Titan Steel Wheels Ltd v Royal Bank of Scotland Plc

The court determined three preliminary issues. First, Titan was not a "private person" within the meaning of the Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001 because its purchase of structured foreign‑exchange products formed part of its business activities. Second, the Bank did not act in the capacity of an adviser to Titan in relation to the June and September 2007 transactions and therefore owed no common law duty of care in respect of those products; the recorded telephone calls and contemporaneous e‑mails showed dealings of a sales/execution character. Third, the Bank's standard terms of business (incorporated into the transactions by course of dealing and post‑transaction documents) allocated roles and risks, excluded advisory responsibility and contained exclusion/limitation clauses which, with one limited exception not material to these preliminary rulings, were not caught by the Unfair Contract Terms Act 1977 or were reasonable. The judge emphasised contractual estoppel and allocation of risk as decisive in precluding a wider duty in tort.

Background and parties: Titan (a UK manufacturer with euro‑denominated income) sued the Royal Bank of Scotland alleging negligent mis‑selling of two FX derivative products (June and September 2007). Titan claimed the Bank advised it to enter unsuitable, complex products; the Bank denied liability and counterclaimed for close‑out losses.

Nature of the application and issues: This hearing decided preliminary issues directed by earlier case management: (i) whether Titan was a "private person" under the FSMA Rights of Action Regulations 2001; (ii) whether, in recorded telephone calls between Titan's financial controller and a Bank treasury manager, the Bank acted as an adviser and owed a common law duty of care in relation to either transaction; and (iii) whether the contractual terms were exclusion clauses within the scope of the Unfair Contract Terms Act 1977 and, if so, whether the Bank could rely on them.

Facts and documentary background: Titan had long used forward and structured FX products, entering many structured transactions with the Bank and other banks. The Bank had sent terms of business (2004) providing an execution‑only service unless otherwise agreed, disclaiming advisory responsibility and requiring Titan to seek independent advice where necessary. The June and September transactions were entered following recorded telephone conversations and contemporaneous e‑mails; post‑transaction acknowledgements and confirmations containing non‑reliance and assessment warranties were signed or accepted by Titan.

Issues framed by the court:

• Construction of the definition of "private person" under the 2001 Regulations and whether Titan's losses were sustained "in the course of carrying on business of any kind".
• Whether the recorded conversations and other communications established that the Bank assumed an advisory role giving rise to an actionable duty of care at common law.
• Whether the Bank's contractual terms amounted to exclusion clauses caught by the 1977 Act and, if so, whether they satisfied the reasonableness test.

Court's reasoning and conclusions:

• On Regulation 3(1)(b): the court adopted a broad construction. Given Titan's regular, large‑scale use of structured FX products, centralised risk management policies and the frequency and scale of transactions (many structured trades across several years and banks), Titan's losses were sustained in the course of carrying on business. Titan therefore was not a "private person" for the statutory cause of action.
• On the existence of an advisory duty: the Bank's terms (incorporated by course of dealing and by post‑transaction documents) expressly disclaimed advisory services, required independent advice and included non‑reliance representations. The contemporaneous evidence (recordings, e‑mails, PTAs and confirmations) showed commercial sales/execution communications rather than an established adviser/advisee relationship. The court found no documentary basis for a retained advisory role, no fee or contract for advisory services, and that Titan's financial controller was experienced. Even if opinions or recommendations were expressed, the contractual allocation of roles and the non‑reliance provisions precluded a common law duty of care.
• On Unfair Contract Terms Act 1977: most of the contractual provisions defined the nature of services and allocated risk rather than excluding negligence as such; they were, in the judge's view, either outside the Act or, if caught, reasonable in the commercial context of contracting between sophisticated parties of comparable bargaining power.

Other procedural matters: the court dealt with disclosure issues (late discovery of call recordings) and refused extensive applications for further disclosure and adjournment, allowing only limited further cross‑examination which was not ultimately needed.

The court determined the preliminary issues against Titan. Issue 1: Titan was not a "private person" under the FSMA Rights of Action Regulations 2001 because its structured FX transactions were part of its business activities. Issue 3: the Bank did not act as an adviser in relation to the June and September 2007 products and therefore owed no common law duty of care; the contractual documentation and course of dealing evidenced an execution‑only/sales relationship. Issue 11: the Bank's standard terms predominantly defined the parties' relationship and allocation of risk rather than operating as excluded negligence clauses within the Unfair Contract Terms Act 1977; to the extent the Act applied the terms were reasonable. The judge relied on incorporation by course of dealing, contractual estoppel and the commercial context to justify these conclusions.