On the facts, the Court was satisfied that the relationship between the claimants and the defendant was not advisory, and that no advice had been given; further, the Financial Services and Markets Act 2000 did not apply as fixed rate lending per se is not a regulated activity (even if it did, it was doubtful that the claimants would have qualified as private persons in order to have a right of direct enforcement of various COBS Rules under s.138D of FSMA, as they were in business as a farming partnership). However, the Court felt that the defendant clearly owed the claimants a Hedley Byrne duty to take reasonable care not to misstate or mislead the claimants on any facts on which the claimants could be expected to rely. The question was whether the bank’s duty of care when providing the claimants with information went further than a simple duty not to misstate or mislead. Judge Havelock-Allan Q.C. said that this would “depend on the particular facts and whether, as a matter of policy, it is thought appropriate to impose such a duty in the circumstances” (para. 78).
The Court took note of the defendant having subscribed to the BBC. It contained a number of prescribed responsibilities, including the requirement to provide customers with “a balanced view of products so that they have an accurate understanding of the financial implications” in plain English. This “balanced view” was “especially important for long-term financial commitments (for example, the costs of withdrawing early from a fixed-term loan…where this is allowed)…”. There were no disclaimers, “basis” clauses or exclusions negating the defendant’s responsibility for the BBC. As such, the Court held that the defendant owed the claimants more than a duty not to mislead or misstate, and that this duty was to explain in plain English to the claimants, when asked by them, the financial implications of entering into a fixed rate arrangement. The Court stressed that this was not a duty to volunteer information if not asked, nor to provide a comprehensive tutorial.
The Court ruled that the defendant was in breach of this “mezzanine duty”. It had failed to provide the claimants with a balanced picture of the consequences of entering into the fixed rate arrangements, including the relationship manager not disabusing Mr Thomas of his suggestion that £10,000–£20,000 was the realistic redemption figure. The Court held that this was a misrepresentation which had influenced the claimants’ decision to enter into the first fixed arrangement; significantly, the Court also held that even if it was not an instance of misrepresentation, the “mezzanine duty” was breached because the relationship manager should have realised when the claimants asked about the redemption clause that they did not understand how it worked. The breach of the “mezzanine duty” persisted in the second fixed arrangement as there was no evidence the defendant’s Loan Administrator had provided the balanced picture that he was required to do under the BBC.