In Boyse (International) Ltd v NatWest Markets plc and another  EWHC 1387 (Ch), the High Court granted summary judgment to two banks in a fraudulent misrepresentation claim concerning LIBOR manipulation. The publication of a Final Notice triggered the start of the limitation period and the claims were time barred. The decision provides helpful guidance for financial institutions and is the latest in a number of recent decisions on the application of section 32(1) of the Limitation Act 1980 (the Act) (see our earlier post here).
The claimant trust company entered into two LIBOR-referenced interest rate hedging products (IRHPs) in August 2007 and November 2008 with the defendant banks (the Banks). In 2012, the FSA announced that it had identified serious failings in the sale of IRHPs to small and medium-sized businesses by an number of financial institutions (including the Banks). In 2014, the claimant accepted the Banks’ offer of a redress payment under its past business review (PBR) compensation scheme. The offer was made without admission of liability and was accepted by the claimant without prejudice to its right to proceed with a claim for consequential loss. In 2015, the Banks rejected the claimant’s claim for consequential loss under the PBR scheme.
The claimant issued proceedings against the Banks in February 2019 for (a) fraudulent misrepresentation for alleged LIBOR manipulation (the LIBOR Misrepresentation Claim); (b) breach of contract for alleged LIBOR manipulation (the LIBOR Implied Term Claim); and (c) alleged negligent and fraudulent misrepresentations made in relation to the suitability of the IRHPs (the IRHP Misrepresentation Claim).
The Banks applied to the High Court for strike out and/or summary judgment.
Decision of the Chief Master
In July 2020, the Chief Master granted summary judgment in favour of the Banks, finding that (i) the LIBOR Misrepresentation Claim and LIBOR Implied Term Claim were time-barred; and (ii) that deceit in relation to the IRHP Misrepresentation Claim was not adequately pleaded (refusing the claimant permission to amend). The claimant did not appeal the strike out of the IRHP Misrepresentation Claim or LIBOR Implied Term Claim.
High Court dismisses appeal
The High Court found in favour of the Banks reiterating the following general principles:
- Section 2 of the Act provides that "An action founded on tort shall not be brought after the expiration of six years from the date on which the cause of action accrued".
- The LIBOR Misrepresentation Claim was an "action based upon the fraud of the defendant" within the meaning of section 32(1)(a) of the Act. It is well-established that claims for fraudulent misrepresentation fall within that sub-section. It therefore followed that the period of limitation did not begin to run until the claimant had "discovered the fraud, … or could with reasonable diligence have discovered it".
- A claimant will have discovered a fraud when he is aware of sufficient material properly to be able to plead it (Law Society v Sephton and Co  EWCA Civ 1627).
- On the issue of what is meant by “reasonable diligence" in section 32(1) of the Act, the Chief Master referred to the following passage from the judgment of Millett LJ in Paragon Finance plc v DB Thakerar & Co  1 All ER 400:
"The question is not whether the plaintiffs should have discovered the fraud sooner; but whether they could with reasonable diligence have done so. The burden of proof is on them. They must establish that they could not have discovered the fraud without exceptional measures which they could not reasonably have been expected to take. In this context the length of the applicable period of limitation is irrelevant... the test was how a person carrying on a business of the relevant kind would act if he had adequate but not unlimited staff and resources and were motivated by a reasonable but not excessive sense of urgency."
The High Court held that a reasonably diligent person in the claimant’s position would have discovered the alleged fraud by no later than 6 February 2013 (i.e. slightly more than 6 years before the claimant issued their claim on 19 February 2019) which was the date on which the FSA published a Final Notice as to the Banks’ LIBOR misconduct. A reasonably diligent person would have been alert to that widely available material about LIBOR prior to February 2013 and should have been on the lookout for news articles and publications, such as a Final Notice published on 6 February 2013. The claimant had (on its case) also suffered significant loss as a result of the IRHP by early 2012.
The High Court also emphasised that care is necessary when using the word ‘trigger’. The Chief Master had described the Final Notice as a “trigger” in the sense of this being the point in time from which the limitation period began to run, because the necessary facts to plead a case where available to the claimant from the date of the publication of the Final Notice, and it followed that further time for investigation was not required.