Thomas & Anor v Triodos Bank NV

A bank providing information about a financial product without advising or recommending it ordinarily owes a Hedley Byrne duty not to misstate. A wider information duty may arise where the bank has voluntarily undertaken, without contrary disclaimers, to follow a customer-facing code of practice. The duty is responsive rather than proactive. It requires a clear, balanced explanation of the product’s financial implications, including the operation and potential scale of early repayment charges. A comprehensive tutorial is unnecessary. The information required is assessed by reference to materiality: whether a reasonable customer would be likely to attach significance to it.

The claimants, an organic farming partnership, borrowed from the defendant bank and fixed substantial borrowing for ten years. They alleged that the bank misrepresented the consequences of switching back to variable rates or repaying early, and failed to explain the redemption charge under its standard terms. They also claimed consequential financial losses. The bank denied liability and counterclaimed for the outstanding borrowing. The central issues were whether the relationship was advisory, whether the bank owed an information duty wider than the ordinary duty not to misstate, whether that duty was breached, and what losses were caused.

1. Nature of the relationship. The bank did not advise or recommend the fixed-rate products. The claimants themselves raised the subject. Information and comments about rates did not amount to advice. The bank therefore did not owe the advisory duty applicable where a recommendation is made.
2. Information duty. A duty wider than the ordinary duty not to misstate may arise on particular facts. The bank had advertised its subscription to the Business Banking Code, whose fairness commitment required a balanced explanation in plain English of a product’s financial implications. There were no disclaimers or contractual provisions negating an assumption of responsibility. The bank therefore owed a responsive information duty when the claimants asked about fixing their rates.
3. The duty required explanation of the period of the fix, where the rates could be found, what the rates represented, the effective rate payable, and the consequences of early repayment. The bank had to explain accurately how clauses 2.10 and 2.11 operated, including the relationship between the rate differential, the amount repaid, the remaining term and the discount for accelerated payment. A worked example was unnecessary, but the explanation had to give a balanced picture.
4. The appropriate question, where the scope of the response was uncertain, was whether a reasonable customer in the claimants’ position would be likely to attach significance to the information. The duty was not proactive: the bank was not generally required to volunteer information or monitor rates, but the claimants had asked about the relevant matters.
5. The bank breached the information duty. Its explanations were incomplete and confusing, and it failed adequately to explain the consequences of choosing a ten-year fix. The failure to provide accurate break-cost figures until July 2009 was a legitimate complaint but did not itself cause recoverable loss.
6. The bank was liable in misrepresentation and for breach of the information duty to the extent identified. The appropriate counterfactual was that the claimants would have fixed the relevant borrowing for two years, not ten. Quantum, the increased tax liability and the bank’s counterclaim were reserved for further determination. The fixed-rate loans were to be terminated and switched to variable rates as soon as practicable after the judgment, without cost to the claimants.

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