Interest Rate Derivative Mis-selling: A new case

A recent case, finding against the customer, indicates there are likely to be few straight-forward victories against the banks.

The Claimants were claiming that they were mis-sold an interest rate swap in May 2005 by virtue of the bank’s negligent mis-statement and/or negligent advice during the sales process.

HHJ Waksman QC in dismissing the claim in its entirety, found:

• Following earlier decisions, if there was a recommendation of the product – this would have constituted advice. He found there was none given in this case. Neither a discussion of the pros/cons of the product nor the incentivisation of the saleswoman was sufficient (on their own) to constitute advice;
• Notwithstanding the Claimant’s relationship manager saying (some years later) "to me it's quite black and white you were mis-sold [the swap]", this added little to his consideration. It was a matter for the court whether there was mis-selling based on the facts of what was said/done at the time of the sale;
• Last year's FSA Notice (which highlighted "serious failings" amongst banks) also added nothing to his consideration of the case; and
• Important arguments around contractual estoppel/exclusion clauses were not considered because it was not required. The Judge focussed on the factual context of the sale and found there was no advice but, even if there were, there was no breach of the duty owed by the bank.

The judgment in this case provides interesting reading and helpful insight into the court’s consideration of issues that are anticipated to be a feature in the growing number of IRD mis-selling claims.

It also offers useful reminders of the courts' treatment of other common factors, for instance:

• Opinions about mis-selling or other apparent failings should be treated in the context in which they are produced.
• It is likely that limitation will come into play and afford Defendants an additional layer of defence - but may also encourage Claimants not to wait for the conclusion of internal reviews before issuing a claim.
• A party's contemporaneous records of events which took place many years ago will be invaluable.
• Defendants can expect increasing "fishing" requests. It will be important to have robust procedures and remember that the DPA and SARs should not be used in an effort solely to pursue litigation.

Green and Rowley v. RBS plc [2012] EWHC 3661 (QB)