St Dominic's Ltd v The Royal Bank of Scotland Plc
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Havelock-Allan |
| Judgment Date | 22 December 2015 |
| Neutral Citation | [2015] EWHC 3822 (QB) |
| Docket Number | Claim No: A4OB5663 |
| Court | Queen's Bench Division |
| Date | 22 December 2015 |
[2015] EWHC 3822 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
BRISTOL DISTRICT REGISTRY
MERCANTILE COURT
Bristol Civil Justice Centre
2 Redcliff Street
Bristol, BS1 6GR
His Honour Judge Havelock-Allan QC
Claim No: A4OB5663
Richard Edwards (instructed by Harrison Clark Rickerbys) appeared for the claimant
Rebecca Loveridge (instructed by Dentons UKMEA LLP) appeared for the defendant
JUDGMENT ON DIRECTION FOR EXPERT EVIDENCE
This is a swaps mis-selling case. This judgment contains brief reasons why I acceded to the claimant's application at the first CMC that the parties should have permission to adduce expert evidence on certain issues defined in a Schedule to the directions order made on that occasion. Broadly those issues focus on the features of the subject swap, the information which would be required in order to assess its suitability, whether the swap was suitable for the claimant and the relative cost to the claimant of the subject swap as opposed to any suitable alternative and/or an interest rate cap.
The claimant is one in a group of three companies which operates care homes. The other companies are called Aster Healthcare Limited ("Aster") and Southern Counties Healthcare Ltd ("SCCL"). Aster is the holding company. All three companies are owned and controlled by Mr Sheth Jeebun and Mrs Zainah Jeebun.
On 7 December 2007, Mr Jeebun, who was acting on behalf of the claimant, agreed on the telephone with Mr Simpson, who was acting on behalf of the defendant, that the claimant would enter into a 15-year Amortising Dual Rate Base Rate Swap on a starting notional sum of £3,200,000 at 4.97% (for any quarter in which the base rate set within the range 4.25% to 6%) or 5.85% (for any quarter in which the base rate set above or below that range.
This was Swap 3 in a sequence of swaps which Mr Jeebun had agreed with Mr Simpson. Swap 1 was entered into in December 2006 by Aster. It was a 15 year Amortising Base Rate Swap at 5.28% for a starting notional sum of £4,950,000. Swap 2 was entered into by SCCL. It began as another 15 year Amortising Base Rate Swap at 5.33% for a starting notional sum of £3,600,000. The deal was agreed by Mr Jeebun on 16 November 2007 (Swap 2A), but was cancelled and replaced on 28 November 2007 by a swap for the same notional amount at two different interest rates, namely, at 5% for any quarter in which the base rate set within the range 4.25% to 6% and at 5.85% for any quarter in which the base rate set above or below that range (Swap 2B).
It is alleged that all 3 swaps were mis-sold. The present action concerns only Swap 3. The sales of Swaps 1, 2A and 2B to Aster and SCCL were eligible for inclusion in the FCA Review. On 4 and 19 June 2015 respectively, Aster and SCCL received revised Offers of Redress from the defendant, which they have accepted. There are no extant proceedings regarding Swaps 1, 2A and 2B. The sale of Swap 3 was not eligible for the Review because the claimant was not a customer who qualified for inclusion in the Review process. Although the claimant contends that the information provided by Mr Simpson when selling Swap 3 was no different from that provided to Aster and SCCL, the Offers of Redress to the latter involved no admission by the defendant of any breach of duty. The breach or breaches of duty in selling Swap 3 remain to be proved.
The cause of action relied upon in the particulars of claim is in negligence. There is no claim for breach of statutory duty under section 138D of FSMA 2000 because the claimant is not a private person. The overall complaint is that the information provided in relation to the Swaps was "so inadequate as to amount to a misrepresentation of the risks involved in the Swaps" (P/C paragraph 3). There are two limbs to the complaint. The first is that the defendant is alleged to have given the claimant insufficient information about the risks associated with the Swaps, in particular exit costs, but also the fact that the claimant would be over-hedged by entering into Swap 3 because the notional amount of that Swap included a sum of £1.2 million for building an extension to St Dominic's Nursing Home which was only drawn down under the corresponding loan agreement over a period of 8 months with the result that during the 8 month period the claimant was paying notional interest under Swap 3 on notional amounts in excess of its actual indebtedness to the bank. The second limb is that the Swaps, including Swap 3, are alleged to have been unsuitable for the claimant and that the defendant failed to take adequate steps to ascertain the claimant's business needs and attitude to risk.
These allegations axe similar but not the same as those which were advanced by the claimant in Crestsign Limited v National Westminster Bank plc and Royal Bank of Scotland plc [2014] EWHC 3043 (Ch) (Mr Tim Kerr QC as he then was) and in Thornbridge Limited v Barclays Bank plc [2015] EWHC 3430 (QB) (Judge Moulder). However the factual matrix here is different not only by reason of the particular exchanges between the claimant (in the guise of Mr Jeebun) and the bank (represented by Mr Simpson), which is feature distinguishing every swaps mis-selling case from the next, but also by reason of the previous Swaps transactions between the claimant and the defendant in respect of which the bank has made Offers of Redress which have been accepted.
The first CMC in this case was held on 22 September 2015. Mr Richard Edwards appeared as counsel for the claimant and Miss Rebecca Loveridge (Mr Mitchell's junior) appeared as junior counsel for the defendant. Only one matter was controversial, which was whether expert evidence should be allowed. Mr Edwards submitted that it should. Miss Loveridge submitted that it should not.
This is not the first such battle. This is the 47 th swaps mis-selling case to be case managed by me in the Bristol Mercantile List. My experience is that a number (but not all) of the defendant banks have opposed the introduction of expert evidence. None has been more rigorous in its opposition to expert evidence than the present defendant, RBS.
The arguments are becoming familiar (and so are counsel: it is, perhaps, not entirely irrelevant to note that Mr Edwards was claimant's counsel in Crestsign and that Miss Loveridge's leader in this case, Andrew Mitchell QC, was leading counsel for the defendant bank in both the Crestsign and Thornbridge cases). I dealt with some of the arguments in Battrick v Royal Bank of Scotland plc [2013] EWHC 4848 (QB). I concluded that judgment with a cautionary postscript to the effect that it was not a tablet of stone to be touted around other Mercantile Courts as support for an order for expert evidence because there might well be other swaps cases where, on the particular facts, expert evidence was not appropriate. Counsel deserve credit for not having cited the Battrick judgment to me on this occasion. Nevertheless, to my knowledge, Battrick has been to other judges.
My impression is that, pre- and post- Battrick. expert evidence has been ordered in swaps cases on more occasions than it has not (whether the view I have taken in the Bristol Mercantile List as exemplified in Battrick has played any part in this trend it is not possible to say). Expert evidence was given in the Crestsign case and in the Thornbridge case and has been ordered by Rose J in Warner Retail Ltd v National Westminster Bank plc [2014] EWHC 2818 (Ch), by Phillips J in Kexgill (Nottingham) Ltd and Kexgill (Preston) Ltd v Barclays Bank plc (Commercial Court claim no. 2014 Folio 661) and by Judge Keyser QC in Mohamed Ali Abedi v The Governor and Company of the Bank of Ireland and The Bank of Ireland (UK) plc (Cardiff Mercantile Court claim no. A90CF183). On the other hand, expert evidence was not ordered by Judge Waksman QC in the Manchester Mercantile Court in Green & Rowley v Royal Bank of Scotland plc [2014] PNLR 6 or by Judge Simon Brown QC in two Birmingham Mercantile cases: Spring Rental Ltd v Barclays Bank plc (claim no. A40BM041) and OM Properties Investment Co. Ltd (claim no. A40BM008)1,
This is not, however, a numbers game. Each case has to be approached on its own facts. I have not always granted expert evidence in swaps cases. In one or two swaps cases the claimant has not asked for it. But in most of the swaps cases where an order for expert evidence has been requested, I have granted it. I have heard it suggested that this has led to a degree of forum shopping between Mercantile Lists. If that is so, it is regrettable. The purpose of this judgment is to reiterate this Court's general approach to a request that expert evidence be permitted in swaps cases and to address, shortly, the reasons why expert evidence has been ordered in this case on the issues defined in the Schedule to the CMC Order.
The essential pre-conditions to an order for expert evidence are: (1) that...
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