Property Alliance Group v Royal Bank of Scotland plc [2016] EWHC 3342 (Ch)

Global Publication February 2017

Claims against RBS of derivative mis-selling, LIBOR manipulation and wrongdoing by its Global Restructuring Group failed.


Property Alliance Group Limited (PAG) was a property investment company and Royal Bank of Scotland plc (RBS) was its principal commercial banking provider. PAG claimed against RBS for mis-selling of four interest rate swaps (the ‘Swaps’), for misrepresentations relating to LIBOR in connection with the Swaps and for breach of contract in relation to the transfer of PAG to RBS’s Global Restructuring Group (GRG) and its subsequent management by GRG.


The High Court rejected every aspect of the claim.

It was accepted by both parties that there was no general advisory duty. PAG contended however for a duty to provide further information, including details of break costs and example scenarios, arising out of the general duty not to misstate. Asplin J held that Crestsign was not authority for such a duty arising whenever information was provided by a bank. It was a duty that fell on the advisory spectrum and went beyond misstatement and whether it existed in a particular case was fact-dependent. Given the sophistication of PAG and general market practice, no such duty arose on the facts. In any case, PAG was aware of potential break costs and did not enter into the Swaps as a result of any information having been withheld.

The statement that the Swaps provided a ‘hedge’ was not a misrepresentation and, in any case, reliance on it was excluded by the contractual non-reliance language in the Swap and, furthermore, PAG did not enter into the Swaps in reliance on such a statement.

There was no implied term in the Swaps that RBS must act in good faith or that the Swaps would be suitable to hedge PAG’s interest rate risks.

With regard to the GRG claim, there was no implied duty of good faith and the power to appoint a valuer was not a discretion subject to an implied duty not to act irrationally. There was also no implied duty that particular personnel would deal with PAG. In any case, there was no breach of the proposed duty – the transfer to GRG was not irrational or conducted in bad faith and there was no evidence of a campaign to extract value from PAG.

With regard to LIBOR, Asplin J started from the basis that there was a common assumption that the parties to contractual arrangements would behave honestly. For an implied representation, it was not sufficient for there to be an assumption by the representee – the assumption must arise "as a result of conduct viewed in context" (para. 405). So although there was an implied term that the parties would conduct themselves honestly in performing the contract, there was no conduct by RBS that would found the LIBOR representations. In any case, the particular wording of the representations argued for was so technical and complex that PAG would not have understood it and so did not rely on it.

Asplin J accepted that LIBOR was capable of giving rise to limited and less technical representations than those argued for, had there been conduct from which they could have been inferred. Asplin J also accepted the existence of an implied term that the Swaps floating rate would be calculated by reference to LIBOR as defined by the BBA, but she held that this term had not been breached.

Asplin J held that the manipulation of GBP LIBOR by RBS was not proved. It was not sufficient to show that there was manipulation of LIBOR in other currencies. One of the alleged manipulations was that RBS provided unrealistic submissions during the financial crisis when it could not actually have borrowed money at the submitted rate, in order to paint a false picture of its ability to fund itself. This manipulation was also not proven because LIBOR submissions were a matter of judgment based on hypothetical, not actual, borrowing rates.

In any case, it was not proven that any alleged representation was made fraudulently – there was not sufficient evidence to justify an adverse inference from the fact that no senior RBS executive gave evidence.


This was a comprehensive victory for RBS. The claims in respect of GRG and LIBOR will be closely studied as the first judicial examination of these arguments. Any finding of wrongdoing by GRG or of LIBOR manipulation with the knowledge of senior RBS executives would have been seized upon by other claimants. To that extent, the prospects of success for future cases based on similar facts is very likely to be reduced.

However, the risk of these types of claim succeeding in the future has not entirely disappeared, particularly if the facts and evidence provide a stronger basis for addressing the particular weaknesses the Court identified in PAG’s claim. For instance, the pleaded representations as to LIBOR were complex and technical, the expert evidence was found by the Court to be unconvincing and PAG was unable to take advantage of the fact that senior executives of RBS did not give evidence.

Overall, this is an encouraging victory for RBS but there remains a risk of future similar claims.


Head of Disputes Knowledge, Innovation and Business Support, Europe, Middle East and Asia

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