In the latest decision regarding LIBOR claims (Property Alliance Group Ltd v The Royal Bank of Scotland Plc [2015] EWHC3272 (Ch)), Property Alliance Group Ltd (PAG) has been allowed to amend its Particulars of Claim against The Royal Bank of Scotland (RBS) to include a plea for fraudulent misrepresentation.


PAG, a property developer, entered into four interest rate swap contracts with RBS between October 2004 and April 2008. This was to hedge the interest due under various loan facilities with RBS. Each of the swaps used GBP LIBOR as a reference rate. LIBOR is the rate at which banks are able to borrow funds from one another, and is set by banks making daily submissions on rates to the British Bankers Association. PAG brought a claim against RBS alleging that RBS mis-sold the swap contracts which amounted to a misrepresentation and breach of contract.

Following disclosure PAG sought to amend its Particulars of Claim to include a plea for fraudulent misrepresentation. It has been recognised by commentators that cases alleging LIBOR manipulation may encounter difficulties in calculating damages. Permission to plead fraudulent misrepresentation could therefore diminish this problem. This is because the court would have discretion to order recission (restoring parties to the position before the contracts were entered into) and damages. In this case, this would include the sums paid under the swaps (about £5 million) and £8 million paid to RBS in June 2011 to terminate the swaps.

The Application

PAG applied on 16 October 2015 to amend its Particulars of Claim. PAG sought to introduce an amendment that RBS made LIBOR representations fraudulently. This arose from PAG's review of the disclosure given by RBS. In conjunction with this amendment, PAG applied for further disclosure. The court expressed that "allegations of fraud are subject to special scrutiny" and cited The Chancery Guide, paragraph 2.8 which requires "full particulars of any allegation of fraud to be set out". Relying on a long line of established authority including Belmont Finance v Williams Furniture [1979] Ch 250 and Three Rivers v Bank of England [2001] UKHL 16 the court was clear that "an inference of dishonesty…must be pleaded and proved". Thus, assertions of fraud are "easy to make but difficult to prove". This set a high threshold to satisfy in order to introduce a plea for fraudulent misrepresentation.

PAG asserted that RBS made the LIBOR representations fraudulently in that RBS "knew the representations were false, had no belief in their truth or was reckless about it". Despite the high test involved in asserting an allegation of fraud, PAG were able to set out detailed information on which their allegations were based. This was because disclosure revealed a picture very different to the knowledge that was before the court when proceedings began.

The key knowledge relied upon to prove this included evidence listed in the Schedule attached to the Particulars of Claim which is at the "heart of PAG's case on LIBOR". This listed communications revealed during disclosure of ten key individuals who had relevant knowledge that customers were entering into transactions by reference to LIBOR in which the representations were false:

  • A calendar reminder set on 11 September to remind Mark Thomasson to submit a low 6 month GBP LIBOR rate on 16th September 2009 at the request of RBS derivatives traders who had transactions set by reference to 6 month LIBOR that were due to fix on that date. On that date Mr Thomasson made a submission that was 5 basis points lower than the submission made on the previous day;
  • An email dated 16th August 2007 from John Ewan (the managing director of the BBA) to Graham Niblock and Mark Thomasson (RBS). This email relates to “ongoing problems with the inter-bank market”. He points out that “currently there is no London interbank market”. Another issue to be discussed is “how best to defend ourselves against potential accusations that the current rates are not a genuine reflection of the market”;
  • A record of a teleconference on 20th August 2007 involving Paul Walker of RBS with a representative of a hedge fund in which Paul Walker states "people are just setting their LIBORs, you know, to suit what they've got on their book";
  • References in documents in November 2007 to “a meaningless benchmark”, “almost an irrelevant indicator”, and “LIBOR is kind of false at the moment”; and
  • On 29th November Paul Walker responded to an email from Mark Thomasson relating to a communication from John Ewan at the BBA in which Mr Walker wrote “Citibank, UBS and Deutsche put in regular Libors way below the market … UBS don't really trade cash anyway, they set their Libors as many banks do to suit the Derivative Fixes. With no underlying cash market what do the BBA expect??????”.

Understandably, the court commented that the above "contents are striking". PAG alleged that given the "number of employees involved and their seniority the allegations show an approach and attitude within RBS to the manipulation of LIBOR that goes well beyond isolated instances of wrongdoing and amount to an ongoing regime within RBS in which misconduct relating to LIBOR was practised and condoned".

The material relied upon by PAG provided ample support for an inference of fraud and dishonesty at the "highest levels of RBS". This was sufficient to justify permission to amend the Particulars of Claim. RBS was also granted permission to submit an Amended Defence. The application for additional disclosure was also granted relating to the ten individuals listed in the Schedule.


The consequences of this decision will have far reaching ramifications for all customers of banks considering pursuing LIBOR manipulation claims, particularly against RBS. The granting of permission to include a claim for fraudulent misrepresentation means that PAG can not only claim damages but also rescind the contract. This case will continue to be watched with interest by lawyers, bankers and their clients alike.

A copy of the case can be found here.