010 the Bank proposed a restructuring of his indebtedness, refinancing eight accounts which were in default or overdrawn with a new loan. The outline terms included, as the first requirement, that there be a resolution satisfactory to the Bank in respect of Mr Marsden's complaint in relation to the Swaps. The Bank further required that the Swaps be broken and that the breakage costs be included in the restructured loan.
On 27 January 2011, following negotiations between solicitors for the Bank and solicitors for Mr Marsden, the Bank formally offered Mr Marsden a new on-demand term loan of £3,671,374 (at an interest rate of 1.5% above base) to consolidate his and his companies' liabilities. It was a condition of the offer that the Swaps were broken. Mr Marsden countersigned the offer by way of acceptance on 4 February 2011.
On 3 March 2011 Mr Marsden countersigned the Settlement Agreement, contained in a letter sent to Mr Marsden's solicitors by the Bank the day before. Mr Marsden thereby acknowledged and agreed that:
" … the entry by the Parties into the facility letter dated 27 January 2011 with a loan amount of £3,671,374.00 is in full and final settlement of all complaints, claims and causes of action which arise directly or indirectly, or may arise, out of or are in any way connected with the Swaps."
The Swaps were duly terminated on 16 March 2011 at a total cost to Mr Marsden of £352,728. The following day the new loan was drawn down.
(f) Mr Marsden's bankruptcy
Notwithstanding the restructuring, Mr Marsden's business continued to struggle, failing to make payments due to the Bank and to other creditors. One such creditor, Carlsberg, issued a statutory demand for £172,572.31. Mr Marsden was adjudged bankrupt on 8 May 2012 and a trustee in bankruptcy was appointed.
(g) The Bank's review of the sale of the Swaps
On 29 June 2012 the FSA (now known as the FCA) announced that the Bank (along with four other banks) had agreed to review its past sales of interest rate hedging products to certain categories of customers. The review process formally started in early 2013.
The Bank wrote to Mr Marsden on 18 February 2013 inviting him to participate in the review, an offer Mr Marsden accepted. The Bank then realised that Mr Marsden was bankrupt. A similar letter was written to Mr Marsden's trustee in bankruptcy on 15 March 2013, but it was not until November 2013 that the Bank was notified that the trustee had assigned his rights of action in relation to the Swaps to Mr Marsden, enabling the Bank to proceed with the review.
On 22 May 2014...
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