In an important decision for financial institutions and for the law of misrepresentation, the High Court has confirmed that a claimant’s conscious awareness or understanding of an implied representation is an essential element for a claim for misrepresentation Loreley Financing (Jersey) No 30 Limited v Credit Suisse Securities (Europe) Limited & Ors [2023] EWHC 2759 (Comm).

The decision is helpful for financial institutions facing such claims in two particular respects:

  • Requirement for awareness. The court’s consideration of the “awareness” requirement in the context of misrepresentation claims adds to the growing body of case law on this important topic. The court concluded that the law does require a claimant to prove that a representation (however made) is received by the representee and that to satisfy the requirements of reliance the representee must be aware of it / have it actively present to their mind when they act on it. The awareness requirement also logically precedes the presumption of inducement, so claimants will need to prove this first, before having the benefit of that presumption.
  • Assumptions based on conduct. The court rejected the notion that mere assumption of the representee based on the representor’s conduct is sufficient in terms of proving reliance on the representation. The awareness/understanding bridge between representation and inducement is always necessary and it is distinct from assumption. While the court conceded that the more obvious the representation, the more likely it is that the representee would have understood it to have been made, this does not remove the necessary requirement to evidence such understanding. The court therefore confirmed that inducement cannot be established by reference to the “counterfactual of truth” (i.e. had the representee known the true position they would not have acted as they did) without satisfying an awareness test.

The present claim builds upon previous cases which had considered the issue of the awareness requirement, with the bank seeking to rely on (amongst others), three IBOR-related representation cases: Property Alliance Group Ltd v The Royal Bank of Scotland plc [2016] EWHC 3342 (Ch), Marme Inversiones 2007 v NatWest Markets plc [2019] EWHC 366 (Comm) and Leeds City Council v Barclays Bank plc [2021] [2021] EWHC 363 (Comm) (see our blog posts here, here and here). These decisions pointed towards an established position that, in misrepresentation cases of this type, there is a relatively stringent awareness requirement.

While it may appear trite that a party alleging to have relied upon a representation must also be able to demonstrate that it was aware of the representation which was being made, the healthy debate which Mrs Justice Cockerill sought to quash with her decision in Leeds remained ongoing even following that judgment. Accordingly, her judgment in Loreley provides welcome clarity on the issue, in addressing much of the post-Leeds discussion/commentary.

The decision also has potential broader application to other types of claim which are analogous to, or share characteristics with, misrepresentation claims. In the context of a securities litigation claim under section 90A of the Financial Services and Markets Act 2000 (FSMA), for example, it can be expected that the awareness requirement will be deployed in at least two scenarios as part of the requirement that a shareholder establish that it reasonably relied on an alleged untrue or misleading statement. First, even if the statement which is said to be untrue or misleading is express, an awareness requirement would suggest that the claimant must adduce some evidence that it read the statement (or at least came to be aware of it through some credible means). Second, in the increasingly common scenario where the statement which is said to be untrue or misleading is, in fact, an implicit statement constructed by an aggregation of a number of statements which were made, this will be subject to the “awareness” requirement, as per ACL Netherlands BV & Ors v Lynch & Ors [2022] EWHC 1178 (Ch) (see our blog post).

In addition, the court also commented on the non-compliance with the new witness statement requirements set out in Practice Direction 57AC. The decision serves as a useful reminder of the risk to the weight given to witness evidence which arises when those rules are not complied with.

We consider the decision in more detail below.


In late 2007, the claimant (L30) paid US$100m to Credit Suisse (the Bank) for certain Notes (the Notes), which formed the basis of a synthetic Collateralised Debt Obligation (CDO) transaction. Following the financial crisis, L30 lost its money in 2010 and sought to claim that money back. The products in question were complex. The Notes were not self-standing in that they were linked, via a credit default swap, to the credit of a reference portfolio which comprised 100 residential mortgage-backed securities (RMBS). In turn, each RMBS itself packaged a number of underlying individual mortgage transactions, in that it comprised rights to cash-flows arising from pools of underlying mortgage loans. Of those 100 RMBS, seven RMBS were ones which had been packaged, securitised or underwritten by the Bank (or its affiliates).

L30 alleged that, in selling the Notes, the Bank made certain representations about both the CDO transaction and the securitization of the RMBS, that the representations were false, made either deliberately or negligently, and that L30 would not have entered into the transaction if the representations had not been made.

The representations advanced were wide-ranging and complex, concerning:

  1. the creditworthiness of the Notes and alleged conduct by the Bank affecting that creditworthiness;
  2. the rigorousness of the Bank’s compliance and due diligence processes concerning the securitization of the RMBS.

There were, in total, more than 30 different representations alleged, which were then grouped into different sub-groups at trial.

There were also issues for the court to consider concerning alleged negligence, unlawful means conspiracy and limitation (given on their face, L30’s claims were time-barred).



The court concluded that prior to November 2012 (being the agreed date for limitation purposes), L30 could with reasonable diligence have pleaded all the elements of its fraudulent misrepresentation and negligence claims which it ultimately pleaded in 2018, meaning that the protection of sections 32 and 14A of the Limitation Act 1980 was not available to L30. The claims advanced were therefore held to be time-barred. Despite this, the court went on to address the remainder of the claims.


Making of representations and reliance

On the misrepresentation claims, the court held that not only were none of the representations as alleged made, but they were not relied upon by L30. The court conducted a detailed analysis of the authorities in which the question of reliance has been considered and, in particular, the extent to which the relevant representation must operate on a claimant’s mind. The key points of general application are considered below.

Requirement of awareness

The court confirmed that the law of misrepresentation requires that a representation (however made) is received by the representee, and that to satisfy the requirements of reliance the representee must be aware of that representation and have it actively present in their mind when they act on it.

In reaching this conclusion, the court considered a number of authorities (including those specifically in the context of IBOR misrepresentation claims), which indicated that for a misrepresentation to be actionable, the representee must be aware of it: namely PAG, Marme and Leeds.

Referring back to her judgment in Leeds, Cockerill J emphasised that a representation must cause inducement, and that causative link must be capable of being discerned. There is a necessary and logical bridge between representation and inducement, which must exist in all cases of representation. It is sometimes referred to as “understanding” or “conscious thought” or “active presence”; or it may be referred to as “awareness”, which was the terminology preferred by Cockerill J in Leeds and the present judgment. The critical point is that this awareness requirement must be satisfied in all misrepresentation cases (express, implied, by words and by conduct or any combination thereof).

The court made the following important observations in respect of the awareness requirement:

  • The awareness requirement is an essential element of all misrepresentation claims. The court rejected the idea that the requirement of awareness is only necessary in certain instances. The court concluded that the awareness requirement is necessary for all misrepresentation cases, but acknowledging that satisfying the awareness requirement will differ according to the circumstances of the case.
  • A representation by conduct does not remove the awareness requirement. The court accepted that while simple representations by conduct may well correlate most closely to a “quasi-automatic” awareness, that does not mean (as has been suggested in some subsequent considerations of Leeds) that there is no requirement of awareness or understanding in simple representation by conduct cases.
  • Awareness vs assumption. In cases of simple representation by conduct, tests such as “contemporaneous conscious thought” are often inapt and other ways of expressing how the bridge between representation and reliance takes effect will be more apt. Accordingly, the court held that the awareness/understanding bridge is always necessary and it is distinct from assumption – though in simple cases (concerning non-complex representations), what is actually required to evidence awareness and understanding may look like assumption.
  • Presumption of inducement. The court considered the “presumption of inducement”, which infers inducement from the fact that a material misrepresentation was made and the claimant did enter the contract. Cockerill J restated her conclusion in Leeds that the awareness requirement precedes the presumption of inducement. Accordingly, the court must reach a finding as to whether the awareness requirement has been satisfied before taking the presumption into account.
  • Counterfactual of truth. The court also considered the “counterfactual of truth” argument, ie proof of what the claimant would have done if told the truth. In the court’s view, this test could never be sufficient to satisfy the awareness requirement. The court accepted that the “counterfactual of truth” test can be helpful in some cases, particularly if there is doubt as to whether a representation has been received or understood (citing as an example, Parabola Investments Ltd v Browallia Cal Ltd [2009] EWHC 901 (Comm)). However, the court pointed to a number of problems with this test, including that it is not necessary and may not be sufficient (per Raiffeisen Zentralbank Osterreich AG v The Royal Bank of Scotland Plc [2010] EWHC 1392 (Comm)). Ultimately, the court agreed with the bank that this test does not work as a gatekeeper, because it does not distinguish between mistaken assumptions not caused by conduct, and an understanding caused by the conduct/representation itself.
  • No single universally applicable test. The court rejected both the claimant’s and defendant’s attempts to pose a “single universally applicable test” for whether a representee is aware of a representation. Instead, the court focused on the need for the bridge between awareness and understanding. The court confirmed such a question is a nuanced one which will vary depending on the circumstances of the case.

Addressing the criticism of her judgment in Leeds directly, Cockerill J confirmed that she did not consider any of the reasoning in Spice Girls v Aprilia World Service BV [2002] EWCA Civ 15 or Gordon v Selico (1986) 18 HLR 219 justified a view that “inducement can be established by reference to the counterfactual of truth without satisfying at least an awareness test”. Cockerill J expressly noted that while some of the case law does suggest that reliance can be established by a link to assumption, the question of awareness does not appear to have been live at this stage of the argument before the courts in question.

Cockerill J noted that there were two hallmarks present in the cases her critics relied upon to evidence that there was no separately discernible requirement for “conscious awareness” of a representation:

  1. The first is the Gordon v Selico/Spice Girls type case, where the court held the representation is simple and cannot well be missed by the representee, as opposed to the present facts where the representation is said to be “capable of being implied despite complex contractual provisions, usually in complex multifaceted transactions”.
  2. The second is when the representation is one which is at the heart of the transaction so as to make it so obvious that the question of reliance is, in the light of that, likely to be susceptible of being decided by the presumption of inducement.

The court contrasted these hallmarks to the series of cases involving banking transactions, where the court regarded awareness as being far from obvious (because so much information is being conveyed (including much more explicitly) thus raising real questions as to whether a particular implicit message is received and understood by the representee). Indeed, the court commented that “proffering of a complex transaction … is not analogous to the ordering of a meal or the raising of an auction paddle”.

Reconciling these differences, the court explained that in the simpler cases, the answer is often either so obvious that there is no dispute, or the court may be prepared to elide the question of awareness into the presumption of inducement (emphasising that the latter is not the correct approach). However, that is unlikely to be the case in misrepresentation claims involving banking transactions.


The court further held that L30 had not proved its case on falsity in relation to the majority of its representations as alleged. The court did not address the Bank’s knowledge of the alleged falsity, deciding it was unnecessary for it to do so in light of its other findings.

Accordingly, Cockerill J concluded that her view remained that “the law does require that a representation (however made) is received by the representee and that to satisfy the requirement of reliance the representee must be aware of it/have it actively present to their mind when they act on it”.


In addition, the court’s approach to dealing with compliance with the new requirements of PD57AC in relation to witness statements was also of note. Several witnesses’ evidence was treated with some caution as they had been sent material they had not seen, meaning their witness statements did not record their unrefreshed evidence (or evidence based on their own knowledge). In addition, it became clear that some of the points in the statements were lawyer’s drafting, with an identical passage appearing in at least two statements. There had also been no conversation about one witness’s recollection of the transaction in question, prior to him being sent 100-150 pages of documents relating to it.

In this case, the issues arose because some witness statements were prepared at an interlocutory stage (where there is no need to comply with the new rules), but then also relied on at trial. The decision therefore serves as a salutary reminder as to the need to comply with the requirements of PD57AC when preparing trial witness statements, and to consider this issue earlier in proceedings when preparing evidence which may subsequently be used at trial. Otherwise, less weight may be attached to that evidence.

Other claims

Finally, the court considered L30’s alternative claim in unlawful means conspiracy based on unlawful means in the form of an alleged breach of Irish prospectus legislation and rules. Cockerill J decided that the Irish prospectus regime had a separate mechanism for compensating investors for untrue statements and omissions of required information, such that a remedy for an action in unlawful means conspiracy was unnecessary. Further, the claim also failed due to the unlawful means not falling squarely within the sort of duties which the Supreme Court in BTA Bank v Khrapunov [2020] A.C. 727 envisaged might constitute unlawful means for the purposes of a conspiracy.