Fine Care Homes Ltd v National Westminster Bank Plc & Anor

A bank selling an interest rate hedging product ordinarily owes no advisory duty to explain its nature, effect or suitability. Such a duty arises only in exceptional cases where, viewed objectively and in the whole factual context, the bank has assumed responsibility for advising on the particular transaction. Contractual terms defining the relationship as non-advisory are important evidence of the parties’ obligations.

Regulatory rules and guidance may inform the content of an existing advisory duty, but do not create a common law duty where none otherwise exists. A bank’s internal credit exposure figure is distinct from the customer’s break cost and does not inevitably prevent further borrowing. A representation that a hedge may be novated is not misleading merely because a hypothetical future transfer might require security.

Fine Care purchased a structured interest rate collar from National Westminster Bank Plc and NatWest Markets Plc in 2007. After interest rates fell sharply, Fine Care incurred substantial payments and claimed that the bank had negligently advised it, negligently misstated the effects of the collar, misrepresented the availability of novation and breached implied contractual duties.

The claim ultimately concerned two alleged omissions or misstatements: that the bank failed to explain that its internal credit limit utilisation figure would impede future borrowing, and that novation might require external security. The court also considered the relevance of FCA rules and guidance to the common law claims.

1. Claim dismissed. Fine Care’s claims in negligent advice, negligent misstatement or misrepresentation, and breach of implied contractual duty all failed.
2. The existence of an advisory duty depended on whether, objectively and considering the transaction as a whole, the bank had assumed responsibility for advising Fine Care on the suitability of the particular collar. A bank ordinarily provides information and sells its products without undertaking such a duty. The case was not exceptional. The bank presented several products, did not advise Fine Care to buy the collar, and repeatedly documented the relationship as execution-only and non-advisory. The contractual terms confirmed the absence of an advisory duty.
3. The FCA Handbook rules and APER guidance did not create a common law duty of care. They could inform the content of an advisory duty if one existed, but could not convert a negligent-misstatement claim into a duty to explain all risks or ensure understanding. Fine Care was not a “private person” entitled to sue directly for breach of FCA rules under section 138D of the Financial Services and Markets Act 2000.
4. The bank’s credit limit utilisation figure was an internal estimate of the bank’s near worst-case exposure. It was distinct from the customer’s mark-to-market break cost and was not itself a contingent liability. The evidence did not show that the figure inevitably impeded borrowing when the collar was sold. Even if an advisory duty had existed, the alleged borrowing warning was not required on the facts.
5. The bank’s statement that the hedge could be novated to another company was accurate. The bank had expected and encouraged novation. The possibility that security might hypothetically have been required before refinancing did not make the statement misleading, particularly as that situation did not arise.
6. The contractual clauses defining the bank’s primary obligations as non-advisory were not non-reliance clauses and were not subject to the reasonableness requirement under the Unfair Contract Terms Act 1977. The remaining claims therefore failed for the same reasons.