WW Property Investments Ltd v National Westminster Bank Plc

The Court of Appeal considered an application to appeal from HH Judge Roger Kaye QC's order striking out WW's claim and refusing permission to add a new claim. The court held there was no realistic prospect of success for the contention that the interest rate hedging agreements were wagering contracts or that there was an implied common‑law requirement of equal knowledge or ignorance, and it dismissed the LIBOR-based pleading as incoherent and without real prospect. However the court found a reasonably arguable case that NatWest might have owed a duty of care in the conduct of the Interest Rate Hedging Product Review (IRHPR) and granted permission to appeal against the refusal to allow particular amendments advancing that duty‑of‑care case.

Key statutory material considered included the Financial Services Act 1986 (section 63 and Schedule 1), the Financial Services and Markets Act 2000 (and the Regulated Activities Order), and the Gambling Act 2005 (notably sections excluding regulated financial activity from the Act's betting definition and the provision preserving enforceability of gambling contracts).

This appeal arises from WW's challenge to the strike‑out of its pleaded claims and the refusal by HH Judge Roger Kaye QC to permit amendments to the particulars of claim. WW had entered into three collar agreements and a later swap with NatWest between 2004 and 2010 to hedge interest exposure on borrowing. The collars produced automatic IRHPR redress which WW accepted; WW pursued a claim for consequential losses under the IRHPR which was rejected. The swap generated no redress under the IRHPR.

Nature of the application:

• Permission to appeal from an order striking out the whole claim and refusing to permit an amendment that would advance new and existing causes of action.
• The pleaded causes of action included: (a) that the hedging agreements were wagering contracts; (b) a LIBOR manipulation claim (implied term / misrepresentation); (c) claims about priority payment arrangements and guarantees; and (d) tort/duty of care claims linked to the IRHPR process and consequential losses.

Issues framed by the court:

• Whether the hedging agreements were wagering contracts and therefore unenforceable or gave rise to an implied term of equal knowledge/ignorance.
• Whether the LIBOR pleading was tenable as an implied term or misrepresentation and whether rescission or damages were available.
• Whether the IRHPR process gave rise to a duty of care owed by NatWest in carrying out the Review and assessing consequential losses, and whether permission should be given to amend the pleading to allege that duty and breaches of it.
• Whether WW's acceptance of the IRHPR redress compromised or barred its remaining claims.

Reasoning and outcome:

• The court rejected the wager argument: contracts entered into for a genuine commercial purpose (hedging) are not wagering contracts in the sense that would render them unenforceable; statutory and regulatory developments (Financial Services Act 1986, FSMA 2000 and Gambling Act 2005) now govern such financial contracts and leave no room for a revived common‑law rule that unequal knowledge renders a wager void. The judge's refusal to allow the wager argument to proceed was upheld.
• The LIBOR claim as pleaded was held to be vague, incoherent and to lack particularisation of the relevant GBP one‑month LIBOR manipulations, reliance and breach sufficient to sustain rescission or damages; that part was dismissed as having no real prospect.
• The judge had erred in refusing to permit some of the proposed amendments relating to the IRHPR and a duty of care in the review process: the Court of Appeal considered there was a reasonable prospect of establishing such a duty and granted permission to appeal limited to the refusal to permit those amendments.
• The court declined to determine the compromise issue at this stage and refused permission to appeal on that point, observing that the formulation of a proper pleading might require the point to be revisited.

Allowed in part. The Court of Appeal rejected the wager argument and the LIBOR pleading as having no real prospect of success, but granted permission to appeal against HH Judge Roger Kaye QC's refusal to permit specified amendments advancing a duty‑of‑care claim concerning NatWest's performance of the IRHPR process, on the basis that such a duty was reasonably arguable and the judge had been wrong to refuse those particular amendments.

Appeal from the decision of HH Judge Roger Kaye QC (Leeds District Registry, B40LS775) dated 1 March 2016, in which the judge struck out WW's claim and refused permission to add a new claim. Permission to bring a limited appeal to the Court of Appeal was granted and the Court of Appeal delivered judgment at [2016] EWCA Civ 1142 (29 November 2016).