Hockin & Anor v The Royal Bank of Scotland & Anor

On strike out, the court must be satisfied that a claim is bound to fail. Where construction or implication of contractual terms depends on a disputed factual matrix, those issues will ordinarily require trial. A wide assignment of claims connected with specified breaches may extend beyond the causes of action expressly contemplated when the assignment was made. The phrase “connected with” is not necessarily limited to claims upon which the assigned breaches are directly relied.

A contractual power to assign may be either an absolute right or a discretion. Whether it is a discretion subject to implied constraints, including good faith, depends on the contract and its factual context. Amendments should be permitted where the proposed claims are sufficiently arguable to have a real prospect of success and are adequately connected with the existing proceedings.

The claimants, assignees of causes of action formerly belonging to London & West Country Estates Ltd, sued the Royal Bank of Scotland and National Westminster Bank in connection with a loan facility, an interest-rate swap, LIBOR representations and conduct by the Bank’s Global Restructuring Group.

The Bank applied to strike out the existing GRG claim, principally on the grounds that the claimants lacked standing, that an implied duty of good faith was legally unarguable, and that the pleading was an abuse of process. The claimants applied to amend to add unlawful means conspiracy, further misrepresentation and deceit allegations, and an assignment claim concerning the loan facility. The central issues were the scope of the assignment, the arguability of the implied term and proposed claims, and the adequacy of the amended pleading.

1. Strike out and standing. The Bank’s strike-out application failed. The Deed of Assignment defined “Rights of Action” broadly as claims connected with the specified “Breaches”, and the ordinary meaning of “connected with” was wider than “reliant upon”. Although the deed referred expressly to mis-selling the swap and not to the loan facility or GRG conduct, it was reasonably arguable that the GRG claim, the further claims and the assignment claim were connected with the alleged swap mis-selling. The assignment therefore could not be construed at this stage as necessarily excluding them.
2. Implied duty of good faith. The threshold for implying a term into a detailed commercial contract is high. The term must be necessary to give the contract business efficacy, or so obvious that it goes without saying, and the contract must be considered as a whole against the relevant factual matrix. The court could not decide on the evidence before it whether clause 16.2 of the 2008 Facility conferred only an absolute right to assign or a contractual discretion subject to implied constraints. The issue could not fairly be determined in a factual vacuum.
3. Abuse of process. The GRG allegations were not a fishing expedition. They formed part of the pleaded sequence of events said to have resulted from the swap mis-selling and were relevant to consequential loss. The circumstances therefore differed from cases in which a claim was issued or half pleaded merely in the hope that disclosure would reveal a cause of action.
4. Amendments. Permission to amend was allowed in part. The proposed further claims were sufficiently arguable to proceed, but the conspiracy allegations had to be confined to the named individuals and further refined as to knowledge and participation. The LIBOR misrepresentation amendments were arguable and were permitted. Material concerning the FSA Final Notice was not presently relevant in the form pleaded and required recasting. The amendments remained subject to production of a further draft pleading.

Not an appeal. The judgment determined interlocutory strike-out and amendment applications in the High Court.