Marme Inversiones 2007 SL v Natwest Markets Plc

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeMr. Justice Picken
Judgment Date25 Feb 2019
Neutral Citation[2019] EWHC 366 (Comm)
Docket NumberCase No: CL-2014-000348

[2019] EWHC 366 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

BUSINESS & PROPERTY COURTS

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

THE HON. Mr. Justice Picken

Case No: CL-2014-000348

Between:
Marme Inversiones 2007 SL
Claimant
and
(1) Natwest Markets Plc
(2) HSH Nordbank AG
(3) Bayerische Landesbank
(4) ING Bank NV
(5) Caixabank SA
Defendants

Pushpinder Saini QC, Alastair Tomson and Andrew Rose (instructed by Kobre & Kim (UK) LLP) for the Claimant, Marme Inversiones 2007 S.L.

David Quest QC, Laura John and Max Evans (instructed by Simmons & Simmons LLP) for the First Defendant, NatWest Markets PLC.

Timothy Howe QC and Adam Sher (instructed by Allen & Overy LLP) for the Second to Fifth Defendants, HSH Nordbank AG, Bayerische Landesbank, ING Bank NV and Caixabank SA.

Hearing dates: 3–5 October, 8–11 October, 23–24 October and 5–7 November 2018.

Draft judgment supplied to the parties: 18 February 2019

Approved Judgment

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.

Mr. Justice Picken THE HON.

Contents

Introduction

………………

[1]–[9]

Background to these proceedings

………………

[10]–[65]

An outline of Marme's case

………………

[66]–[70]

An outline of the defences raised

………………

[71]–[72]

The Defendants' claims for declaratory relief

………………

[73]–[75]

EURIBOR

………………

[76]–[89]

Factual witnesses

………………

[90]–[113]

Marme's misrepresentation claim

………………

[114]–[323]

Implication: applicable legal principles

………………

[115]–[123]

Implication: this case

………………

[124]–[158]

Falsity

………………

[159]–[250]

Barclays communications

………………

[167]–[182]

RBS communications

………………

[183]–[213]

Conclusions on direct evidence

………………

[214]–[216]

Criminal proceedings

………………

[217]–[227]

EU Commission Decision

………………

[228]–[240]

Other secondary material

………………

[241]–[250]

Fraud

………………

[251]–[277]

Reliance

………………

[278]–[322]

Awareness

………………

[281]–[288]

Causation

………………

[289]–[322]

Conclusion

………………

[323]

Rescission

………………

[324]–[354]

Affirmation

………………

[325]–[331]

Partial rescission

………………

[332]–[354]

Damages

………………

[355]–[404]

Applicable legal principles

………………

[356]–[362]

Bargaining power

………………

[363]–[383]

Counterfactual 1 – PIK Loan Structure

………………

[384]–[395]

Counterfactual 2 – Swap Discount Structure

………………

[396]–[404]

Liability of the Non-RBS Banks: Agency

………………

[405]–[485]

Apparent authority – the law

………………

[408]–[425]

Preliminary observations

………………

[426]–[435]

The Senior Loan

………………

[436]–[447]

The Swaps

………………

[448]–[479]

Reliance

………………

[480]–[484]

Conclusion

………………

[485]

The Defendants' claims for declaratory relief

………………

[486]–[509]

Conclusion

………………

[510]–[511]

Introduction

1

These high value and complex proceedings arise out of events which led to the recent convictions of two individuals involved in rate fixing. They involve two connected actions. The first action concerns a claim by Marme Inversiones 2007 SL (‘Marme’) against NatWest Markets Plc (which was at all relevant times known as RBS plc, and is, therefore, referred to in this judgment as ‘RBS’) and the Second to Fifth Defendants (referred to as the ‘Non-RBS Banks’) (together with RBS, the ‘Banks’ or the Defendants), and the Non-RBS Banks' counterclaims in that action. The second action concerns RBS's claim against Marme, which mirrors the counterclaims made by the Non-RBS Banks in the first action. These proceedings arise primarily out of interest rate swaps entered into between Marme and each of the Defendants in September 2008, a few days prior to the collapse of Lehman Brothers. It is common ground that the issues raised in both actions are the same.

2

Marme is a Spanish special purpose vehicle which was incorporated in Spain by Mr Glenn Maud and Mr Derek Quinlan on 22 November 2007 for the purpose of buying the Spanish headquarters of Banco Santander SA (‘Santander’), ‘Ciudad Financiera’. Marme is a wholly owned subsidiary of Delma Projectontwikkeling BV (‘Delma’), a Dutch company, which is in turn a wholly owned subsidiary of Ramblas Investments BV (‘Ramblas’), also a Dutch company. In 2008, the ultimate beneficial owners of Ramblas were Mr Maud and Mr Quinlan in equal shares. Marme, Delma and Ramblas are all currently subject to a liquidation procedure in Spain.

3

RBS is a Scottish bank headquartered in Edinburgh and is a subsidiary of the Royal Bank of Scotland Group plc.

4

The Non-RBS Banks are, respectively: the Second Defendant, HSH Nordbank AG (‘HSH’), a publicly owned and regulated German state bank based in Hamburg and Kiel, Germany; the Third Defendant, Bayerische Landesbank (‘Bayern’), a publicly owned and regulated German state bank based in Munich; the Fourth Defendant, ING Bank NV (‘ING’), a Dutch bank based in Amsterdam which is part of the publicly listed ING Group; and the Fifth Defendant, Caixabank S.A. (‘Caixa’), a Spanish financial institution based in Barcelona.

5

The actions concern the question of Marme's liability to make payments to the Defendants in relation to interest rate swaps entered into by Marme on 12 September 2008 (the ‘Swaps’). The context was the purchase of Ciudad Financiera by Marme, which was financed in part by a loan of €1.575 billion to Marme by a syndicate of eight lenders, including the Defendants (the ‘Senior Loan’). The terms of the Senior Loan required Marme to enter into hedging arrangements in relation to the interest payable; the Swaps were entered into to satisfy this requirement. The parties' respective liabilities under the Swaps were set by reference to the Euro Interbank Offered Rate (‘EURIBOR’).

6

Marme seeks rescission of the Swaps ab initio and/or damages of up to €996 million on the basis that RBS, fraudulently or otherwise, made representations (on its own account and as agent for the Non-RBS Banks) regarding the integrity of the process of setting EURIBOR which were untrue.

7

Mr Saini QC relied, for these purposes, on the behaviour of one individual, Mr Philippe Moryoussef, who was employed at Barclays from 2005 to March 2007 and who subsequently joined RBS as Head of European Interest Rate Derivatives, a position which he held from August 2007 to September 2009. Mr Moryoussef was, in July 2018, convicted of conspiracy to defraud in respect of EURIBOR. Marme contends that Mr Moryoussef was manipulating EURIBOR whilst at RBS and submitted that, as a result of his activities, RBS should be regarded as, as Mr Saini QC put it, a “ rotten bank”.

8

For its part, RBS does not accept that Mr Moryoussef manipulated, or attempted to manipulate, EURIBOR whilst he was employed at RBS, although RBS accepts that he did so whilst he was with Barclays. It was RBS's position that Mr Moryoussef was, given his prior conduct when employed by Barclays, a “ rotten apple in the RBS barrel” but that this did not make RBS a “rotten bank”.

9

As well as defending Marme's claim, the Defendants (RBS by way of claim and the Non-RBS Banks by way of counterclaim) seek various declarations that they have lawfully terminated the Swaps, as to the contractual termination values of their Swaps and as to the sums due thereunder. The Defendants say that Marme's total contractual liability is to pay approximately €710 million plus interest.

Background to these proceedings

10

There is some dispute between Marme and the Defendants as to the underlying facts and a number of factual and evidential issues will have to be resolved. The following sets out the relevant common ground between the parties.

The Ciudad Financiera transaction

11

The background to the dispute is the signing by Marme, on 25 January 2008, of a Sale and Leaseback Agreement in what was apparently Europe's “ largest ever property deal” namely the purchase and lease-back of Ciudad Financiera (the ‘Transaction’). Marme acquired Ciudad Financiera from Santander, which in turn entered into a lease of the property back from Marme.

12

Mr Maud and Mr Quinlan were originally presented with the opportunity to purchase Ciudad Financiera in September 2007 whilst they were negotiating the financing for the Citigroup Tower, in which Santander was also involved. Mr Maud and Mr Quinlan were originally competing against JP Morgan and Goldman Sachs for the purchase of Ciudad Financiera; however, Marme was the successful bidder, in part as it was able immediately to commit to the purchase.

13

Mr Maud and Mr Quinlan negotiated and agreed the acquisition with Santander through their respective vehicles, Propinvest Group Limited (‘Propinvest’) and Quinlan Private. The Sale and Leaseback Agreement was signed on 25 January 2008 between Marme, various subsidiaries of Santander as vendors, and Santander as depository for the vendors.

14

The purchase price agreed was €1.9 billion (plus various costs and taxes) albeit that this was subsequently increased slightly. Marme leased Ciudad Financiera back to one of Santander's subsidiaries for a term of 40 years with a starting rent of €74.08 million per annum (ultimately increased to €82,693,711 per annum), which was subject to an annual rent review. Mr Maud and Mr Quinlan between them provided a non-refundable deposit to secure completion of the Transaction, originally in the sum of €50 million but later increased to €75 million.

15

Completion was originally due to take place on 31 March 2008 and the initial plan was that the Transaction would be funded by a bond issue backed by...

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