On 28 February 2013, Mr Justice Cooke dismissed an application by the defendants to amend their counterclaim in the case of Deutsche Bank AG and Others v. Unitech Global Limited and Another [2013] EWHC 471 (Comm), on the basis that it had no reasonable prospect of success. The defendants alleged that Deutsche Bank had made certain misrepresentations relating to LIBOR, which induced Unitech Global Limited (Unitech Global) to enter into a credit facility agreement and a swap agreement. The decision is interesting given the very different conclusion reached by Mr Justice Flaux in Graiseley Properties Ltd v. Barclays Bank [2012] EWHC 3093 (Comm), where the addition of claims for misrepresentation and breach of implied terms by Barclays in relation to LIBOR were allowed.


In early 2012, two claims were issued:

  • Firstly, Deutsche Bank and a lending group sought repayment of US$150 million owing under a credit facility agreement from Unitech Global and its parent company guarantor, Unitech Limited (together, the Defendants). The agreement provided for payment of interest by reference to LIBOR.
  • Secondly, Deutsche Bank issued a claim against Unitech Limited as guarantor for the sum of US$11 million allegedly owing under an associated interest rate swap. The obligations under the floating rate payment provisions were also determined by reference to LIBOR.

The Defendants filed a counterclaim, asserting that the Bank acted negligently in advising Unitech Global to enter into an “unsuitable” swap agreement, the risks of which had not been properly explained. The Defendants claim that damages due under the counterclaim cancel out the debt owed.

Following the raft of publicity surrounding allegations of manipulation of LIBOR by a number of banks, the Defendants sought to amend their counterclaim, to add various claims, as follows:

  • they had a claim under the Misrepresentation Act 1967 arising from representations they alleged the Bank impliedly made; alternatively
  • the Bank had acted in breach of its duty of care in that the representations were made negligently; and/or
  • there was a claim for breach of contractual warranty on the basis that, in making the representations, the Bank gave an implied warranty that they were true.

All of these claims were predicated on the allegations that, by its conduct and/or impliedly, the Bank represented that:

  1. LIBOR was a genuine average of the estimated rate at which panel banks could borrow from each other in a reasonable market size just prior to 11 am London time on any given day.
  2. The LIBOR rate was based on the panel banks’ submissions to Thomson Reuters which were good faith accurate estimates of the rate at which they could actually borrow from each other in a reasonable market size just prior to 11 am London time on any given day.
  3. The Bank had not itself acted, was not acting, and had no intention of acting, in a way which would, or would be likely to, undermine the integrity of LIBOR.
  4. The Bank was not aware of any conduct (either its own, or of other panel banks) which would, or would be likely to, undermine the integrity of LIBOR.

No argument was put forward that the Defendants’ obligations were affected by manipulation of LIBOR and no specific loss was pleaded. The Defendants’ position was simply that they never would have entered into the deal with the Bank were it not for the alleged representations.

Investigations into LIBOR rigging are ongoing, and Cooke J noted that he could make no determination on that factual issue at this stage. The Bank denied the allegations but argued that, regardless of issues of fact, claims in respect of the amendments sought would not succeed.

The Judgment

The test as to whether the amendments should be permitted is whether there is a reasonable prospect of success. This decision primarily turned on whether there was a reasonable prospect that the above representations could be implied in all the circumstances. Cooke J first reiterated the test for when a representation will be implied, as set out in IFE Fund v. Goldman Sachs International [2006] 2 CLC 1056. In determining what, if any, implied representation has been made, the court has to consider what a reasonable person would have inferred was being implicitly represented by the representor’s words and conduct in their context.

Considering that test, Cooke J could not find that a reasonable person would have inferred any of the four alleged misrepresentations. In particular, Cooke J commented that “linking a payment obligation to a LIBOR rate cannot be enough to give rise to a representation about how that LIBOR rate was, is, or will be, compiled”. The mere fact of (a) a bank being a member of the LIBOR panel and (b) entering into an interest swap rate agreement, does not automatically give rise to any of the implied representations alleged by the Defendants.

Although acknowledging that less weight would be given to them in a claim alleging dishonesty, Cooke J set out at length the disclaimers in the swap and credit facility documents. These made clear that the Bank was not making any recommendation and that it was for the Defendants to rely on their own judgement as to whether to enter the transactions. In his view, these terms also militated against a finding that the representations had been made.

In respect of representations (1) and (2), these concerned the way in which LIBOR came to be compiled and would have the effect that the Bank made representations about matters which were entirely beyond its control. Cooke J considered these representations unrealistic since they are so broad and uncertain that they go “far beyond anything any reasonable representee could imagine”. If permitted, they would also have meant that every panel bank could be taken as making those representations about the way LIBOR was produced.

In respect of (3) and (4), Cooke J felt there was a real difference between an implied term that a bank will not manipulate the LIBOR rate specified in the particular contract and the much more wide- ranging representations for which the Defendants were arguing. Whilst the former might readily be implied since it would specifically relate to proper performance of the contract, in the absence of any relevant express representation and where disclaimers in the documents strongly suggest otherwise, Cooke J was unable to find that these representations could be implied just because the Bank is a panel bank.

Given the failure to establish that any of the representations would be implied, both the misrepresentation claim and the negligence claim could not succeed. Cooke J also observed that, barring allegations of dishonesty, it would be difficult to see how a duty of care could be established either in view of the disclaimers in the contractual documents.

In respect of the warranty claim, Cooke J identified various difficulties. In particular, a collateral contract in the form of an alleged warranty would conflict with entire agreement clauses in the contractual documents; and in any event none of the representations as pleaded would satisfy the criteria for being implied as a warranty (A.G. of Belize v. Belize Telecom Ltd [2009] UKPC 10).

Finally, in respect of the relief sought, namely discharging the Defendants of their liability under the swap and the credit facility, Cooke J commented that the legal basis for this “is unknown”. He also pointed out various other difficulties, not least that many of the lending group were not panel members, making it even more implausible that any representations would have been made by them.

Accordingly, on the evidence presented in respect of the pleaded amendments, none of them exceeded even the low applicable threshold. Permission to amend was therefore denied.

Interaction with Graiseley v. Barclays

In reaching his decision, Cooke J recognised that there was no great distinction between the facts in this case and those in Graiseley which Flaux J had decided differently.

In Graiseley, Cooke J noted that Flaux J placed reliance on the fact that Barclays was aware of the consequences of manipulating LIBOR rates on contracts that refer to it. However, Cooke J stressed that this should have no bearing on the test for whether any given representation has been made. Although Cooke J noted that every case will turn on its facts, it appears he considered that Flaux J had erred by focusing on the knowledge of Barclays, rather than asking what a reasonable person in Graiseley’s position would have understood Barclays to be representing.


The decision in this case (especially in respect of implied representations (1) and (2) and the emphasis placed on disclaimers in the contractual documents) will be comforting to those banks who are or have been embroiled in LIBOR investigations. However, every case will turn on its facts and where there has been some express conduct or statement made prior to a contract forming, it will be much more likely that an implied representation might arise.

There were hints within the judgment that, had the representations been pleaded differently, then they might have been more likely to be allowed. In particular, it was notable that the Defendants did not seek to argue that there was any implied promise not to manipulate the LIBOR rate in the contracts in a way which might alter the Defendants’ payment obligations. Presumably this was because any damages which might flow from breach of such an implied term would be difficult to prove given the limited impact Deutsche Bank’s submissions would have had. It remains possible that in other cases these sorts of arguments might be put forward and it may be possible to overcome this difficulty if it could be shown that the bank concerned was part of a wider LIBOR-rigging conspiracy.

Therefore, although Cooke J considered on these facts and pleadings that none of the amendments would have a realistic prospect of success, he did not rule out the possibility of a successful future application to amend to plead different claims relating to LIBOR. He also granted the Defendants permission to appeal since it is plainly unsatisfactory to have two recent inconsistent judgments on a point which is of general importance given the potential for widespread litigation.

Banks and their lawyers will want to watch this space to see if any further application or appeal is made. A decision by a higher court would provide some much needed clarity in this regard. Until then, banks should remain prepared for the fact that the courts may allow existing claims to be amended to include claims for implied misrepresentation relating to LIBOR. Whether or not such claims can then be proven at trial remains to be seen.