MTR Bailey Trading Ltd v Barclays Bank Plc

On reconsidering refusal of permission to appeal, a proposed ground should proceed where it has a real prospect of success. Permission may be confined to specified grounds. It was arguable that a bank’s fairness obligations under COBS 2.1.1R required a broader assessment of conditioning a loan transfer on assumption of an interest-rate swap. It was also arguable that the company had statutory and contractual claims, and that the transaction preserved an equity of rescission. Other COBS and exclusion-of-liability grounds were unarguable or abandoned. A fiduciary-duty ground was doubtful but just met the permission threshold.

Mr Bailey and the Company claimed declarations, rescission and damages concerning an interest-rate swap. Mr Bailey accepted the Bank’s redress offer, leaving the Company’s claims. The High Court dismissed the Company’s application for permission to amend its particulars of claim and granted summary judgment for the Bank.

The Company sought oral reconsideration of a refusal on the papers of permission to appeal. The issues concerned fairness under the COBS rules, statutory rights of action, contractual incorporation of those rules, rescission and fiduciary duty.

Lord Justice Kitchin granted permission to appeal, but only on the grounds identified in the judgment.

1. The judge may have taken too narrow a view of the relationship between the Bank, Mr Bailey and the Company. It was arguable that requiring the Company to assume Mr Bailey’s swap obligations, including potential breakage fees, as a condition of transferring the loans was unfair under COBS rule 2.1.1R. This ground had a real prospect of success.
2. The allegations based on COBS rules 9.2.1R, 10.2.1R and 11.2.1R were unarguable. The Company did not pursue them, and permission was refused on those grounds.
3. The statutory cause-of-action issue was arguable. Under section 150 of Financial Services and Markets Act 2000, as then understood to be section 138D, a contravention of a rule may be actionable by a private person suffering loss. Whether the Company was carrying on business for the purposes of the Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001 merited consideration. The decisions in the Titan Steel Wheels case [2010] EWHC 211 and the Camerata Property case [2012] EWHC 7 did not prevent permission being granted.
4. The alternative claims under section 150(3) and the exclusion provisions of the 2001 Regulations were not pursued. The judge had found that the Bank had not purported to exclude or restrict liabilities under the regulatory scheme.
5. It was arguable that the retail client agreement incorporated the applicable COBS rules. Clause 1.4, including its reference to applicable regulations, warranted consideration on appeal.
6. It was arguable that the 2011 transaction operated by assignment, assumption and release, rather than novation. On that analysis, the Company might have acquired Mr Bailey’s equity of rescission.
7. The fiduciary-duty ground was doubtful. Nevertheless, the Company had just demonstrated a real prospect of success sufficient to obtain permission on that issue.

The order was therefore limited to these specified grounds; the merits remained for the appeal.

• Court of Appeal (Civil Division): On 10 June 2015, Kitchin LJ reconsidered the refusal of permission on the papers and granted permission on specified grounds under [2015] EWCA Civ 667.
• High Court, Queen’s Bench Division: His Honour Judge Keyser QC dismissed the Company’s application for permission to amend its particulars of claim and granted summary judgment for the Bank on 27 August 2014.