Norham Holdings Group Ltd v Lloyds Bank Plc

A compromise of basic redress under the FCA interest-rate hedging review does not merge a customer’s underlying causes of action or create a contractual entitlement to consequential loss. The words “claims for consequential loss” preserve claims for that head of loss, but do not remove the need to establish an actionable cause of action. Review findings of regulatory non-compliance do not, without more, establish breach of an actionable legal duty or an estoppel preventing the bank from defending subsequent civil claims.

Norham, a property holding company, entered into an interest-rate swap with Lloyds Bank. Following the FCA review of interest-rate hedging sales, the bank offered basic redress under Option B. Norham accepted that redress while reserving claims for consequential loss, and later rejected the bank’s consequential-loss determination.

Norham alleged that the compromise created a contractual entitlement to consequential loss assessed by the review’s counterfactual. Alternatively, it argued that the bank was estopped by convention from disputing that the swap had been mis-sold in breach of an actionable duty. The court determined both preliminary issues.

1. Construction. The compromise settled all claims and causes of action connected with the swap sale except claims for consequential loss. It did not create a contractual right to consequential loss or require assessment by reference to the review counterfactual. The natural meaning of the agreement, its wording and the commercial context supported that construction.
2. The FCA review was a regulatory process. It did not confer contractual rights on customers or impose a duty of care in their favour. The review’s finding that the bank could not establish regulatory compliance did not amount to an admission sufficient to establish a civil cause of action. The reasoning in CGL Group Ltd v Royal Bank of Scotland plc [2018] 1 WLR 2137 and Elite Property Holdings Ltd v Barclays Bank plc [2019] Bus LR 129 supported that conclusion.
3. Under Jameson v Central Electricity Generating Board [2000] 1 AC 455, whether a settlement discharges prior claims depends on its terms. The policy of upholding settlements does not determine what was settled.
4. Estoppel. Norham could not establish an estoppel by convention. There was no clear common assumption that the bank had breached an actionable duty, would not defend civil proceedings, or would accept the review counterfactual as determinative. Norham remained required to prove a cause of action capable of supporting consequential loss. Both preliminary issues were answered no.