The High Court has dismissed claims that Barclays Bank PLC had undertaken an advisory duty and breached its obligation not to mislead when agreeing an interest rate swap with the borrower inThornbridge Ltd v. Barclays Bank PLC. Thornbridge and Barclays entered into an interest rate swap intended to protect the borrower against interest rate rises; interest rates then fell to historic lows and the borrower paid much more under the swap than expected. Thornbridge alleged Barclays failed to provide adequate information regarding break costs and failed to set out the advantages or disadvantages of other hedging products. The court held:

  • Barclays did not recommend the swap; the claimant should have understood any comments Barclays made regarding interest rates to be predictions rather than formal advice. The bank had no obligation to supply information in the absence of an advisory relationship, though it did have a duty not to mislead. The interest rates could not have been foreseen, and though there was a misleading statement in respect of interest rate caps, this had not caused the borrower loss;
  • even if Barclays had given advice, Thornbridge was contractually estopped from claiming that Barclays had advised it to enter into the transaction because the relevant clauses were basis clauses, not exclusion clauses; and
  • the swap had fulfilled its intention: to limit the liability of Thornbridge against rising interest rates, and had thus not been unsuitable.

(Source: High Court Rules No Advisory Duty for Bank over Interest Rate Swap Connected to Loan)