Thornbridge Ltd v Barclays Bank Plc

A bank supplying information about an interest-rate swap does not assume an advisory relationship merely because its salesperson expresses views, explains the product or uses advisory terminology. The question is objective and depends on the parties’ dealings viewed as a whole. In an execution-only transaction, the common-law duty is ordinarily limited to taking reasonable care not to provide inaccurate or misleading information; it is not a general duty to educate or explain every alternative product. Clear non-reliance provisions may establish a contractual estoppel, rather than operate as exclusion clauses. Contractual references to applicable regulatory rules do not necessarily incorporate those rules as contractual obligations. A company conducting business is not a “private person” entitled to sue directly for breach of conduct-of-business rules under section 138D of the Financial Services and Markets Act 2000.

Thornbridge, a property investment company, borrowed £5,652,000 from Barclays to acquire Queens House. As a condition of the loan, it entered into a five-year interest-rate swap. After interest rates fell, the claimant’s loan instalments were not promptly adjusted and its combined cash payments increased. The swap continued to maturity.

Thornbridge claimed damages for negligence, breach of contract and breach of statutory duty. It alleged that Barclays had advised an unsuitable product, failed to explain break costs and refinancing restrictions, and failed fairly to describe the advantages and disadvantages of swaps, caps and collars. The central issues were whether Barclays had assumed an advisory relationship, whether wider information duties arose, whether regulatory rules had contractual or statutory effect, and whether the claimant would have chosen a cap.

1. Advisory relationship. The claim was dismissed. Whether advice was given and whether Barclays assumed legal responsibility were objective questions. The court considered the exchanges, presentation, disclaimer, client documentation and commercial relationship as a whole. The salesperson’s expressions of opinion and explanations were part of the ordinary sales process and did not create an advisory relationship. The claimant understood the mechanics of the swap and made its own choice.
2. Contractual estoppel. Alternatively, the non-reliance and assessment provisions in the swap confirmation were basis clauses. They recorded the agreed nature of the relationship as arm’s-length and execution-only. They therefore prevented Thornbridge from asserting that Barclays had advised it or that it relied on Barclays’ advice. They were not exclusion clauses, so the reasonableness requirement under section 2(2) of the Unfair Contract Terms Act 1977 did not arise. Even if it did, the provisions would have been reasonable.
3. Information duties. The common-law Hedley Byrne duty required Barclays not to misstate or mislead. It imposed no general positive duty to explain fully the products Barclays wished to sell, identify every comparative advantage, or warn about refinancing consequences where those matters were not raised and no refinancing was contemplated. The examples of swap break costs were not misleading. The statement suggesting that break costs applied to a cap was inaccurate, but it was not causative of loss.
4. Regulatory duties. The contractual phrase making the agreement subject to applicable regulations limited the contract so that it did not contravene applicable law; it did not incorporate the FSA rules as open-ended contractual obligations. Section 138D did not give Thornbridge a direct claim because it was a company suffering loss in the course of carrying on business.
5. Suitability and causation. The swap performed its intended function of protecting against rising interest rates. The cash-flow problem resulted from the loan instalments not being adjusted as rates fell, not from an inherent defect in the swap. Thornbridge failed to establish that, properly informed, it would have chosen a cap. Judgment was therefore entered for Barclays.

First-instance decision. No appellate history is stated in the judgment.