In this crucial judgment, Picken J dismissed Marme’s claim for misrepresentation in which it sought rescission of interest rate swaps with five banks (or €996 million in damages).

The claim arose out of a 2008 Spanish property deal (described as "Europe's largest ever property deal"), for which Marme obtained financing of some €1.5 billion from a syndicate of lenders. Marme agreed to pay interest at a rate referable to EURIBOR and also entered into five interest rate swaps with the five Defendant banks.

Following the 2008 financial crisis, Marme found itself unable to refinance and subsequently to repay the loan when it fell due in September 2013. In 2014 it entered into a Spanish insolvency process and then issued proceedings for rescission of the swaps (and / or damages in lieu) on the basis that Natwest had made untrue representations about the "integrity of the process" by which EURIBOR was set and that it had held itself out as having authority to act as agent of the other banks. But for that misrepresentation, it said, it would have negotiated more favourable finance terms.

Key points

The judgment covers a range of issues but of particular note are its findings on implied representations and reliance:

  • The test for implied representations is not the same as for implied terms. For an implied representation to be found, "clear words or clear conduct" are required;
  • The Court will not imply a representation from conduct in terms which are: "vague, uncertain, imprecise or elastic";
  • Whether or not a representation is implied is a question of fact, based on an objective determination, in which the natural assumptions of the "reasonable representee" may be a helpful guide. But, the Court can also consider what was "reasonably apparent to both the representor and the representee";
  • A wide-ranging or complex representation is likely to require "more" in terms of words or conduct;
  • The circumstances in which a "duty to speak" arises under English law are limited (and this was not such a case);
  • Unless it can be proved that the representee "gave any thought" to the representations at the time they were made, it will be impossible to prove reliance; and
  • To prove reliance, a causal link must be shown as to how the representee would or might (in the case of fraud) have acted differently had the representations not been made.

The representations about EURIBOR alleged here could not be implied, not least because there were no "clear words or conduct", and Marme was not aware of the alleged representations so could not be said to have relied on them.

Stephenson Harwood comment

This decision is likely to be welcomed by financial institutions facing claims arising from historic allegations of benchmark rate manipulation. It makes it clear that for a misrepresentation claim to succeed, the representee must have given some "conscious contemporaneous thought" to the fact that a representation was being made. If that cannot be evidenced, the Court will give short shrift to the idea of any reliance on a representation.