Cameron Developments (UK) Limited v. National Westminster Bank Plc  EWHC 1884 (QB)
In July, HHJ Moulder struck out a claim by a property developer (Cameron), for consequential losses allegedly incurred as a result of entering into an interest rate swap. The sale of the swap was reviewed as part of the Interest Rate Hedging Product (IRHP) review process conducted by the defendant bank (the Bank) (amongst other UK banks), pursuant to an agreement with the FCA. Having reviewed the sale of the swap, the Bank offered Cameron redress by way of an alternative product and a cash sum. Cameron was also invited to submit details of any claim it wished to make in relation to consequential losses not included in the initial offer of basic redress.
Cameron accepted the offer of basic redress. In doing so it acknowledged that acceptance represented "full and final settlement of any claims, liabilities, costs or demands that [it] may have against [the Bank] arising under or in any way connected with the sale of this IRHP as identified above. For the avoidance of doubt this applies to any past, present or future claims, actions, liabilities, costs or demands, regardless of whether or not you are aware of them at the date of this letter." Cameron subsequently submitted a claim to the Bank for consequential loss. The claim for consequential loss was rejected by the Bank.
Cameron subsequently made a claim for consequential loss in the courts. The claims brought by Cameron in the court proceedings alleged mis-selling; however, in view of the acceptance of the offer of basic redress, it was common ground between the parties that there could be no recovery of direct losses resulting from the sale of the swap. In order to pursue its claim for consequential loss, Cameron made allegations regarding the way in which the Bank conducted the review of the sale of the swap. The Bank applied to strike out the claim.
At the time the strike out application was heard (10 July 2017), a judgment of the Court of Appeal was anticipated in the case of CGL Group Limited v. The Royal Bank of Scotland plc, considered above whether the Bank owed a duty of care to customers when conducting the IRHP review. Whilst the CGL decision was awaited, it was agreed by all parties that it would be assumed for the purposes of the application that the Bank did owe a duty of care in relation to the IRHP review.3
The main issues left to be determined by the court included, first, whether there had been a contractual agreement in relation to the Bank considering consequential loss in the review. If there was such an agreement, there was then the question of whether a claim on such a contractual agreement (along with the hypothetically agreed duty of care claim) was precluded by the terms of the settlement. The third issue was whether the contractual claim should be struck out or summary judgment granted.
The judge found that there was no evidence of any dealing between the parties to support the assertion that the Bank entered such a contract. There was no link between the acceptance of the basic redress offer and the review of a claim for consequential loss given consideration of consequential loss was not contingent on acceptance of a basic redress offer. The judge noted that the FCA's website stated that all customers who "receive" (as opposed to "accept") a basic redress offer have the opportunity to make a claim for consequential loss. The FCA's website was said by the judge to contain several features which negated any suggestion of a contractual relationship with regards to the review, including: the fact that the FCA did not require banks to give details of how redress calculations were made, as these were reviewed by the independent reviewers; the fact that customers were informed that the review process was overseen by independent reviewers; and the fact that customers were cautioned in relation to using lawyers as costs are unlikely to be recoverable.
The court found that, even if a contractual agreement was found to exist, a claim based on breach of it would have been precluded by the settlement agreed by acceptance of the basic redress offer. The court found that the use of the words "in any way connected with" the sale of the swap, on a literal reading, brought Cameron's challenge within the settlement. As the judge put it, "No review would be necessary unless the claimant fell within those category of customers who had been sold a swap." The judge was also persuaded by submissions that the settlement between the parties caught not only claims in existence but also those arising in the future.
In addition to a literal interpretation of the meaning of the language used in the settlement agreement, the court also found that the commercial context and practical consequences of the IRHP review was consistent with an interpretation that the settlement agreement was intended to preclude future challenges to the review process (outside of the mechanisms prescribed by the review process). The view of the court was that any distinction between the initial review and the consequential loss review was illusory rather than real, as the final determination took into account both the basic redress and any consequential losses, to reach a single final outcome. As the review was in essence a single process, it was not irrational to have a single settlement agreement dealing with it in its entirety.
The court therefore held that both the alleged contractual claim and the hypothetically agreed duty of care claim were precluded by the language of the settlement agreement and should be struck out.
This is one of a number of recent court cases where customers who participated in IRHP reviews conducted by various banks sought to re-open, re-review or reverse the outcome of those reviews by asserting a right to bring the review process itself before a court. The court's decision provides some clarity and assistance to banks, particularly in circumstances where a customer has accepted an offer of redress.