Manchester-based developer Property Alliance Group (PAG) took its multimillion pound battle with banking giant Royal Bank of Scotland (RBS) to the Court of Appeal this week.
In a two-month long High Court trial in 2016 the developer alleged that RBS behaved fraudulently by selling its swaps based on the LIBOR rate, which the bank was later found to have been manipulating.
In addition, the developer claimed that the swaps were missold because they did not protect PAG from its interest rate risk. PAG also claimed for damages for breach of contract over RBS’ decision to transfer PAG to its Global Restructuring Group.
RBS denied wrongdoing, misselling, misrepresentation and breach of contract. In December 2016, in a 540-paragraph ruling, the judge hearing the case backed the bank, rejecting all of PAG’s claims.
However, last year, the developer won permission to take the case to the Court of Appeal. The appeal is being heard this week before Master of the Rolls Sir Terence Etherton, Lord Justice Longmore and Lord Justice Newley. It is scheduled to take around eight days, making it a particularly long appeal hearing.
A written judgment will be handed down later this year.
This morning, lawyers for the bank addressed the scope and nature of the “duty of care” that banks owe to customers when selling swaps and other derivative products.
According to PAG’s High Court case, RBS recommended and sold four Libor-based interest rate-derivative products, in sums of between £60m and £75m, between 2004 and 2008 as “hedging” or “protection” against PAG’s interest rate risk in respect of investment loan facilities. It said that the swaps had a “toxic effect” and that, among its losses, it incurred breakage costs of £8m in terminating them.
However, in the High Court action, the judge, Mrs Justice Asplin, ruled that managers at PAG did not agree to the swaps “in reliance upon the LIBOR representations”.
The judge said that they “could not have understood the implied representation to have been made, and therefore did not rely on them”.
The judge also said that RBS did not fraudulently misrepresent the swaps because “the information which was provided was not inaccurate”.
Property Alliance Group Limited v The Royal Bank of Scotland PLC
Appeal of Claimant from the order of Mrs Justice Asplin
Court of Appeal (The Master of the Rolls, Longmore LJ, Newley LJ) 29 Jan – 8 Feb 2018.
