Biannual Banking Litigation Update (Autumn 2021)

Welcome to the Autumn 2021 edition of our biannual Banking Litigation Update, in which we highlight the most important cases and developments affecting UK financial institutions over the past six months.

Read the full Banking Litigation Update here.

We have also recorded a short video to provide a high level overview of developments during this period, which you can access here:

The content of this edition of our Banking Litigation Update is as follows:

Brexit

• UK post-Brexit reform: Financial Services Act 2021
• European Commission notice to Lugano Depositary states EU not in a position to consent to UK accession

COVID-19

• High Court considers doctrine of frustration in COVID-19 context and confirms there is no such thing as “temporary frustration”
• High Court considers operation of force majeure clause in context of COVID-19 pandemic
• High Court considers implied terms and "failure of basis" in context of COVID-19 pandemic

Mis-selling and Misrepresentation

• Court of Appeal decision in Adams v Options: the meaning of “advice” and potential implications for financial product mis-selling claims
• High Court summarily dismisses alleged LIBOR fraudulent misrepresentation claim on the basis that it is time-barred
• Court of Appeal clarifies proper approach to assessing damages for fraudulent misrepresentation

Securities Litigation/Class Actions

• CJEU considers issuer liability for prospectuses marketed to both retail and qualified investors
• Herbert Smith Freehills contributes chapter to The Securities Litigation Review (7th Edition)
• Court of Appeal provides guidance on the “reflective loss” principle and its interaction with the Contracts (Rights of Third Parties) Act 1999
• HMT reform of prospectus regime: the potential impact on securities litigation
• Privy Council confirms that the so-called “reflective loss” principle applies to ex-shareholders
• First Collective Proceedings Order granted by the Competition Appeal Tribunal, in Merricks v MasterCard case
• Court of Appeal confirms claims seeking remediation for damage cannot proceed as representative action under CPR 19.6

LIBOR Discontinuation

• LIBOR transition: critical FCA consultation on “tough legacy” definition
• The UK’s LIBOR safe harbour legislation: a missed opportunity?

Contractual Construction

• Court of Appeal upholds decision correcting drafting error by interpretation

Duties in Financial Services

• The FCA’s proposed new “Consumer Duty” – what does it mean?
• Court of Appeal determines that a fiduciary relationship is not a necessary pre-condition to relief in respect of an undisclosed commission paid to an agent
• Court of Appeal considers tests for “blind-eye” knowledge and vicarious liability in the context of a dishonest assistance claim
• Supreme Court clarifies proper approach to SAAMCO and to determining scope of duty of care owed by professional advisers
• Supreme Court clarifies requirements for tort of lawful act economic duress

Part 36 Offers/Costs

• High Court finds existence of Part 36 offer prevents it from making costs order following split trial
• High Court refuses to apply the so-called Arkin “cap” to adverse costs order against litigation funder
• High Court finds accepted Part 36 Offer was superseded by subsequent settlement agreement
• Court of Appeal decision suggests a Part 36 offer can leave more to be resolved than a contractual offer

Disclosure and Privilege

• Parent companies’ documents found to be in subsidiaries’ control for disclosure purposes
• High Court strikes out claim for abuse of process and dismisses parallel disclosure application under Bankers’ Book Evidence Act 1879
• Court of Appeal confirms litigation privilege available even if third party misled as to purpose of information request
• Court of Appeal confirms one joint privilege holder could not prevent disclosure of privileged material to assignee of other joint client
• Disclosure Pilot to be extended for a further year and the procedures streamlined
• Privilege not lost despite opponent having wholesale access to email accounts containing the privileged material
• High Court finds accountants’ investigation report not protected by litigation privilege and considers requirements for obtaining disclosure under the Disclosure Pilot

Governing Law and Jurisdiction

• Court of Appeal decision highlights dangers of choosing non-exclusive jurisdiction clause in favour of an EU court
• Proposal for EU to join 2019 Hague Judgments Convention
• High Court finds common law “necessary or proper party” gateway for service out of the jurisdiction does not apply when the anchor defendant has voluntarily submitted to the court’s jurisdiction

Other Significant Developments

• Commercial Court finds witness evidence less reliable where witnesses did not refresh memories from contemporaneous documents
• High Court strikes out time-barred claims holding that banks did not deliberately conceal facts so as to extend the limitation period
• Redemption periods and liquidity mismatch in authorised open-ended property funds: regulatory update and litigation risks
• Supreme Court confirms that, where cause of action accrues at midnight, the following day is included for limitation purposes
• New regime for trial witness statements does not change law on admissibility
• Know your limits: the increasingly high bar for claims to extend the limitation period

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