Leeds City Council v Barclays Bank Plc

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeMrs Justice Cockerill DBE,Mrs Justice Cockerill
Judgment Date22 Feb 2021
Neutral Citation[2021] EWHC 363 (Comm)
Docket NumberCase No: FL-2018-000009

[2021] EWHC 363 (Comm)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS

OF ENGLAND AND WALES

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

FINANCIAL LIST

Royal Courts of Justice,

Rolls Building

Fetter Lane, London,

EC4A 1NL

Before:

Mrs Justice Cockerill DBE

Case No: FL-2018-000009

Case No: FL-2018-000008

Between:
(1) Leeds City Council
(2) Greater Manchester Combined Authority
(3) Newcastle City Council
(4) North East Lincolnshire Council
(5) Nottingham City Council
(6) Oldham Council
(7) Sheffield Council
Claimants
and
(1) Barclays Bank Plc
(2) Barclays Bank UK Plc
Defendants
Between:
London Borough of Newham
Claimant
and
(1) Barclays Bank Plc
(2) Barclays Bank UK Plc
Defendants

Tim Lord Q.C. and Kyle Lawson (instructed by Hausfeld & Co LLP) for the Claimants in Claim FL-2018-000009

Raymond Cox Q.C. and Chloe Carpenter Q.C. (instructed by Collyer Bristow LLP) for the London Borough of Newham

Adrian Beltrami Q.C. and Adam Sher (instructed by Clifford Chance LLP) for the Defendants

Hearing dates: 18, 19, 20 January 2021 Draft Judgment sent to parties: 18 February 2021

Approved Judgment

I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

THE HONOURABLE Mrs Justice Cockerill DBE

Mrs Justice Cockerill DBE Mrs Justice Cockerill

Introduction

1

The underlying claims in these two actions are for rescission of certain loans which are said to be affected by the LIBOR rigging affair of 2012 on the grounds of fraudulent misrepresentation or (in one case) in the alternative for damages for misrepresentation. Both claims were issued against Barclays Bank plc. In due course it transpired that the correct entity may be Barclays Bank UK plc, or that both should be defendants. The parties very sensibly resolved this issue between them without recourse to the Court, and the claims proceed against both Barclays entities (the “Bank”). The Claimants in both actions are local authorities. Although in the first action there are a number of claimant authorities I will refer to the respective Claimants as “Leeds” and “Newham”.

2

The Bank seeks to strike out the claims against it. It contends that the claims against it are bound to fail for two reasons. The first is because the Claimants cannot show that they relied on the representations which they allege were made (the “Reliance Issue”). At first sight, it might seem surprising that a strikeout application can be brought on such a basis. In truth however, the difference between the parties is on a point of law, namely the correct test for reliance. The application therefore proceeds on the basis that the facts pleaded by the Claimants are in fact true. The question is whether those facts are in law insufficient to prove reliance in a misrepresentation action. If the Bank is right, this disposes of both actions absolutely.

3

The second reason relied on by the Bank is what has been called the “Affirmation Issue”. It arises only if the Bank is wrong on the first issue, and if it succeeds it would dispose of most of the claim. The Bank contends that if I accept as correct the legal principles that it says govern affirmation of contracts by a misrepresentee, then even if the Claimants succeed in proving misrepresentation, none of them have any real prospect of defeating the Bank's contention that they affirmed the relevant contracts. If the Bank is right on this issue then that disposes of the claims for rescission, though not Newham's claims for damages.

4

Strictly speaking, the Reliance Issue is a strikeout application (since the Bank says that the Claimants did not in their pleading assert facts amounting in law to a complete cause of action), and the Affirmation Issue is a summary judgment application (since the Bank contends that the inferences which the Court can make from the evidence already available mean that it will definitely succeed on this issue). However, none of the parties suggested that there is any material distinction in this case.

5

By order of Butcher J dated 15 January 2020, the applications in both claims were listed to be heard together; and so the parties found themselves in one joint hearing before me. The applications were fought with great determination, skill and courtesy over a three day remote hearing. The hearing bundles total nearly 2,200 pages, while the combined authorities bundle contains 110 authorities over nearly 4,700 pages.

Summary of the background

6

Between September 2006 and November 2008, each Claimant obtained from the Bank various long-term LOBO Loans for terms between 60 and 70 years (the “Loans”). LOBO is an acronym of Lender Option – Borrower Option; in essence, every now and then the Bank may at its option change the interest rate payable, but if it does so, the borrower may at its option repay the loan early rather than pay the higher interest. The Loans were governed by different contracts, and their specific terms (including the term of the loan, the starting interest rate, whether the rate was fixed or variable, the methods of setting the interest rate and calculating early redemption fees, etc.) varied. Some were also restructured in or around 2017. What all the Loans had in common was that LIBOR was used as the reference rate for the purposes of setting the relevant interest rate and/or as part of the methodology for calculating breakage costs.

7

LIBOR is an acronym for the London Interbank Offered Rate, a set of benchmark rates whose purpose is to reflect the cost of inter-bank borrowing on the London financial market. It is published for a number of currencies and maturity periods. In simple terms, it is supposed to reflect the rate at which an established bank could obtain an unsecured loan from another bank in a particular currency for a particular period. For many reasons, it has been of fundamental importance to global financial markets, not least because it assists in the analysis of the overall health of the banking sector, as well as being widely used by financial institutions for purposes such as setting rates for their products relative to it.

8

As is probably well known to any reader, LIBOR is calculated by surveying major banks every day for their assessment of the rate at which they consider they could borrow on the open market. In 2012 the LIBOR rigging scandal erupted. It was discovered that a number of banks on the survey panel were engaged in manipulating the various LIBOR benchmarks: rather than submit their genuine assessment of the rate at which they thought they could borrow, they submitted rates that served their own purposes, e.g. assisting their trading divisions which held LIBOR-tied positions on the markets. The scandal led to fines, prosecutions and reforms on both sides of the Atlantic.

9

The Claimants contend that the Loans are tainted by a number of alleged representations concerning LIBOR that the Bank is said to have made by offering the Loans to the Claimants (the “Alleged Representations”). They are to the effect that LIBOR rates were (at any rate so far as the Bank knew) being set honestly and properly, and that the Bank was not (and had no intention of) engaging in any improper conduct in connection with its participation in the LIBOR panel. It is common ground (and public knowledge) that the Bank did in fact engage in LIBOR manipulation, albeit the precise nature and extent of the Bank's involvement in it is very much in issue.

10

While the Bank vigorously contests many aspects of the claims (including the allegation that it made the various Alleged Representations at all), for the purposes of its strikeout applications I must take the Claimants' factual case at its highest. Accordingly, the Bank accepts that its applications should be determined on the assumed basis that:

i) Each of the Alleged Representations was in fact made.

ii) Each of the Alleged Representations was false.

iii) The Bank made each of the Alleged Representations fraudulently.

11

Further, since the Affirmation Issue only arises if the Claimants have otherwise valid causes of action in misrepresentation, the Bank accepts that in determining that issue I should assume against it that such complete causes of action have been established.

How the two issues arise

The Reliance Issue

12

The Bank formulated this issue in its skeleton argument thus:

“Barclays contends that the Claimants cannot satisfy a central legal requirement concerning reliance – viz. that the claimant in a misrepresentation case must establish that it actively/consciously appreciated at the time that the alleged representation was being made to it.”

13

This is the crux of the Reliance Issue: the Bank says that (1) a necessary element of reliance is “awareness” of the representation being made; and that (2) none of the Claimants allege such “awareness” in the sense in which the law requires them to prove it. An important point here is that the Claimants do not say that they can satisfy that awareness requirement in the terms put forward by the Bank. Their position is that they do not need to do so, because the Bank misunderstands and misstates the correct legal test – or at the very least, that the Bank has not persuaded the Court to the requisite standard at the interlocutory stage that the test is what it says it is. This perhaps explains why, were the Bank's applications to succeed, the Claimants do not invite me to permit them to cure any defects in their cases by further amendments. The Claimants stand by their pleaded case.

14

The Claim Form in the Newham Action was issued on 22 June 2018. It alleges claims:

“for...

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