Elite Property Holdings Ltd & Anor v Barclays Bank Plc

A bank’s participation in an FCA-supervised review of interest-rate hedging product sales does not, without a clear assumption of responsibility, create a contract with a customer governing the conduct of that review. A revised redress offer may form a compromise agreement, but it does not thereby impose a contractual duty to assess consequential loss.

A claimant alleging mis-selling must plead a causal link between the particular breach alleged and the loss claimed. The fact that loss continued after a later transaction was entered does not establish that the later transaction caused it.

The appellants, associated property-investment companies, entered into structured collars and later replacement swaps with the respondent bank. They accepted a 2010 settlement concerning the structured collars. Following an FCA-supervised review of interest-rate hedging product sales, they accepted revised redress offers while pursuing consequential-loss claims.

HHJ Bird struck out the swaps mis-selling claim and dismissed review claims. He also refused permission to amend the pleading to allege a contractual “Review Agreement”: [2016] EWHC 3294 (QB). The appellants sought permission to appeal, principally contending that the swaps had caused their development losses and that the revised offers created contractual duties concerning the review.

1. Permission to appeal was refused. Flaux LJ, with whom Lindblom LJ agreed, held that neither proposed ground had a real prospect of success.
2. The swaps mis-selling pleading disclosed no causative link between the alleged mis-selling of the swaps and the development losses. The pleaded losses were caused by the earlier structured collars. Describing those losses as repackaged, carried over or continuing after the swaps did not alter their cause. The date on which loss was incurred was not the relevant inquiry; the relevant inquiry was what caused it. The break-cost loans were incurred to exit the collars and could not be treated as caused by the swaps.
3. No contractual review agreement arose from acceptance of the revised redress offers. The bank was conducting the review pursuant to its agreement with the FCA, which excluded third-party enforcement. The only contract made on acceptance was a settlement or compromise. The appellants gave no consideration for a supposed new promise to conduct the review because they had already chosen the option that deferred basic redress and interest, and acceptance of the revised offer instead conferred an additional benefit on them.
4. The court applied the regulatory analysis in CGL Group Ltd v Royal Bank of Scotland plc [2017] EWCA Civ 1073. The statutory and regulatory scheme entrusted enforcement of the review to the FCA and did not support an inferred contractual obligation to customers. The court also agreed, though this was unnecessary to the result, that the necessity test for implied terms was unmet and that section 13 of the Supply of Goods and Services Act 1982 did not apply because the bank was not supplying a service by reviewing its own past conduct and determining redress.
5. The court gave permission for its judgment to be cited because this was the first Court of Appeal decision on whether a bank owed its customer a contractual duty in conducting the review.

• Court of Appeal (Civil Division) — After hearing full argument at an oral permission hearing, the court refused permission to appeal on both grounds: [2018] EWCA Civ 1688.
• High Court of Justice, Queen’s Bench Division, London Mercantile Court — HHJ Bird dismissed the advisory and review claims, struck out the relevant swaps mis-selling pleading, and refused permission to amend to advance the alleged Review Agreement: [2016] EWHC 3294 (QB).