Biannual Banking Litigation Update (Autumn 2024)

Welcome to the Autumn 2024 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

• High Court considers bank's vicarious liability for fraudulent misrepresentations made by former employee
• High Court rejects investor claims against bank for role in failed film finance scheme
• Supreme Court gives guidance on accessory liability of company directors and the remedy of account of profits
• High Court grants summary judgment (in part) in latest IRHP mis-selling claim, but leaves limitation issues for trial
• Inducing a breach of contract: Court of Appeal considers necessary degree of participation in a third party's breach to establish tort of inducement
• High Court strikes out APP fraud claims against receiving payment service provider
• Latest APP fraud claim against receiving PSP: High Court refuses to strike out claim for unjust enrichment
• High Court finds agent breached fiduciary duty in "half secret" commission case
• High Court finds in favour of lenders in context of fraud claim in relation to misrepresentations made on behalf of a borrower
• High Court rejects claim against regulated firm for alleged contravention of COBS

• Payment processing risks in a post-Philipp v Barclays world

Impact of sanctions on financial services agreements

• Supreme Court finds no obligation on party seeking to rely on force majeure clause to accept counterparty’s offer of non-contractual performance
• High Court confirms actual ownership of funds must be established before offence can be made out under Russian sanctions prohibitions
• Court of Appeal finds payment obligations under letters of credit suspended by UK Russian sanctions regime
• High Court highlights four distinct categories of control in "ownership and control" test under UK sanctions regulations

Contractual construction

• High Court refuses summary judgment where bank account frozen without notice
• High Court decides contractual discretion to make margin call is subject to implied duty of rationality, even when express duty to act reasonably
• High Court finds borrower's security confers floating charge, despite intention of parties to create fixed charge and lender's contractual power to exercise control
• Court of Appeal dismisses claim by participant against lender of record in a sub-participation arrangement
• Court of Appeal finds party cannot avoid paying debt by relying on non-fulfilment of condition precedent caused by its own breach of contract
• Court of Appeal considers whether default interest clause is an unenforceable penalty
• Court of Appeal dismisses US investment bank's success fee claim in connection with the public offer of shares in Indian bank
• High Court considers interpretation of intercreditor deed of priorities
• Court of Appeal rules against Republic of Argentina in GDP-linked sovereign bond claim finding in favour of the claimants' construction of provision "rebasing" GDP measurement

Securities litigation and class actions

• Court of Appeal clarifies when multiple claimants can bring claims using a single claim form
• Competition Appeal Tribunal considers when funders can be paid out of agreed damages following settlement of collective proceedings
• Representative actions under CPR 19.8: High Court strikes out claim for compensation on behalf of passengers in 116,000 delayed or cancelled flights

Costs and funding

• Civil Justice Council establishes review of third party litigation funding
• Litigation funding: Bill to reverse effect of Paccar falls in pre-election wash-up
• Security for costs: Claimant ordered to provide security despite ATE policy with anti-avoidance endorsement

Disclosure and privilege

• High Court makes Bankers Trust disclosure order against foreign trustee in relation to assets in foreign trust and bank accounts
• High Court finds party has practical control over documents of sub-contractor and sub-sub-contractor for disclosure purposes
• Collateral use undertakings: High Court grants permission to disclose schedules to claim in response to foreign court order
• High Court orders defendant to provide disclosure in jurisdiction dispute

Governing law and jurisdiction

• High Court grants injunction to prevent enforcement of Russian anti-suit injunction and considers Russian law on exclusive jurisdiction over sanctioned persons
• High Court finds conspiracy claims fell within exclusive jurisdiction clauses under Hague Choice of Court Convention 2005
• High Court grants anti-suit and anti-enforcement injunctions in favour of bank, rejecting novel argument that arbitration agreement frustrated by sanctions
• The in-house lawyer's guide to the Hague 2019 Judgments Convention (now ratified)
• High Court grants injunctions in favour of bank in context of syndicated loan dispute over payments withheld due to sanctions
• Retained EU law: Supreme Court clarifies law that applies to pre-Brexit causes of action
• Privy Council changes English law on the intersection of insolvency and arbitration
• Supreme Court gives reasoned judgment upholding anti-suit injunction against Russian court

• Planned new provisions to encourage UK courts to depart from EU case law will no longer come into force on 1 October

Procedural developments

• Proposed rule changes regarding the court's power to compel ADR
• High Court allows last-minute application for extension of time to comply with unless order
• Offers to mediate: It is not the offeror's responsibility to chase a response
• High Court uses discretion to allow bank's application for summary judgment instead of default judgment in respect of debt claim against foreign borrower
• Without prejudice rule: High Court considers the estoppel exception
• Court of Appeal decision on committal for contempt of court
• Court of Appeal clarifies when a claim may be an abuse of process due to a failure to raise it with the court in earlier proceedings
• Trial witness statements: High Court decisions highlight importance of compliance with Practice Direction 57AC

Other significant developments

• High Court dismisses judicial review challenge of non-statutory FOS decisions
• Court of Appeal dismisses judicial review challenge of FOS decision
• High Court considers contractual remedies for failure to transfer cryptocurrency

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.