There are a number of high profile banking cases coming to the High Court and appellate courts: we highlight a few of these as ‘ones to watch’ later this year.
Lehman Brothers Limited (In Administration) v Lehman Brothers International (Europe) (In Administration) (Waterfall I) – Supreme Court decision expected
Following the hearing in October 2016, the Supreme Court is expected to make the latest decisions in relation to the distribution of the surplus in the Lehman Brothers administration. Although a surplus in an administration is unusual, the judgment will rule on whether creditors of LBIE are entitled to claim for currency losses suffered by them as a result of the decline in sterling, and the ranking of those claims. Foreign currency creditors are estimated to comprise 2 per cent of the total creditors of Lehman and the balance of those creditors’ unpaid foreign currency claims against LBIE is estimated to total £1.6 billion.
Dunbar Assets plc v Julie Anne Davey – High Court decision
This claim, which concerns Dunbar’s responsibilities as a secured lender, led to a trial in the summer of 2016. The decision is expected in the first half of 2017 and should provide guidance on the responsibilities and duties of a bank when it appoints administrators over a borrower and its assets.
Coming in March 2017…
Abdullah v Credit Suisse – High Court trial
This claim concerns the alleged mis-selling of structured products during the financial crisis. It is alleged, among other things, that the products were not suitable for the Claimants’ investment objectives. Trial commenced in late November 2016, but was adjourned part way through in light of the ill-health of the Defendants’ expert witness. Trial will resume in late March 2017.
National Bank Trust v Ilya Yurov and others – High Court trial
This $830 million fraud claim is pursued by the new owners of one of Russia’s largest banks, which had previously been the recipient of a $1 billion bailout, against three former shareholders and directors and their wives. It is alleged that the shareholders used the bank’s money to fund loans to their own business ventures, and deliberately concealed the loans from the bank. The court provided guidance last year on applications to discharge freezing orders on the grounds of alleged material non-disclosure.
Coming in April 2017...
The Libyan Investment Authority (LIA) v Société Générale S.A and others – High Court trial
This trial follows an unsuccessful claim by LIA, Libya's sovereign wealth fund, against Goldman Sachs in 2016. LIA claims around $2.1 billion for schemes that it alleges are corrupt, involving trades entered into in 2007 and 2008. Originally scheduled to go ahead last year, the trial was pushed back, reportedly following arguments from the defendant that it needed time to resolve disclosure related issues and in light of the recent turmoil in Libya.
The Joint Administrators of Lehman Brothers International (Europe) (In Administration) (LBIE) v Burlington Loan Management Limited and others (Waterfall II, Tranches A and B) – Court of Appeal hearing
These cases also concern the substantial surplus in the administration of LBIE and are due to be heard by the Court of Appeal in April 2017. Tranche A concerns the correct calculation of statutory interest and, to the extent that they exist (pending the Supreme Court’s ruling in Waterfall I), currency conversion claims. Tranche B concerns the effect of release clauses in post-Administration contracts entered into between LBIE and its creditors.
Coming in May 2017…
RBS Rights Issue Litigation – High Court trial
Two group actions against banks, RBS and Lloyds, are set to be heard this year. The first, scheduled for 12 weeks beginning in mid-May 2017, is the RBS Rights Issue Litigation, which will be one of the largest trials in 2017. It concerns allegations that the prospectus for the rights issue of RBS in 2008 contained material misrepresentations. The claim was brought by groups of shareholders, all but one of which have now agreed to settle, leaving the final group, largely made up of retail investors, to fight a claim valued at £1 billion. The case, which has already produced an important interlocutory decision on the extent of privilege in investigation materials, is likely to raise important issues regarding prospectus liability for banks.
UBS AG (London Branch) and another v Kommunale Wasserwerke Leipzig GmbH (KWL) and others – Court of Appeal hearing
The Court of Appeal will hear UBS’s appeal of the High Court decision entitling KWL, a German municipal water company, to rescind various derivatives and avoid liability for close-out amounts amounting to over $300 million. The appeal will provide important guidance on the responsibility of a bank for the actions of its intermediary agents.
Coming in October 2017…
Stuart Wall v The Royal Bank of Scotland plc – High Court trial
One of the swaps mis-selling and LIBOR manipulation claims to be heard against RBS this year, this case will also address allegations made against RBS for disclosure failings. The case is already notable for an interim decision in September 2016 that RBS was entitled to know the identity of the claimant’s third party funder for the purposes of pursuing an application for security for costs against the funder under CPR 25.14. This is a helpful decision for defendant banks who might otherwise be deprived of the opportunity to pursue similar applications against funders seeking to remain anonymous. An interesting point which the court will consider is whether the claimant’s after the event insurance cover will defeat RBS’ application for security for costs.
Sharp and others v Blank and others (the Lloyds shareholder litigation) – High Court trial
The second group action against a bank to be heard this year is the claim brought by shareholders of Lloyds TSB against the bank and its directors relating to the takeover of Halifax Bank of Scotland. Valued at around £350 million, the case has produced important decisions relating to the circumstances in which a company can claim privilege against its shareholders, and the limits of fiduciary duties owed by directors to a company’s shareholders. Further points of wider interest regarding the breadth of a bank’s disclosure obligations in relation to its shareholders are expected from the trial later this year.
Fortress and others v BNP Paribas and others – High Court trial
BNP Paribas is defending a claim that it was responsible for the failure of a $650 million Islamic finance transaction, allegedly arising from the failure to execute the transaction with a ‘wet-ink’ signature from the individual behind the deal.
Coming in November 2017…
Bank Mellat v HM Treasury – High Court quantum hearing
Bank Mellat, an Iranian private bank, seeks £2.3 billion of damages from HM Treasury. The claim arises from a long running dispute concerning a financial restrictions order imposed on Bank Mellat under the financial sanctions regime, which prevented people from doing business with the bank. The UK Supreme Court ultimately quashed the order on the basis that it was irrational, disproportionate and procedurally defective. The High Court will now assess Bank Mellat’s damages claim, brought under section 8 of the Human Rights Act 1998, for loss of profit.
Also coming in 2017…
Walter Hugh Merricks CBE v Mastercard Incorporated and others – decision on collective proceedings application
In January 2017, the Competition Appeal Tribunal heard an application for a collective proceedings order against Mastercard. If granted, the order will allow Mr Merricks to act as the representative for a potentially vast class of consumers in a claim valued at £14 billion, and would be only the second opt-out class action brought under the reformed collective damages regime. Judgment on the application was reserved. The proceedings follow a wave of litigation brought by retailers against Mastercard over interchange fees relating to credit and debit card transactions, which allegedly were anti-competitive and resulted in overcharging of consumers. In proceedings brought by Asda and other large retailers against Mastercard, the High Court recently determined in favour of Mastercard on liability issues. Consideration of issues relevant to quantum will follow.
Diane Hockin and others v The Royal Bank of Scotland plc and another - Trial
Originally due to be heard in January 2017, this trial was adjourned pending judgment on the claim brought by Property Alliance Group Ltd (PAG) against RBS, which involved overlapping issues in relation to interest rate swaps mis-selling and LIBOR manipulation. That judgment, in which PAG’s claims were dismissed, was handed down in December 2016, clearing the way for the Hockin trial which is expected to provide further guidance on the bank’s duty of care when entering into swap transactions and the approach to claims relating to LIBOR manipulation. PAG has since filed an application at the Court of Appeal for permission to appeal.
The Joint Administrators of Lehman Brothers International (Europe) (In Administration) (LBIE) v Burlington Loan Management Limited and others (Waterfall II, Tranche C) – Court of Appeal hearing– expected to be listed
This case follows on from Tranches A and B and concerns the amount of interest payable to ISDA master agreement and other counterparties following close out of derivative contracts after commencement of the administration. In particular, the Court of Appeal will consider the High Court’s decision of default interest being based on the non-defaulting party’s cost of borrowing, rather than on a wider basis such as costs associated with equity funding.
Thornbridge Limited v Barclays Bank plc – Court of Appeal hearing
In another swaps mis-selling case, the appeal of the High Court’s decision in favour of Barclays will give the Court of Appeal opportunity to consider the circumstances in which an advisory duty will arise.