Biannual Banking Litigation Update (Spring 2023)

Welcome to the Spring 2023 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:

Duties in Financial Services

• Key Supreme Court insolvency ruling clarifies stance on creditor duties
• Supreme Court strikes out Quincecare claim where no loss suffered by insolvent Ponzi scheme
• Court of Appeal rejects novel duty of care on banks to protect employees from economic loss arising from a criminal conviction in the performance of duties
• Hong Kong court provides novel and influential analysis of the Quincecare duty

Contractual Construction

• Interpreting ICC standardised rules in trade finance disputes: courts take an international perspective
• High Court considers contractual construction of irrevocable letter of credit incorporating UCP 600
• Contractual duties of good faith: Court of Appeal confirms context is king
• Court of Appeal finds settlement agreement released unknown fraud claims despite lack of express words to that effect
• Court of Appeal finds limitation period may start to run before deadline for payment of debt
• High Court finds lender’s exercise of absolute contractual right is not subject to implied Braganza duty
• High Court considers enforcement of security by way of appropriation under the Financial Collateral Arrangements (No 2) Regulations 2003 (FCARs)
• Supreme Court finds no entitlement to payment in circumstances not addressed by express contractual terms

ISDA Master Agreement

• High Court finds no continuing event of default under ISDA Master Agreements once administration of counterparty terminates
• High Court confirms interest rate swaps entered into with Italian municipal authority were valid, lawful and binding on the parties
• High Court finds that bank’s notice of event of default under section 5(a)(i) of the 2002 ISDA Master Agreement is valid

Securities Litigation / Class Actions

• Herbert Smith Freehills launches new edition of Class Actions in England and Wales
• Green credentials: walking an advertising tightrope
• Court of Appeal confirms reflective loss rule will bar claims of former shareholders of a dissolved company because the principle must be determined at time of alleged loss
• High Court allows claim in respect of secret commissions to proceed as “opt-out” representative action under CPR 19.6 (now 19.8)
• High Court considers reliance in s.90A FSMA claims in context of split trial application

Sanctions

• Court of Appeal finds party was required to accept non-contractual performance in exercising reasonable endeavours to “overcome” force majeure event
• High Court finds UK sanctions do not preclude entry of judgments in favour of Russian sanctioned parties

Cryptoassets

• What the Crypto Winter means for insolvency
• High Court orders delivery up of stolen Bitcoin against crypto exchange
• Information orders granted against cryptocurrency exchanges to help trace stolen cryptocurrency
• Is the decentralised governance of Bitcoin a myth? Court of Appeal finds real issue to be tried as to whether developers owe fiduciary duties to Bitcoin owners

Disclosure and Privilege

• No privilege for original version of document simply because comparison to final version would reveal legal advice
• Court of Appeal confirms identity of those instructing lawyers not generally protected by litigation privilege
• High Court finds reference to legal advice in witness statement engaged cherry-picking rule
• High Court directs party to identify which current and ex-employees have been asked for/given consent to search for documents on their personal devices
• High Court decision shows need for clear evidence if trying to prevent use of privileged material disclosed in error
• European Court expands scope of legal professional privilege under EU law
• High Court underlines need to consider scope of agency in considering whether documents to which agent has access are in principal’s control

Procedural Developments

• Anti-suit injunction granted restraining proceedings in an EU member state
• UK government consults on joining Hague Judgments Convention 2019
• Court orders contempt proceedings to be brought in respect of possible breaches of embargo on draft judgment
• Court of Appeal finds disclosure to party’s US lawyers breached embargo on draft judgment, but no further steps taken

Other Significant Developments

• Global Bank Review 2022: Banking on People
• Will publication of synthetic USD LIBOR impact the litigation risks of transition?
• A litigator’s yearbook 2022 (England and Wales)

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.