RBS wins Libor Court of Appeal case

Manchester-based developer Property Alliance Group (PAG) lost its Court of Appeal lawsuit against banking giant RBS. The developer has been involved in a multimillion-pound tussle with the bank, alleging it 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 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 defeated PAG in a high court trial in 2016, but the developer took the case to the court of appeal last month. In a ruling today the three-judge panel that heard the appeal again ruled against PAG. RBS denied wrongdoing, misselling, misrepresentation and breach of contract throughout. 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 they “could not have understood the implied representation to have been made, and therefore did not rely on them”. The judge also said RBS did not fraudulently misrepresent the swaps because “the information which was provided was not inaccurate”. In today’s detailed 176-paragraph judgment, the judges backed Asplin J’s findings in all but one respect. PAG had argued one of the clauses a loan facility agreement between them an RBS had an implied term that required RBS to act “reasonably, in a commercially acceptable way” in relation to a valuation. Asplin J rejected this. However, in today’s ruling, the Court of Appeal found the clause in question did not give RBS “wholly unfettered” power. “It seems to us, accordingly, that RBS could not commission a valuation [under the disputed clause] for a purpose unrelated to its legitimate commercial interests”, the judges said. Even so, they ruled that the High Court judge was correct to conclude that RBS was entitled under the circumstances to commission the valuation and recover the cost from PAG.  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) March 2018.