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Titan Steel Wheels Ltd v The Royal Bank of Scotland Plc

Judgment Cited authorities 40 Cited in 44 Precedent Map Related
Vincent
JurisdictionEngland & Wales
JudgeMr Justice David Steel
Judgment Date11 February 2010
Neutral Citation[2010] EWHC 211 (Comm)
Docket NumberCase No: 2008 FOLIO 1231
CourtQueen's Bench Division (Commercial Court)
Date11 February 2010
Categories

[2010] EWHC 211 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION COMMERCIAL COURT

Before: Mr Justice David Steel

Case No: 2008 FOLIO 1231

Between
Titan Steel Wheels Limited
Claimant
and
The Royal Bank of Scotland Plc
Defendant

James Corbett Q.C. and Paul Downes (instructed by HBJ Gateley Wareing LLP) for the Claimant

Adrian Beltrami Q.C. (instructed by Denton Wilde Sapte) for the Defendant

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 David Steel

Mr Justice David Steel:

Introduction

1

In these proceedings, the Claimant (“Titan”) has claimed for losses arising from the alleged mis-selling of two derivative products by the Defendant (“the Bank”) in June and September 2007. The bank denies any liability and counterclaims for the costs of closing the transactions out.

2

Titan is a manufacturer of steel wheels for the “off-highway” vehicle industry. Titan's income is predominantly in euros whereas much of its expenditure is in sterling. Thus it needs to sell Euros and purchase Sterling on a regular basis. Therefore, whilst it may be committed to expenditure in Sterling over the medium term (for example by way of salaries and plant purchase), if the value of the Euro deteriorated Titan would be exposed to a shortfall in available income to meet its expenditure.

3

The claim concerns two currency swap or derivative products that the Bank provided in June 2007 and September 2007. In a nutshell Titan says that these products were so unusual and complex that (a) Titan's financial controller had no actual or implied authority to enter into them and the facts were such that the Bank knew this; (b) the Bank advised Titan to take these products which were in fact unsuitable to its needs and thus is liable in negligence; (c) the Bank had a duty under the FSA rules to deal “fairly” with Titan including a duty to ensure that communications or descriptions of the products were accurate and not misleading and that, although the information provided by the Bank contained some health warnings, they did not go far enough.

4

The Bank on the other hand says that the claim was misconceived: (a) Titan had used these (or quite similar) products for a long period without complaint and the financial controller had actual, implied or ostensible authority to enter into them on Titan's behalf; (b) Titan was well able to work out for itself what was or was not suitable: and it either did so or cannot blame the Bank if its decision to use these products was misguided; (c) there was no advice given and the Bank's contractual terms make it plain that no advice was being given or if it was it should not have been relied upon; (d) there is no duty under the FSA rules which is actionable as a matter of breach of statutory duty by Titan.

5

The Bank has a counterclaim which represents the loss on the closing out of the two transactions in issue. This is valued at £2.8m plus interest. Whilst there may be some relatively minor issues as to the precise calculation of this figure, Titan accepts that if the claim fails they will have a liability of something like this under the terms of the transactions entered into.

The preliminary issue

6

This is the trial of certain preliminary issues as directed by Mr Justice Flaux at a CMC on 30 April 2009 and as amended by the Order of Mr Justice Hamblen on 17 September:

(i) Issue 1: Was Titan a “private person” as defined by the Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001?

(ii) Issue 3: In a series of telephone conversations between a Mr Annetts (Titan's financial controller) and a Ms Plested (a corporate treasury manager of the Bank), did the Bank act in the capacity of an advisor to the Bank and did it owe a common law duty of care in respect of advice given in respect of either (a) the June 2007 Currency Swap Product; or (b) the September 2007 Currency Swap Product? 1

(iii) Issue 11: Are all or any of the contractual terms exclusion clauses which are subject to the Unfair Contract Terms Act 1977? If so, is the Bank entitled nevertheless to rely on such terms?

The Witnesses

7

Titan called three witnesses to give oral evidence:

i) Mr Annetts

Mr Annetts was the Financial Controller of Titan. He had been employed by the company since 1995.

ii) Mr Akers

Mr Akers was the Chief Executive Officer of the parent company Titan Europe. Again he had held that position since 1995.

iii) Mr Wicks

Mr Wicks had been the Financial Director of Titan from 1998 to 2004 and thereafter was a director of the parent company.

8

Titan also put in evidence a statement from Dr. Ellis a consultant with the securities industry. His evidence was fairly uncontroversial.

9

The Bank called two witnesses:

i) Ms Plested

Ms Plested was a Corporate Treasury Manager with the Bank who had been in a front office role for foreign exchange business since 1996.

ii) Mr Nicklin

Mr Nicklin was a Foreign Exchange Structurer within the Bank employed in that capacity since 2001.

10

Ms Plested and Mr Annetts had dealt regularly with each other since 1997 from which time Mr Annetts had placed a number of contracts for foreign exchange products. It was Titan's case in the main action that Mr Annetts had no authority to enter into some or all of these contracts on Titan's behalf. But for the purposes of the preliminary issues, the

principal factual issue to which Mr Annetts and Ms Plested could contribute in their evidence was the extent to which Ms Plested had become the advisor of Mr Annetts and in that capacity had recommended or persuaded Mr Annetts to purchase the June and September products.
11

In fact the contribution which they could make in their written statements and oral evidence was at most marginal. This was because, quite apart from the usual contemporary documentation, almost all the relevant telephone conversations (during which on the Bank's case Ms Plested has acted in the capacity of “saleswoman” and on Titan's case of “trusted advisor”) were recorded and both the recordings and transcripts of them were available to the court.

12

In this regard particular emphasis was placed on telephone calls on 26, 27 and 29 June 2009 and 18 September 2009. Titan claims that these conversations contained “advice” on the part of Ms. Plested uttered in her capacity as a “trusted advisor” in the field of foreign exchange transactions. In the event, the question as to whether “advice” was in fact tendered is very much a secondary issue to the question in what capacity Ms. Plested was acting. “Advice” can come in many forms including the provision of information, opinions, suggestions, recommendations and so on. Nonetheless, the two issues elide and the precise content of Ms Plested's share of the conversations was subjected to detailed analysis. 2

13

The Bank submitted that no “advice” was ever tendered. Titan submitted that Ms Plested had clearly offered advice and, if relevant, had gone well beyond merely providing an execution service or even straightforward marketing into the field of expressing views as to the suitability of various products for Titan's purposes and their likely impact. Accordingly it is necessary to review the conversations to see the context of the remarks, their emphasis and their tone as well as their content.

14

Before embarking on this task it is necessary to divert onto the issue of disclosure. During the course of the hearing it became clear that notes of various telephone conversations earlier in 2007 produced by the Bank had been prepared much later in the year by Ms Plested at the request of the Bank. These notes were based on further recordings which had been listened to by Ms Plested but had not been disclosed.

15

A request for further disclosure elicited the response from the Bank that the recordings could not be found and thus must have been lost or destroyed. The notes were quite short and did not contain any material to suggest that the earlier conversations were of any significance in determining the issues. The highest it could be put, as Ms Plested accepted, was that the tone of the June and September conversations was of a piece with all earlier conversations.

16

After the evidence had been completed but in the somewhat prolonged period before final speeches the Bank revealed that some of the recordings had been found after all, not on the main system (from where they had been deleted) but on Ms Plested's own computer. They were in due course transcribed and included in the trial bundles.

17

This was unquestionably an unsatisfactory situation. The Bank's failure to search Ms Plested's computer earlier was a potential breach of its disclosure obligations. But

equally unfortunate was Titan's overreaction to this development. On the basis that the Bank had earlier made a “false statement” about the relevance of the material, Titan sought wide ranging further disclosure, an opportunity to cross-examine the author of the witness statement producing the recordings and the recall of Ms Plested for further cross-examination. This in turn was the basis of an application to adjourn the period of two days set aside for speeches and to fix another period of 3–4 days to allow for such cross-examination as well as final submissions.
18

In the result, as appears below, I refused these applications save that I did make provision for half an hour at the beginning of the first day of speeches for further cross-examination of Ms Plested. At that stage I had not read the newly disclosed transcripts and did not want to preclude Titan from putting any significant features of them to Ms Plested. 3 In fact, Ms Plested was unable to attend since a doctor's...

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