Titan Steel Wheels Ltd v The Royal Bank of Scotland Plc

For the purposes of the Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001, a corporate customer suffers loss “in the course of carrying on business of any kind” where it regularly and substantially enters into foreign-exchange transactions connected with its commercial activities. The phrase is wider than “in the course of a business” used in consumer-protection legislation.

Contractual terms defining an execution-only relationship, excluding reliance on advice and allocating responsibility may prevent a common law duty of care from arising. Such terms are not necessarily exclusion clauses under the Unfair Contract Terms Act 1977. Where the parties have equal bargaining power and the terms are clear and available to the customer, an exclusion clause may satisfy the requirement of reasonableness.

Titan, a manufacturer whose income was mainly in euros and expenditure mainly in sterling, claimed losses arising from two structured currency products supplied by the Bank in June and September 2007. It alleged that its financial controller lacked authority, that the Bank had advised it to enter unsuitable products, and that the Bank owed duties under the Financial Services and Markets Act 2000 and the Unfair Contract Terms Act 1977.

The trial concerned preliminary issues: whether Titan was a “private person” entitled to sue under section 150 of the Financial Services and Markets Act 2000; whether the Bank acted as adviser and owed a common law duty of care; and whether the contractual terms were subject to the 1977 Act.

The court determined the preliminary issues against Titan.

1. Private person. The expression “in the course of carrying on business of any kind” in regulation 3(1)(b) of the 2001 Regulations had a wide meaning. The consumer-protection authorities relied on by Titan concerned the different expression “in the course of a business” and arose in different statutory contexts. In any event, Titan’s foreign-exchange activity passed any narrower regularity test: it involved sustained, large-scale and frequent transactions, including 23 structured products from the Bank and similar products from two Irish banks. Titan was therefore not a “private person”.
2. Contractual allocation of roles. The Bank’s terms of business and the transaction documents were incorporated by reasonable notice and course of dealing. They stated that the Bank provided execution-only services, did not act as adviser or fiduciary, and that Titan would not rely on its opinions or recommendations. These provisions were contractual estoppels and, alternatively, evidence negating any assumption of responsibility. They allocated the parties’ roles and risks and ordinarily precluded a wider common law duty of care.
3. Advice and assumption of responsibility. Even without the contractual terms, the Bank acted as a saleswoman rather than an adviser. There was no written request for advice, advisory agreement, fee, or documentary record of advisory status. Titan’s financial controller had extensive experience, exercised independent judgment, dealt with other banks on similar terms, and was not reasonably entitled to regard the Bank’s employee as an adviser.
4. Unfair Contract Terms Act. The provisions defining the service and excluding advisory responsibility were not exclusion clauses. Clause 12.5 was an exclusion clause, but it was reasonable. Titan and the Bank had equal bargaining power, the terms were clear and repeatedly notified, Titan dealt with other banks, and independent advice was available.

This was a first-instance determination of preliminary issues in the High Court Commercial Court. The judgment does not state any prior appellate decision.