On 21 December 2016 Mrs Justice Asplin handed down a keenly awaited judgment in the case of Property Alliance Group Limited v The Royal Bank of Scotland PLC [2016] EWHC 3342 (Ch) dismissing all of the claimant's claims. The case had attracted considerable media and market attention as it was the first major civil claim involving allegations of LIBOR manipulation to reach trial and had been regarded as something of a test case.


Property Alliance Group Ltd (PAG) is a property investment and development business with a large portfolio of property. Its claim against RBS concerned four interest rate swaps which it entered into with RBS between 2004 and 2008. Each swap used 3 month GBP LIBOR as a reference rate.

Broadly speaking PAG's case fell into three main categories:

  • Swaps Claims which involved allegations that the four interest rate swaps had been mis-sold;
  • GRG Claims under which PAG claimed that the transfer of the management of its relationship with RBS from the RBS management team in Manchester to the RBS division in London known as the "Global Restructuring Group" (GRG) and its subsequent management by GRG amounted to a breach of implied terms of good faith and an abuse of alleged contractual discretions;
  • LIBOR Claims which included allegations that RBS made implied misrepresentations in connection with the setting of LIBOR which induced PAG to enter into the swaps or that the swaps themselves contained implied terms in connection with RBS's conduct relating to LIBOR. Essentially PAG argued that by proposing LIBOR as a reference rate in the swaps RBS represented that it was not rigging the rates for its own ends.

The case originally started as a claim in the Chancery Division but in January 2016 it was transferred into the Financial List so that it could be dealt with by a specialist judge whose final judgment would carry appropriate weight and respect in financial markets. The Financial List judge allocated to the case was Asplin J.

1. Swaps Claims


The judge had to consider three main issues under this category:

  • in relation to a claim based on mis-statement, having provided explanations about each of the swaps, did RBS owe PAG a duty of care to give a full, accurate and proper explanation of the nature and effect of the products and, if so, what was the extent of that duty? Was RBS required to provide full scenario modelling in relation to each of the swaps and to give details of the potential break costs and the `mark to market' ("MTM") value of the swaps at the outset?
  • in relation to a claim based on misrepresentation, did RBS misrepresent the swaps when it represented that they would "hedge", "protect", "de-risk" and be a "solution" to PAG's interest rate risk exposure and that they were "suitable" for PAG for that purpose? By using terms such as "hedge" was RBS making a representation that the swaps would reduce PAG's exposure to the relevant risk i.e. that they would be an "appropriate hedge"? Was PAG contractually estopped from advancing its claim?
  • In relation to the contractual claims, was the sale of the swaps in breach of implied terms that the swaps would be suitable for hedging PAG's interest rate risk, that RBS would act in good faith and in accordance with commercial fair dealing and that RBS would not withhold from and/or fail to disclose important information about the "hedging" undertaken?

Key findings on the Swaps Claims

Dismissing all of PAG's claims under this head Asplin J made the following key findings:

  • in the absence of an advisory relationship RBS did not owe a duty of care wider than the long established Hedley Byrne duty to take reasonable care not to mis-state the facts. If the decision in Crestsign Ltd v National Westminster Bank Plc & Anor [2014] EWHC 3043 (Ch) (Crestsign) was intended to suggest that once information is provided by a bank, a salesman is always under a duty to explain fully the product he wishes to sell, even when there is no advisory relationship, then she declined to follow it;
  • there was no duty to provide a "scenario analysis" or to reveal the extent of the break costs or the MTM at the outset or at any time;
  • given that express contractual terms defined the relationship between PAG and RBS as non-advisory, none of the explanations of the terms of the swaps and oral statements made about them could be relied upon as investment advice or recommendations. In those circumstances, a reasonable representee would have understood terms such as "hedge" to be generic and not a representation as to the quality of the transaction on which they could rely;
  • the fact that PAG was required under various loan facility agreements to enter into interest rate hedging did not give rise to an implied term that the swaps would be suitable to hedge those facilities. Further it would be contrary to the spirit and express terms of those facility agreements, which excluded equitable or fiduciary duties, to imply into them a duty to act in good faith and a duty not to withhold important information.

2. GRG Claims


The key issues here were:

  • was there an implied term in the parties' agreements that RBS should act in good faith?
  • was there an implied term that RBS would exercise its powers and discretions under the agreements reasonably, in a commercially acceptable or rational way, in good faith, for a proper purpose, and not capriciously or arbitrarily or in a way that no reasonable lender acting reasonably would do?
  • if the implied terms outlined above were to be implied, had RBS breached them?

Key findings on the GRG Claims

Dismissing all the claims made under this head the judge found that:

  • there was no implied term as to good faith. There is no general duty of good faith in English law and whilst it might be implied in certain recognised categories of contract or in circumstances where it might be the
  • presumed intention of the parties, neither of those exceptions applied here, particularly where the agreements contained express and standard terms excluding any equitable or fiduciary duties;
  • the alleged implied term regarding the exercise of a contractual discretion did not arise as RBS was exercising either absolute contractual powers (which did not involve any element of it exercising a discretion) or it was making decisions where no contractual power or discretion arose at all;
  • even if she had found that the above terms were implied, she would not have found on the facts that RBS had breached such terms by acting in bad faith and/or irrationally.

3. LIBOR Claims

PAG advanced two alternative claims in relation to LIBOR:

  • a claim for rescission, made on the basis that RBS had made a number of fraudulent and/or negligent misrepresentations about LIBOR and the way in which it was set ("LIBOR Misrepresentation Claim"); and
  • a claim for damages, made on the basis that RBS had breached a number of implied terms ("LIBOR Implied Terms Claim").

LIBOR Misrepresentation Claim


PAG alleged that there were five representations which could be implied from RBS's conduct in proposing and entering into each of the LIBOR referenced swaps. The issues for the judge were:

  • could the mere proffering of a product which was referenced to a LIBOR rate give rise to implied representations about how LIBOR was set? Were there words or conduct on the part of RBS from which the representations could be inferred? Would a reasonable representee have drawn the inferences contained in the five alleged representations?
  • if the representations were, in fact made, were they relied on by PAG?
  • if the representations were, in fact, made and relied on were they false? Had RBS been engaged in trader manipulation, "lowballing" or "financial crisis manipulation" (ie making LIBOR submissions in circumstances where there were no offers in the interbank market because banks were at the time unwilling to lend to each other and there was therefore no rational or reasonable basis on which panel banks could make genuine or proper submissions)?
  • if the representations were made, relied on and were false, were they made fraudulently?

Key findings on the LIBOR Misrepresentation Claim

  • In order for there to be an implied representation there had to be some positive words or conduct by RBS from which the representation could be inferred. The mere proffering of a product referenced to a LIBOR rate was not sufficient to found the implied representations. Even if that was wrong and the bank's conduct was sufficient to found the implied representations, a reasonable representee would not have drawn the inferences alleged.
  • PAG did not rely on the alleged representations when it entered into the swaps.
  • RBS had not been involved in "trader manipulation" or "low balling" of GBP LIBOR. RBS had not been subject to any regulatory decision about GBP LIBOR and it was not enough to seek to rely on an inference drawn from regulatory decisions in relation to other currencies such as JPY and CHF LIBOR. Any claim based on "financial crisis manipulation" failed because it was not necessary under the BBA definition of LIBOR for a panel bank to have actually been able to borrow money of a particular tenor and currency in order to make a submission at a specific time on a particular day. Panel banks were required to make submissions every working day and, where there was no interbank market, to use their judgment to submit a rate based on a range of permissible factors. Also the evidence did not support the conclusion that the relevant people at RBS knew that the BBA definition should be interpreted in the way in which PAG alleged.
  • The claim that representations had been made fraudulently could not be sustained on the evidence as PAG could not show that the relevant individuals at RBS intended PAG to rely on the LIBOR representations.

LIBOR Implied Terms Claim


PAG alleged that terms should be implied to the effect that: (a) the floating rate payable by or to RBS under each of the swaps would be calculated by reference to LIBOR as defined by the BBA; (b) that if RBS had reason to believe that on a given date LIBOR might represent anything other than the interest rate defined by the BBA it would not withhold or conceal that information; and (c) that RBS would not make false or misleading LIBOR submissions to the BBA and/or engage in any practice of attempting to manipulate LIBOR such that it deviated from the rate defined by the BBA.

The court had to decide the following issues:

  • should the above mentioned terms be implied because they were obvious and/or necessary in order to give business efficacy to the swaps and facility agreements?
  • if the terms were implied had they been breached?

Key findings on the LIBOR Implied Terms Claim

  • The court accepted that the term referred to at (a) above should be implied into each of the swaps. But this was only to the extent that it was restricted to the conduct of RBS. The alleged implied term at (b) was not necessary to give business efficacy to the swaps and that at (c) was too widely framed and vague to satisfy the test for implication.
  • In any event RBS had not breached the implied term at (a) above.


The judgment represents a considerable victory for RBS.

Despite its length (187 pages) the judgment actually contains little in the way of new law in relation to swaps claims. It is however helpful in bolstering the view that in relation to a claim based on mis-statement, and in the absence of an advisory relationship, the scope of duty extends no further than taking reasonable care not to mis-state the facts. The judge's endorsement of the view that a distinction needs to be drawn between someone acting as a salesman and someone acting as an advisor is also helpful in that it adds further judicial weight to the point.

The judgment is also useful in confirming that express contractual terms defined the relationship between PAG and RBS as non-advisory and that PAG was therefore contractually estopped from arguing that there was an advisory relationship. This effectively affirms the findings on basis clauses made in Crestsign and Thornbridge Ltd v Barclays Bank Plc [2015] EWHC 3430 (QB).

What is perhaps more significant though is the impact that this decision is likely to have on a considerable number of other claims against RBS which raise similar issues about the conduct of GRG and LIBOR manipulation. Arguably the judgment will also impact on similar claims brought against other banks in relation to their conduct over LIBOR and the conduct of their GRG equivalents (which for the sake of convenience we refer to as Tomlinson Claims (Tomlinson Claims)).

As swaps mis-selling cases have evolved over the years, more and more claimants have attempted to bolster their swaps claims by bolting on similar Tomlinson and LIBOR manipulation claims. Whilst each case is of course fact sensitive, Asplin J's findings on these aspects of the claims in the PAG case must surely deliver a heavy blow to claimants seeking to advance similar claims in other cases, as inevitably there will be a degree of overlap. Asplin J herself recognised this in November 2016 when she took the step of adjourning a trial due to place in January 2017 in the case of Hockin and Others v RBS and Another (in which she is also the allocated trial judge) so that the parties could consider the PAG judgment (not by then drafted by her but expected in the near future) and then re-evaluate what issues might remain live in their case as a consequence.

Finally it is worth remembering that the PAG case was transferred into the Financial List precisely because it bore the characteristics of a test or lead case and deserved to be heard by a judge with particular expertise and experience in the law relating to the financial markets. The decision is therefore likely to impact on a wide range of claims. The depth and rigour of Asplin J's analysis should also be regarded as a boost for the reputation of the nascent Financial List.