Titan Steel Wheels Ltd v Royal Bank of Scotland Plc [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | David Steel J. |
| Judgment Date | 11 February 2010 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 11 February 2010 |
Queen's Bench Division (Commercial Court).
David Steel J.
James Corbett QC and Paul Downes (instructed by HBJ Gateley Wareing LLP) for the claimant.
Adrian Beltrami QC (instructed by Denton Wilde Sapte) for the defendant.
The following cases were referred to in the judgment:
Davies v SumnerWLR [1984] 1 WLR 1301.
Havering LBC v StevensonWLR [1970] 1 WLR 1375.
Henderson v Merrett Syndicates Ltd [1994] CLC 918; [1995] 2 AC 145.
IFE Fund SA v Goldman Sachs InternationalUNK [2006] EWHC 2887 (Comm); [2006] 2 CLC 1043; [2007] EWCA Civ 811; [2007] 2 CLC 134.
JP Morgan Chase Bank v Springwell Navigation CorpUNK [2008] EWHC 1186 (Comm).
Peekay Intermark Ltd v Australia and New Zealand Banking Group Ltd [2006] 1 CLC 582.
Pensher Security Door Co Ltd v Sunderland City CouncilUNK [2000] RPC 249.
R & B Customs Brokers Co Ltd v United Dominions Trust Ltd [1988] 1 W 321.
R v Secretary of State for the Environment, Transport and the Regions, ex pa Spath Holme LtdELR [2001] 2 AC 349.
Riggs AP Bank Ltd v Eurocopy (Ch D, 6 November 1998).
Smith v BushELR [1990] 1 AC 831.
Trident Turboprop (Dublin) Ltd v First Flight Couriers Ltd [2008] 2 Ll R 581.
Stevenson v RogersELR [1999] 1 QB 1028.
Valse Holdings v Merrill Lynch International BankUNK [2004] EWHC 24 (Comm).
Banking — Derivatives — Alleged mis-selling of derivative products by defendant bank — Bank denied liability and counterclaimed for costs of closing out transactions — Preliminary issues — Defendant manufacturer with income predominantly in euros and expenditure in sterling — Parties entered into currency swaps — Defendant not “private person” as defined — Transactions in course of carrying on business — Bank did not act in capacity of advisor and did not owe common law duty of care in respect of advice given about swaps — Banks terms gave rise to contractual estoppel and/or negated coming into existence of duty of care — Exclusion clause reasonable — Unfair Contract Terms Act 1977 — Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001.
This was a claim for losses arising from the alleged mis-selling of two derivative products by the defendant bank in June and September 2007.
The claimant (Titan) was a manufacturer of steel wheels for the “off-highway” vehicle industry. Its income was predominantly in euros, whereas much of its expenditure was in sterling, and it thus needed to sell euros and purchase sterling on a regular basis. The claim concerned two currency swap or derivative products that the bank provided in June and September 2007. Titan said that the 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 that; (b) the bank advised Titan to take the products which were in fact unsuitable to its needs and thus was 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.
The bank said that the claim was misconceived: (a) Titan had used those or 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 could not blame the bank if its decision to use the 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 was no duty under the FSA rules which was actionable as a matter of breach of statutory duty by Titan. The bank had a counterclaim which represented the loss on the closing out of the two transactions in issue. That was valued at £2.8m plus interest.
The trial of preliminary issues was directed: the first issue was whether Titan was a “private person”, which was defined by the Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001, reg. 3(1)(b) as “any person who is not an individual, unless he suffers the loss in question in the course of carrying on business of any kind”; the third issue was whether the bank, in telephone conversations, acted in the capacity of an advisor and owed a common law duty of care in respect of advice given in respect of either currency swap product; the 11th issue was whether all or any of the contractual terms were exclusion clauses which were subject to the Unfair Contract Terms Act 1977, and, if so, whether the bank was entitled nevertheless to rely on such terms.
Held, ruling accordingly:
1. The authorities made it clear that in considering whether deals were “in the course of business' the specific nature of the deals and their degree of regularity were relevant. The structured products were by definition not entered into solely by way of a hedge. The motive for entering into them was to make a profit. In reality the products were in the nature of a businesslike speculation which was not a pure hedge and could fairly be described as one-off trades forming part of the business. In any event, even if the purchase of foreign exchange products was incidental to Titan's business, the scale and frequency of the hedging was sufficient to satisfy any requirement of regularity justifying the categorisation of such activity as being integral to the business. The transactions were not merely sporadic and intermittent activity outside the course of Titan's business. To the contrary, the trades were sustained, large scale and a necessary concomitant of Titan's trading. It followed that Titan was not a “private person” for the purposes of the FSMA.
2. The bank gave reasonable notice that its standard contractual terms applied. They expressly provided that the bank would not provide advisory services and that any opinions expressed by the bank did not constitute investment advice, and that Titan was to take independent advice as necessary. In that sense the bank made clear that it was only providing an execution service. The specific terms of each transaction, both as contained in the post transaction acknowledgements and the confirmations, were to the same effect. Those terms formed part of the contracts between Titan and the bank either by virtue of the signed confirmations or, in any event, by reason of the course of dealing based on the same documentary structure over the previous six years. The terms, taken as whole, were only consistent with the conclusion that Titan and the bank were agreeing to conduct their dealings on the basis that the bank was not acting as an advisor nor undertaking any duty of care regardless of what recommendations, suggestions or advice were tendered. The terms went further than relieving the bank from any obligation to give advice: they provided that any statements were not to be treated as advice nor could they be relied upon by Titan. The terms either created a contractual estoppel or negated the coming into existence of a duty of care. (Peekay Intermark Ltd v Australia and New Zealand Banking Group Ltd[2006] 1 CLC 582 and IFE Fund SA v Goldman Sachs InternationalUNK[2007] EWCA Civ 811; [2007] 2 CLC 134applied.)
3. The bank offered some ideas and recommendations in regard to financial products in the face of the large scale euro income of Titan. But in doing so, the circumstances established that the bank was not an adviser subject to a duty of care but merely a salesperson. The relationship was a commonplace feature of commercial activity. Titan listened to the bank's views and determined for itself whether the products were worth purchasing. Therefore the bank did not act in the capacity of an advisor and did not owe a common law duty of care in respect of advice in relation to the June and September products. (JP Morgan Chase Bank v Springwell Navigation CorpUNK[2008] EWHC 1186 (Comm)followed.)
4. Clause 12.5 of the bank's terms of business was a genuine exclusion clause. The other terms merely defined the basis upon which the bank was providing its services and fell outside the provisions of the Unfair Contract Terms Act. Assuming in favour of Titan that the Act did apply, clause 12.5 satisfied the test of reasonableness. There was complete equality of bargaining power. Titan was a substantial entity that was a customer of the bank. It was open to Titan to choose any bank and it did take its custom elsewhere. The terms were not simply standard for the bank but, it appeared, to many banks including others from which Titan bought products. There was no difficulty in Titan seeking (as the terms expected) advice from another quarter if desired. The terms were clear and they were regularly brought to the notice of Titan. It was irrelevant that the information and resources available to the bank as to the nature and suitability of each product might have been greater than that available to Titan.
David Steel J: 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”) 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 is 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...
To continue reading
Request your trial
-
Mark Thomas Raymond Bailey and Another v Barclays Bank Plc
...in this context was considered by David Steel J in Titan Steel Wheels Ltd v Royal Bank of Scotland plc [2010] EWHC 211 (Comm), [2012] 1 C.L.C. 191. The claimant, Titan, was a manufacturer of steel wheels for the "off-highway" vehicle industry. Because of the location of its market, it need......
-
Camerata Property Inc. v Credit Suisse Securities (Europe) Ltd [QBD (Comm)]
...CLC 1179; [1997] AC 191. Thoday v ThodayELR [1964] P 181. Titan Steel Wheels Ltd v Royal Bank of Scotland plcUNK [2010] EWHC 211 (Comm); [2012] 1 CLC 191. Banking — Negligence — Investment advice — Mis-selling — Investment in structured products — Five year note issued by Lehman Brothers en......