Leeds City Council & Ors v Barclays Bank Plc & Anor

In a misrepresentation claim, reliance requires more than proof that the claimant would have acted differently if told the truth. The representee must have been aware that the representation was made and, where necessary, understood it in the sense later alleged. It must have been actively present to the mind. This requirement applies to representations implied from conduct as well as express representations, although in simple cases conscious attention to the conduct may amount to awareness of the representation. The counterfactual of truth and the presumption of inducement are relevant to causation, but cannot replace awareness. An assumption that a benchmark was honest, or a bare assertion of subconscious influence, is insufficient in a complex LIBOR case.

Two conjoined first-instance actions concerned local authorities’ claims for rescission of long-term LIBOR-linked loans entered into with Barclays Bank plc and Barclays Bank UK plc. The claims alleged fraudulent or negligent misrepresentations concerning the honest setting and manipulation of LIBOR.

The Bank applied to strike out the claims on the ground that the pleadings did not establish reliance. It also sought summary judgment on the basis that the Claimants had affirmed the loans by continuing to make payments and, in some cases, entering restructuring agreements. The central questions were whether awareness of an implied representation was required and whether affirmation could be determined before trial.

The Reliance Issue was determined in favour of the Bank. The pleaded facts were assumed to be true, including that the representations had been made, were false and had been made fraudulently.

1. Actionable misrepresentation requires the representee to have been aware that the representation was made and, where relevant, to have understood it in the sense complained of. The representation must have been actively present to the mind. The requirement applies to express representations, representations implied from words, representations by conduct and hybrid representations. Raiffeisen Zentralbank Osterreich AG v Royal Bank of Scotland Plc [2010] EWHC 1392 (Comm), Property Alliance Group Ltd v The Royal Bank of Scotland Plc [2016] EWHC 3342 (Ch) and Marme Inversiones 2007 SL v NatWest Markets plc [2019] EWHC 366 (Comm) were materially analogous.
2. There was no separate rule for representations by conduct under which an assumption automatically established reliance. In a simple case, awareness of the conduct might effectively amount to awareness of the representation. The alleged LIBOR representations arose from complex dealings and did not speak for themselves.
3. The relevant causation question was what would have happened if the representation had not been made. Evidence of what the claimant would have done if told the truth could assist, but was not itself the legal test. Nor could the presumption of inducement in fraud cases overcome the absence of awareness. A continuing-representation allegation could not convert a misrepresentation claim into one of non-disclosure.
4. Leeds relied on the counterfactual of truth, assumptions about LIBOR and an unparticularised assertion of subconscious influence. Newham likewise did not plead that any relevant person understood a representation to have been made. Those cases had no real prospect of establishing reliance and were struck out.
5. The Affirmation Issue therefore did not arise. The judge nevertheless held that continued payment was paradigmatic affirmatory conduct, but that informed election required knowledge of the relevant facts and of the right to rescind, together with unequivocal conduct. The knowledge issues were fact-sensitive. The existence of in-house legal advisers did not justify summary determination. The Bank’s application on affirmation would therefore have been refused, following the approach in The Law Debenture Trust Corporation Plc v Ukraine [2018] EWCA Civ 2026.

not stated in the judgment.