Banking Litigation Update

Welcome to our latest Banking Litigation update in which we highlight a number of the most important cases and developments affecting UK financial institutions over the last six months or so.

Once again, a number of the judgments coming out of the English Courts relate to misselling claims against banks and consist of both the outcome of the main actions and interlocutory skirmishes such as permission to amend claims and early strike-outs. In an interesting variation on the misselling theme, one of the judgments handed down over the last six months was a claim brought under a cause of action which was almost entirely novel in the context of a relationship between an investor and its bank since it relied on the rarely used concepts of undue influence and unconscionable bargain (LIA v GSI). The last six months has also brought significant decisions on privilege, including confirmation at first instance of the position set out in Three Rivers (No. 5) concerning the interpretation of "client" for the purposes of legal advice privilege. This decision has important implications for the conduct of both litigation and regulatory and other investigations which all disputes lawyers will need to be aware of.

Our update also includes a number of decisions on jurisdiction as well as significant clarification from the Court of Appeal about the scope of liability under the Misrepresentation Act 1967 for secondary market purchases of debt capital markets instruments.

Looking forward to the next six months, the courts continue to hear the main actions in a number of significant misselling claims and banks will be monitoring the approaches taken by the courts in those cases on an on-going basis. Appeals are listed to be heard over the coming months in the Holmcroft Properties v KMPG judicial review of the independent reviewers assessment of redress under the FCA scheme, the outcome of which will be keenly monitored by banks across the industry as well as permission to appeal being considered in the LIA v GSI case and the PAG v RBS LIBOR case.

2017 will also feature significant cases which had been working their way through the courts over the years since the financial crisis, the outcome of which will be of interest to both equity and debt capital market practitioners, disputes lawyers across the financial services industry and other stakeholders in the London disputes market (such as litigation funders).

We hope you find our update useful and, as ever, please feel free to contact one of us or your usual Herbert Smith Freehills contact if there are any topics which you would like to discuss further.

MIS-SELLING CLAIMS

• High Court strikes out claims relating to the mis-selling of interest rate hedging products
• Court of Appeal refuses permission for addition of claims regarding LIBOR manipulation
• High Court dismisses mis-selling claim and clarifies standard of care required of financial advisors
• High Court rejects claim that dealings between bank and client went beyond an ordinary arm's length bank-client relationship

CONTRACTUAL CONSTRUCTION

• Supreme Court on contractual interpretation - striking a balance between the language used and the commercial implications
• Court of Appeal clarifies interpretation of default interest provisions under commercial mortgage backed securitisation documentation

DISCLOSURE AND PRIVILEGE

• No appeal against controversial decision in RBS case applying narrow interpretation of “client” for purposes of legal advice privilege
• Court of Appeal finds settlement offer not subject to “without prejudice” protection as it amounted to an unambiguously improper threat

JURISDICTION

• Court of Appeal gives further guidance on how jurisdiction rules apply in economic tort claim
• Commercial Court finds “torpedo” action ineffective where parties agreed asymmetric jurisdiction clause
• Court of Appeal upholds summary judgment for breach of jurisdiction clauses
• Article published on when jurisdiction clause in prospectus will bind secondary purchaser of securities

OTHER SIGNIFICANT DEVELOPMENTS

• Court of Appeal finds third party who conspired with defendant to breach freezing order could be liable for tort of conspiracy to injure by unlawful means
• Court of Appeal clarifies scope of potential liability under the Misrepresentation Act 1967
• Employers may owe duty of care to employees in conduct and settlement of claims
• Herbert Smith Freehills sponsors and contributes chapters to the recently published First Edition of Getting the Deal Through – Financial Services Litigation 2016
• Party permitted to change experts on condition it disclosed previous expert’s notes setting out substance of views

Click here to read the Update.