Agents for syndicates of financiers can take some comfort from a recent decision in which the English High Court held that a syndicate Agent’s duties are defined by the contract between it and the lenders: Torre Asset Funding v Royal Bank of Scotland plc [2013] EWHC 2670 (Ch) (3 September 2013). The Court dismissed a claim against Royal Bank of Scotland plc (“RBS”) arising out of a highly-leveraged commercial real estate financing entered into shortly before the onset of the global financial crisis.

The decision is especially interesting for its analysis of an Agent’s role as being “solely mechanical and administrative in nature” and the fact that the conclusion was reached despite RBS having multiple roles in the transaction.

It is not certain that an Australian court would reach the same conclusion, because of the Australian courts’ slightly different approach to fiduciary duties and conflicts in a commercial context, and our misleading and deceptive conduct statutes, but this English decision will nevertheless be of interest to facility agents.


RBS acted as Agent and a Lender in a series of facilities made available to a property company, Dunedin Property Industrial Fund (“Dunedin”). The facilities that were relevant in this case were two of the three mezzanine facilities, the B1 Facility and the B2 Facility. Torre Asset Funding (“Torre”) and RBS were Lenders under the B1 Facility. All the Facilities contained covenants relating to interest cover ratios and loan-to-value ratios. The loans were advanced in October 2006. By mid-2007, it was clear that Dunedin was not generating as much income as expected and by late 2007, valuations indicated a decline in the value of the portfolio. Concerns about the ability of Dunedin to continue to meet its interest payment obligations led RBS to propose rolling up the B2 Facility’s interest until the maturity of the loan. Ultimately, the proposal stalled when a Lender under the A Mezzanine Facility declined to approve it. Subsequently, property values dropped sharply, as did Dunedin’s income from lettings, and Dunedin gave notice of a default in July 2008. Administrators were appointed and Lenders in several layers of the financing structure did not recover any of their loans.

The issues

Torre made a number of claims relating to the provision of information by RBS. Torre alleged that the team within RBS managing the B1 and B2 loans was aware of events that constituted a default in July 2007 and had a duty to inform Torre of the default but failed to discharge that duty. Torre argued that, had it known about the default, it would have sold the loans and avoided the loss that it eventually suffered.

The decision

The judge found that there had, in fact, been a default in July 2007, as a result of Dunedin starting discussions with RBS to restructure the B2 Facility. Torre’s claim failed. The reasons for this finding were:

  • There was no general duty at common law on RBS to inform Torre. Nor was there a relevant express contractual duty. The Facility Agreement, which was based on standard LMA terms (which are very similar to those in APLMA documents commonly used in Australia), circumscribed and limited the scope of the agency and contained the usual broad exclusion of any fiduciary relationship. The agency relationship in this case was fully defined by the contract between the parties.
  • No duty should be implied, because it was unnecessary in the context of complex transaction documents carefully negotiated and entered into on arms’ length terms.

Finally, the judge held that, although RBS owed Torre a duty of care, Torre’s loss was not of a type covered by that duty of care. In any case, since RBS had not acted with “gross negligence” or demonstrated “wilful misconduct”, the exclusion clauses in the Facility Agreement protected it.


The case is interesting because it confirms that the English courts will give effect to the agent-protection provisions of LMA-based Facility Agreements. This continues a theme in disputes between agents and syndicate members, as sophisticated parties engaging at arm’s length, of the supremacy of the contractual framework between them. The judge reviewed several recent decisions on interpretation of complex financial documents in reaching his decision, and the message is that, for the English courts at least, the Facility Agreement means what it says. Whether an Australian court would reach the same conclusion is less clear, although it is likely to do so absent behaviour which engages the misleading and deceptive conduct statutes or provokes closer scrutiny of the fiduciary and conflict elements of the relationships between the parties.