WW Property Investments Ltd v National Westminster Bank Plc
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Roger Kaye |
| Judgment Date | 01 March 2016 |
| Neutral Citation | [2016] EWHC 378 (QB) |
| Date | 01 March 2016 |
| Court | Queen's Bench Division |
| Docket Number | Case No: B40LS775 |
[2016] EWHC 378 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
LEEDS DISTRICT REGISTRY
MERCANTILE COURT
The Courthouse,
1 Oxford Row,
Leeds
LS1 3BG
His Honour Judge Roger Kaye QC
sitting as a Judge of the High Court
Case No: B40LS775
Professor Julian Roberts (instructed by DFG Solicitors) for the Claimant
Andrew Mitchell QC and Adam Sher (instructed by Dentons UKMEA LLP) for the Defendant
Hearing dates: 11–12 January 2016, 1 March 2016
His Honour Judge Roger Kaye QC:
Introduction
There are two applications before me:
• First, an application by the defendant dated 1 September 2015 to strike out the claim or for summary judgment in its favour ("the Strike Out Application");
• Second, an application dated 1 October 2015 by the claimant to amend its Particulars of Claim mainly to add a new claim based on alleged negligent performance of obligations allegedly owed to the claimant under a review process known as the Interest Rate Hedging Product Review ("IRHPR") conducted by the defendant in accordance with arrangements put in place by the Financial Conduct Authority ("FCA") following allegations against a number of High Street Banks of mis-selling interest rate hedges or swaps ostensibly in order to mitigate against the risk of interest rate fluctuations applicable to the loans of borrowers from the banks ("the Amendment Application").
These two applications first came before me on 8 October 2015 when it was apparent, first, that the claimant, WW Property Investments Ltd, wished to consider further amending the Particulars of Claim so as to amend the pleading in respect of the IRHPR but also to amend allegations that the hedge and swap agreements entered into between the claimant and defendant (as set out below) amounted to wagering contracts and secondly, that the half a day then allowed was going to be insufficient time for the hearing. I accordingly adjourned the hearing to 11 January for two days (including pre-reading time) and permitted the claimant to bring forward a further draft of the proposed Amended Particulars of Claim provided a copy was provided to the defendant before 22 October, which was done.
It is common ground that if the defendant is to succeed in its Strike Out Application the case it has to meet is that based on the proposed draft Amended Particulars of Claim in their current form.
As will become apparent, that was not however, the end of the matter since there was a late attempt by the claimant during the hearing to adjourn the proceedings yet again to consider still further amendments to the draft Amended Particulars of Claim. For reasons given in a previous ruling, I refused this application.
Background
The background for present purposes may be summarised 1 as follows:
• Between 2004 and 2010 the claimant borrowed money from the defendant. Over the same period, it entered into four interest rate hedging contracts or Collars (Collar 1, Collar 2 and Collar 3) plus, in 2010, a Swap agreement following the close-out of each of the three Collar agreements;
• Despite the attempts of Professor Roberts to argue to the contrary (even after the draft judgment was handed down), the contracts were plainly all
intended to hedge the claimant's exposure to interest obligations arising from the loans made by the defendant to the claimant; in simple, terms, by fixing the loan interest at a fixed rate whatever base rate fluctuations took place over the period of the agreement (save, in the case of the Collars, where the rates dropped below a certain level);• Each of the hedges had a market value at day 1 (referred to as a Day 1 MTM) in favour of the defendant.
• These agreements – with hindsight (though the claimant says this was anything but obvious) — were (having regard to the prevailing low interest rates after 2008) disadvantageous to the claimant and advantageous to the defendant.
• In 2014, the hedges were reviewed (along with similar contracts entered into by borrowers with a number of banks) as part of the IRHPR conducted by the defendant pursuant to a Review Agreement entered into by the defendant (and other banks) with the Financial Services Authority (FSA), now known as the Financial Conduct Authority (FCA). An integral part of this process was the involvement of an independent firm of reviewing accountants, suitably qualified to carry out the review, and known as "the Independent Reviewer".
• In accordance with the terms of the IRHPR so far as concerned the claimant, the Collars were categorised as Category A business, resulting in the automatic provision of redress to the borrowing customer, in this case the claimant, subject to the assessment process. This resulted in offers being made in August 2014 by the defendant to the claimant.
• The claimant initially challenged the redress offer in respect of Collar 1 which was then re-assessed with the agreement of the Independent Reviewer but confirmed in December 2014.
• The claimant accepted the offer and received redress of over £420,000 from the defendant. Although excepting and reserving the right to claim for " additional losses" under the IRHPR, the claimant, with this exception, in accepting the offer of redress signed a compromise agreement, in " full and final settlement" of " any claims, actions, liabilities, costs or demands" it might have against the defendant " arising under or in any way connected with the sale" of the Collars applicable to " any past, present or future claims, actions, liabilities, costs or demands, regardless of whether you [i.e. the claimant] are aware of them at the date of this letter" [of acceptance]. A claim for such additional or consequential losses was duly made by the claimant and, after some toing and froing, ultimately rejected by the defendant with the sanction of the Independent Reviewer in November 2015 (largely, and briefly, on the grounds of lack of evidence and failure to meet the relevant factual and legal tests).
• The Swap was categorised as Category B business meaning redress was not automatic unless the sale of the Swap failed to meet the appropriate standards. The defendant invited the claimant in November 2013 to include the Swap in the IRHPR process, which was accepted. The eventual outcome in December 2013 (again with the agreement of the Independent Reviewer) was, following yet another challenge by the claimant, that the defendant had met the standards applicable and hence no redress was appropriate.
This process was followed by the commencement of the present action on 6 March 2015. Particulars of Claim were not served until 1 July 2015. No Defence has been served or filed but, instead, the defendant made the Strike Out Application as previously indicated. The response was service of a proposed first draft Amended Particulars of Claim on 25 September and the Amendment Application followed by the revised draft as previously mentioned. Both applications have been supported by copious witness statement evidence.
In the result I have two large bundles of over 700 pages. The draft proposed revised Amended Particulars of Claim are over 25 pages.
The Claims
Notwithstanding the length of the draft proposed revised Amended Particulars of Claim, the claimant's proposed claims against the defendant bank may be summarised as follows:
• First, the Wager Claim: I deal with the constituent elements of this below, but essentially the argument is that the interest rate hedge agreements amount to contracts for differences and accordingly are to be characterised as wagers at law but, since the non-zero Day 1 MTM was neither disclosed nor of equal uncertainty to both sides, this means that the defendant is guilty of "cheating" with the result that the contracts are voidable or vitiated at law and the defendant is liable in damages on the basis that the contracts would never have been entered into at all 2.
• Second, the LIBOR claim: this is essentially a claim based on an implied term or representation that the defendant would not manipulate LIBOR rates. This only related to the Swap Agreement since the Collars were not referenced to any LIBOR rate.
• Third, the claimant seeks rescission of a "Property Participation Agreement" ("the PPA") entered into in 2009 between the claimant and a subsidiary of the defendant, West Register (Investments) Ltd ("West Register") and also of guarantees given by the claimant's directors and shareholders 3 ("the PPA and Guarantees Claim").
• Fourth, the claimant also now alleges that the defendant owed it a tortious duty of care in connection with the manner in which it conducted the IRHPR ("the Tort Claim").
The Issues
Having regard to these claims, it is also common ground that there are, for present purposes, five issues for determination:
• First, have the claims in respect of the three Collars been compromised under the redress agreement above-mentioned ("the Compromise Issue");
• Second, does the Swap agreement amount in law to a wager, and if so with what consequences ("the Wager Issue");
• Third, does the claimant have any sustainable claim in respect of the alleged LIBOR manipulation ("The LIBOR Issue");
• Fourth, does the claimant have any sustainable claim in respect of the PPA and Guarantees Claim;
• Fifth, does the claimant have any sustainable claim in respect of the Tort Claim ("The Tort Issue").
Strike Out and Summary Judgment
I have mentioned "sustainable" claim above but it has to be remembered (and it is also common ground) that in order to strike out a claim or enter summary judgment against a claimant the conditions required by CPR 3.4 or 24 (as the case may be) must be met. Under the former ( CPR 3.4) the court may strike out a claim where the statement of case discloses no reasonable grounds for...
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