Hockins’ Hopes Rewarded whist Defending Banks’ Demands Dashed 

In Hockin v Royal Bank of Scotland and Anotherthe Court considered two applications: the Defendant Banks' application to strike out parts of the Claim and the Claimants’ application to amend the Particulars of Claim. The strike out application was concerned for the most part with whether the Claimants could rely upon an alleged implied duty to act in good faith on the part of the Banks in the performance of the terms of a loan facility – what was described as the GRG claim. The Claimants argued that that application had been overtaken by their subsequent application to amend which sought to add significant additional claims and/or to particularise the GRG claim by reference to an unlawful means conspiracy claim and detailed further allegations of deceit or negligent misrepresentation. This report focuses on the GRG claim and related issues but it should be noted that the Claimants also sought to make amendments to their mis-selling and LIBOR misrepresentation claims which were opposed by the Bank but allowed, at least in part. 

London West & Country Estates Ltd (“LWE”) an owner/operator of commercial business parks, was a wholly owned subsidiary of a holding company owned by the first and second Claimants, Mr and Mrs Hockin. In 2008, LWE entered into a 3 year, £55 million facility with the Banks with interest referable to LIBOR (the “2008 Facility”), and a 10 year Bank callable interest rate swap, the swap being a precondition of the 2008 Facility. A year later, the Defendants placed LWE into their global restructuring group ("GRG"). After a period, the 2008 Facility was assigned to a company referred to as 'Isobel', a joint venture between the Defendants and Blackstone private equity group at what was alleged to be a considerable discount. Isobel placed LWE into administration. LWE assigned its rights of action against the Defendants to the Claimants by a Deed of Assignment dated 20 March 2014. 

The Defendants sought to strike out the GRG claim on the basis that the Claimants lacked legal standing to bring the claim because it did not fall within the terms of the assignment between them and LWE which was concerned with rights of action in relation to the swap not the 2008 Facility on which the GRG claim was based; that the Claimants’ arguments as to an implied duty of good faith in the operation of the 2008 Facility were bad in law (the Banks also sought to rely on this point to oppose the related amendments); and that the claim was an abuse of process because it was inserted into the Particulars of Claim without any belief in it and as part of a fishing expedition to obtain material on disclosure for the purposes of mounting a claim.

Mrs Justice Aplin rejected each of these arguments and declined to strike out the claim. She found that despite the absence of reference to the 2008 Facility in the Deed of Assignment, the language used was wide enough for the Claimants to reasonably argue that the GRG claim and the related claims flowed from the mis-selling of the swap as a matter of causation and because entry into a hedging instrument acceptable to the Banks was a term of the 2008 Facility. She also found that it was not possible on the evidence before her to conclude that there were no reasonable grounds for bringing the GRG claim and/or to conclude that the permission to amend should be refused. Doing so would be to come to a conclusion in a factual vacuum. Finally, she rejected the notion that the inclusion of the GRG claim was an abuse. This was not a case where the claim had been included in order to extract disclosure to support it.  

The case is notable for the sheer range of claims and arguments that the Claimants are deploying against the Banks and the apparent willingness of the court to allow these to be considered at trial.  

A Settlement Agreement that covers deliberate wrongdoing 

In Tchenguiz & Ors v Grant Thornton UK LLP & Ors [2016] EWHC 865 (Comm) (20 April 2016) the Commercial Court found that a Settlement Agreement in respect of earlier proceedings compromised the Claimants' potential claims of conspiracy, malicious procurement and execution of search warrants and malicious prosecution against the Defendant, Johannes Runar Johannsson, a member of the Resolution and Winding-Up Committees of Kaupthing Bank HF ("Kaupthing"). The court gave Mr Johannsson summary judgment as a result.

The claims against Mr Johannsson arose from a Serious Fraud Office (SFO) investigation into Mr Tchenguiz and others' role in the collapse of Kaupthing which was terminated in 2012 without any allegation of criminal conduct or other wrongdoing being continued or advanced against Mr Tchenguiz.

The Claimants alleged that this investigation had been instigated by Mr Johannsson and Kaupthing in 2009 and 2010 in order to put pressure on Mr Tchenguiz in connection with lending made by the bank to companies with which he was associated and related security and to settle connected proceedings he had begun in the Commercial Court and in Iceland.

The proceedings in the Commercial Court and Iceland were settled in September 2011 on the Claimants' case on the best terms then available to Mr Tchenguiz. The settlement terms released claims by reference to subject areas and included the release of claims concerning "investigations carried out or actions taken by any authorities in relation to any of the [Tchenguiz related parties] or the affairs of Kaupthing or its counterparties" and the"provision of any documents or information to any authority". The parties to the settlement terms were legally advised.

As a matter of construction the Court held that the specificity of this wording and the surrounding circumstances, including the SFO investigation of Mr Tchenguiz, left no room for doubt that the SFO was one of the authorities to which the parties were referring. Viewed objectively the only claims that the parties could therefore have been looking to compromise here were claims based on allegations of misconduct or deliberate wrongdoing. While in most cases it was unlikely parties would agree the release of fraud based claims and could do so only by reference to very clear language, the position here was different. Here if the question were asked whether the release of claims against them concerning investigations by authorities extended to claims of misconduct or deliberate wrongdoing whatever their exact nature, they would have said, yes. On its true interpretation, the settlement agreement therefore compromised the claims brought.

Regulatory Decisions

Insider dealers sentenced in Operation Tabernula trial

Following an investigation by the FCA, conducted in partnership with the National Crime Agency, Martyn Dodgson, a senior investment banker, and Andrew Hind, a Chartered Accountant, were sentenced on 12 May 2016 at Southwark Crown Court to 4.5 years and 3.5 years imprisonment, respectively, having been convicted of conspiring to insider deal between November 2006 and March 2010.

Dodgson sourced inside information from within the investment banks at which he worked, either through working on transactions himself or through being able to see what his colleagues were working on. He passed on this inside information to Hind who then affected secret dealing for the benefit of Dodgson and himself.

Dodgson's sentence is the longest ever to have been handed down, in what has been described as the FCA’s largest and most complex insider dealing investigation.

Confiscation proceedings will also be pursued against both defendants.

FCA fines and bans financial adviser for insider dealing

The FCA has fined Mark Taylor, a financial adviser, £36,285.00  and issued a Prohibition Order against him for at least 2 years for engaging in market abuse. It is understood that, had it not been for Mr Taylor's financial hardship, the FCA would have imposed a penalty of £78,819.00.

The FCA found that Mr Taylor, who had worked at Towry Limited for 2.5 years, bought shares in another firm, Ashcourt Rowan plc, based on inside information provided to him by mistake during his time at Towry.

In February 2015 Towry made an offer to acquire Ashcourt Rowan, a wealth management company, for £2.70 per share and discussions continued into March 2015 without a deal being finalised.

On 12 March 2015, prior to any public announcement being made, an internal email was sent to all Towry staff stating that the firm had increased its offer for Ashcourt Rowan to £3.49 a share. Following an attempt to recall the message, a further email was sent to all staff warning them not to act on the information as it was potentially inside information.

Having read both emails and the attempted recall, Mr Taylor, used his online trading account to purchase 5,582 shares in Ashcourt Rowan for a total of £15,011.82. After the public announcement of the increased offer for Ashcourt Rowan, Mr Taylor then sold his shares for £18,509.91 making a profit of £3,498.00.