An appeal brought by property investment and development business Property Alliance Group Limited (PAG) in its long-running case against the Royal Bank of Scotland (RBS) has been dismissed by the Court of Appeal. PAG was refused permission to appeal the decision to the Supreme Court, which brings to an end the first civil proceedings involving allegations of LIBOR manipulation to reach trial.
PAG’s case concerned three principal categories. Firstly, the “Swaps claims” which involved allegations of misrepresentation, misstatement and breach of contract by RBS in connection with the sale of four interest rate swaps between 2004 and 2008. Secondly, the “LIBOR claims” which concerned RBS’ alleged knowledge of, and participation in, manipulation of LIBOR rates. Thirdly, the “GRG claims” which related to alleged breaches of contract arising out of the transfer by RBS of PAG into its controversial Global Restructuring Group and subsequent treatment. PAG claimed that it was entitled to rescission of the swaps and/or damages. At first instance, the claim was dismissed by Asplin J in December 2016.
PAG’s appeal, which was heard in January and February 2018, focused on four key aspects of its case. Firstly, the claim that RBS is liable in tort for negligent misstatement because it did not provide PAG with all potential information about break costs (“the Negligent Misstatement Claim”). Secondly, the claim that RBS falsely represented to PAG that each of the swaps in question were a “hedge” which would reduce PAG’s interest rate risk (“the Misrepresentation Claim”). Thirdly, the claim that RBS made fraudulent implied representations concerning LIBOR and how it was set (“the LIBOR Claim”). And finally, a claim that RBS was wrong to have PAG’s portfolio revalued in August 2013 (“the Valuation Claim”).
PAG’s appeal was dismissed on every issue. The Court of Appeal held that there was no breach by RBS of its duty of care to PAG by virtue of the fact that RBS did not illustrate to PAG the “worst case” scenario in respect of break costs. RBS had provided sufficient information and did not owe a specific duty to explain the nature or effect of the transaction. The Court of Appeal also dismissed PAG’s argument that the term “hedge” represented that the product would lower PAG’s interest rate risk; and held that there was no reliance on the part of PAG on RBS’ use of the term “hedge” when it entered into the swap in question. So far as the allegations of LIBOR manipulation were concerned, the Court of Appeal held that there was no evidence of this.
The case has been closely watched by those bringing claims against banks in relation to LIBOR manipulation as well as those bringing claims in connection with RBS’ controversial Global Restructuring Group and has resulted in a number of notable procedural decisions. The decision in favour of RBS may bring some relief for the banks currently defending these types of claims, but the detailed reasoning of the court at first instance and at appeal offers other claimants what could prove to be a very helpful insight into the approach the court will take when assessing these factually and legally complex claims.