In Sarwar v Royal Bank of Scotland (27 July 2011), the Court considered the long term consequences of a bank having inadvertently supplied misleading information to a judge at trial concerning interest rates charged to a customer’s account.
Mr Sarwar had failed to satisfy the debts he owed to the Royal Bank of Scotland (the “Bank”). Consequently, the Bank sought to enforce the security it held over the debt. In response, Mr Sarwar unsuccessfully sued the Bank and at trial in 2000 he was ordered to pay the Bank’s costs and interest.
During (the much later) proceedings to assess its costs in 2007, the Bank disclosed to the Court that it had inadvertently misinformed the Court during the trial in 2000 about the rates of interest charged on the debt during various periods, saying that they had been somewhere between 1.5% and 4% above base rate when it fact the rate had been 25%. This had a substantial impact on the level of costs claimed by the Bank.
Mr Sarwar therefore challenged the Bank’s claim to the higher rates of interest charged to him on his indebtedness. The Costs Judge agreed with the Bank that the Customer was trying to re-litigate the same issues considered at trial, i.e. the Court had already found that interest was due and payable at 25%, and Mr Sarwar was “estopped” from re-opening the matter.
Mr Sarwar appealed this decision and the Court (Robin Knowles QC, sitting as a Deputy Judge of the High Court) allowed the appeal, holding that there was no cause of action or issue estoppels operating against Mr Sarwar.
Crucially, the Judge said that the trial judge back in 2000 had only had to consider whether interest was due and payable by Mr Sarwar as the rates of interest charged by the Bank were not contested; the Court was informed by the Bank and believed that the rates were between 1.5% and 4% above base rate and not 25%. The Judge also said that if the Bank had fully disclosed the true interest rate charged then the trial judge would have gone on to consider the Bank’s entitlement to charge interest at the higher rate. The Judge added that the Bank should have taken all reasonable steps to ensure the accuracy of information supplied to the Court at trial and to correct any inaccuracies promptly. Moreover, the Bank was now attempting to take advantage of its error by arguing that the matter was closed.