The terms of an ISDA agreement in which the parties represented that they had relied on their own independent decisions to enter the transaction trumped provisions in an earlier set of terms of business which referred to the bank providing advice and recommendations. A tortious breach of duty to advise claim also failed because the court found on the facts that the client had not relied on the bank to provide advice: Marz Limited v Bank of Scotland plc [2017] EWHC 3618 (Ch), 5 December 2017

In 2008, as a condition of lending to Marz Limited (Marz), Bank of Scotland plc (BoS) required the company to hedge against the interest rate risk on a portion of the loan. Marz accordingly entered into an interest rate swap (Swap) with BoS. Marz claimed that BoS breached a contractual duty to ensure that the Swap was suitable and breached a common law duty to take care in advising Marz. The court found for BoS in both respects.

Contractual claim fails – ISDA Master Agreement trumps inconsistent terms of business

BoS sent its Terms of Business (Terms) for Retail Clients to Marz in February 2008 under cover of a letter that stated BoS would be providing “advisory and execution services”. The Terms provided, amongst other things, that where BoS made a recommendation to the client, BoS would take reasonable steps to assess whether it was suitable (clause 5). The Terms also provided that where there was conflict between the Terms and another agreement (and gave the example of an ISDA), the other agreement would prevail (clause 2.2).

The parties later documented the Swap under an ISDA Master Agreement, Part 5(2) of which provided that, absent written agreement expressly imposing affirmative obligations to the contrary, each party represented as at the date of the transaction that it had not relied upon the other party and had made its own independent decisions, was capable of assessing the merits of and understanding the transaction and assuming the risks of the transaction and that the other party did not act as its fiduciary or advisor in respect of the transaction.

The court held that Part 5.2 of the ISDA Master Agreement was in “wholesale conflict” with clause 5 of the Terms and the effect of clause 2.2 of the Terms was that Part 5.2 of the ISDA prevailed as a “comprehensive, subsequent and specifically applicable set of contract terms relating to the Swap”. Specifically, the court considered that the Terms did not constitute a written agreement expressly imposing affirmative obligations contrary to Part 5(2) because clause 2.2 of the Terms specifically provided there where there was a conflict between the Terms and another agreement, the other agreement would prevail.

No duty of care owed regarding Swap

Marz claimed that:

  • BoS gave it advice on the merits of entering into the Swap and purported to explain the available hedging products in such a way as to enable Marz to take an informed decision; and
  • therefore owed common law duties of care in relation to its advice and/or its explanation of the options.

No reliance

The court considered that the question of whether BoS assumed a duty needed to be assessed objectively in the context of the whole relationship between the parties, including the contractual framework and the communications that passed between them. Marz pointed to emails from the bank in which sales staff suggested that a seven-year hedging arrangement was “probably the most suitable for the customer” and that the client could potentially make “quite staggering” and “huge” savings. The salesman also noted that he thought the Swap would be of “great benefit” for the customer. The court considered that this was “obvious sales-talk” and noted that the Product Profile provided in relation to the Swap did not contain a recommendation, but did contain a disclaimer which was inconsistent with the proposition that the bank was advising the customer on the suitability of the product.

The court also found as a matter of fact that Marz had not relied on BoS anyway. It had its own team of advisers and the director with whom BoS negotiated the loan and Swap, Mr Adil, had considerable experience and knowledge of hedging products, including interest rate swaps. The court further found it relevant that Mr Adil had not wanted Marz to enter into a hedging product and that Marz entered the Swap not because Mr Adil was persuaded by BoS that it would be beneficial, but because it was a condition of the loan that Marz wanted to obtain.

Contract pointed away from concurrent tortious duties

The court also considered that the parties’ rights and obligations were largely fixed by their contractual agreements and these “did not leave much if any room for concurrent duties of care on the part of BoS in tort”. The court considered the doctrine of contractual estoppel, under which a customer is unable to deny the existence of a particular state of affairs which the parties recorded as the basis on which they had agreed to contract. While acknowledging that Springwell Navigation Corp v JPMorgan Chase Bank (formerly Chase Manhattan Bank) & ors [2010] EWCA Civ 1221 was binding authority, the court regarded the current case “more as a matter of contract than estoppel”, in which the parties were bound by their agreement that there was no advisory relationship and the customer had made its own decisions, without reliance on advice from the bank.


This is the latest in a long line of, and is consistent with, unsuccessful misselling cases arising from the 2008 financial crisis. The judgment demonstrates that the English courts continue to approach these cases through an objective assessment of the impact of the contractual and factual context as a whole. The courts will not be easily persuaded that “sales talk” constitutes ‘advice’.