UK judges are among the most bank-friendly in the world as another decision shows.
In my blog post 21 August 2012, I bemoaned what I considered to be the failings in the English litigation landscape that have contributed to the woes of the victims of the interest rate swap mis-selling scandal. In particular, I referred to the fact that we have one of the most bank-friendly judiciaries in the developed world. That reputation continues, with the Court of Appeal upholding the decision of the High Court in Green & Rowley v RBS  EWHC 3661.
Having entered into an interest rate swap in 2005 to hedge against existing liabilities, business partners Mr Green and Mr Rowley alleged that they had been "mis-sold' the swap by RBS. The High Court found that no recommendation or advice had been given and so the bank owed no advisory duty of care. HHR Judge Waksman QC had ruled that while the bank owed a duty of care when making statements in relation to which it knew or ought to have known the men would rely upon its skill and judgment (the Hedley Byrne duty), this was not informed by the content of the Conduct of Business Rules (the "COB Rules").
In Green & Rowley v RBS  EWCA Civ 1197 the Appellants, who were time-barred from bringing an action under the then Section 150 of the Financial Services and Markets Act 2000 ("FSMA 2000"), appealed on the ground that where a bank arranges or executes a relevant transaction, the statutory duties under the COB Rules give rise to a concurrent common law duty of care to its customers to ensure they understood the nature of the risks involved in entering into the swap. Green and Rowley submitted that such a cause of action would protect those unable to rely on Section 150 FSMA 2000.
The Court of Appeal rejected this "misconceived" argument on the basis that in a non-advisory situation, "there is neither justification nor need for the imposition of a common law duty independent of but co-extensive with the remedy provided by statute." The Appellants had failed to point to any rule determining whether a statute created a right of action for breach of statutory duty, leading Tomlinson LJ to conclude that "Section 150 of [FSMA 2000] expressly provides a private law cause of action" and that Parliament had not intended to provide a more generous limitation period to a limited class of claimants. The Court of Appeal declined to create a new common law duty and dismissed the appeal. With the parties' agreement, the Court decided not to deal with the second ground for appeal, that RBS had not informed the Appellants that the break fees could be substantial. It remains to be seen whether Green and Rowley will appeal to the Supreme Court.