CGL Group Limited v Royal Bank of Scotland
12 January 2016
CGL Group Limited (“CGL”), a property holding company, brought a claim against Royal Bank of Scotland (“RBS”) for the alleged mis-selling of two interest rate hedging products, which RBS argued were time-barred.
In 2006, CGL bought two financial products from RBS, a base rate collar trade and a swap. Both were closed out after interest rates fell.
The FCA subsequently carried out a review of percentage rates in relation to hedging products (“the Review”). In 2012, the FCA set up a redress scheme to compensate investors for mis-selling of certain financial products. In 2013, RBS accepted that CGL fell within that redress scheme for its base rate collar trade, but not for its swap.
CGL subsequently commenced proceedings against RBS, alleging that it had mis-sold to CGL. CGL accepted that its allegations of a breach of duty by RBS were time-barred as those allegations concerned events over six years ago. However, CGL argued that it was nevertheless able to bring its claims because it had only obtained the necessary “knowledge” for them under section 14A Limitation Act 1980 when reports of the Review were published in the media in 2012.
RBS brought an application to strike out CGL’s claim on the basis that it was in fact time-barred because CGL had acquired the relevant “knowledge” for its claim in November 2009, which was more than three years before proceedings were issued.
The Court observed that the extent of the “knowledge” that was necessary for the Claimant’s claim under section 14A Limitation Act, and when CGL acquired it, was a question of fact that would depend on the particular facts of the case. In addition, there had to be a causal relationship between that “knowledge” and the damages that CGL alleged that it had suffered.
The Judge found that CGL’s claim fundamentally concerned an alleged failure by RBS to provide advice and information. The Judge also found on the evidence that CGL had more than a mere suspicion that it had been mis-sold by September 2009, which sufficed to give it “knowledge” for the purposes of section 14A. Therefore, at that stage CGL was in a position to bring its claim. Accordingly, the claim was time-barred.
The case provides a useful reminder of the importance of limitation to financial claims, and of when the Claimant “knew” about their claim. There can often be a significant lag between difficulties arising with a financial product and claims being made about it. It is therefore important to consider at the outset whether those claims might be time-barred, as that will bring about a quick and complete end if they are.
It is often fairly straightforward to establish whether the “primary” limitation period of six years to bring a claim has expired. What is more complex, as this case shows, is establishing the “secondary” limitation period for bringing claims, which is three years from when the Claimant had the requisite “knowledge” to claim. As the Judge observed, this is a highly fact-sensitive issue. Nevertheless, a Claimant does not need a complete understanding of their claim before they can be said to have the necessary “knowledge” to bring it, despite what Claimants often allege. Instead, the Claimant needs to have sufficient awareness of the claim, which is a lower hurdle. The evidence can be analysed to piece together a picture of this awareness, in order to challenge the Claimant’s position, as was done successfully in this case.
However, it is not uncommon for a Court to shy away from striking out a claim on limitation grounds unless the evidence of the Claimant’s “knowledge” is conclusive. Even so, a robust stance on limitation can also be useful to pressure a Claimant into an early and reasonable settlement.