Deutsche Bank AG

A party alleging misrepresentation must establish reliance. Reliance requires awareness of the representation when it was made, including where the representation is alleged to be implied. Where the evidence does not show that the representee was aware of, or understood, the alleged representation, the claim fails without the court needing to determine whether the representation was made or whether it was false. A court may therefore decide a misrepresentation defence at the reliance stage and avoid hypothetical issues that cannot affect the result.

The judgment concerned two related Commercial Court actions. Financial institutions claimed sums exceeding US$300 million from Unitech Limited under a guarantee and indemnity supporting a loan transaction and an interest rate swap.

Unitech had participated in the litigation but did not attend the trial, adduce evidence or cross-examine the claimants’ witnesses. It relied on alleged misrepresentations that the swap was suitable as a hedge and on alleged representations concerning LIBOR. The central issues were whether the alleged representations had been made, whether they were actionable, and whether Unitech had relied on them.

1. Misrepresentation and reliance. The court held that the burden lay on Unitech to establish its misrepresentation defence. It was unnecessary to decide whether the alleged representations were made or should be implied because the defence failed for lack of reliance.
2. Awareness required. Reliance requires the party asserting reliance to show that it was aware of the representation when it was made. This applies to alleged implied representations as well as express representations. The court relied on Marme Inversiones 2007 SL v Natwest Markets plc and Others, [2019] EWHC 366 (Comm), at [279] and [281]-[288].
3. Application. Unitech provided no evidence that anyone at Unitech was aware of, or understood, the alleged suitability recommendation or the alleged representations about LIBOR. The contemporaneous communications did not concern the LIBOR-setting process. The surrounding circumstances also did not support reliance. The alleged suitability recommendation was treated as an ex post facto construct.
4. Scope of decision. The court deliberately refrained from deciding hypothetical issues beyond reliance because that issue was sufficient to dispose of the defence. The fraud allegations therefore failed with the misrepresentation defence; the court criticised Unitech’s failure to withdraw them while absenting itself from trial.
5. Orders. Judgment was entered for the lenders in the sum of USD 293,476,217.37. Judgment was also entered for Deutsche Bank in respect of the swap, including USD 11,055,487 as the early termination amount and USD 9,631,833.16 interest.