Loreley Financing (Jersey) No 30 Limited v Credit Suisse Securities (Europe) Limited & Ors

Claims under section 32 of the Limitation Act 1980 are postponed only until the claimant discovers, or could with reasonable diligence discover, enough facts to plead a complete cause of action. The claimant need not know every detail or possess trial-proof evidence.

An implied representation must be clearly inferred from words or conduct viewed in context, including contractual documents and disclaimers. The so-called helpful test is only one factor and does not create a general duty of honesty or disclosure. Reliance requires the representation to have been received and understood, although the form of awareness is fact-sensitive. The claims were time-barred and, alternatively, failed on representation, reliance, negligence and conspiracy.

Loreley Financing (Jersey) No 30 Limited purchased USD 100 million of AAA-rated notes linked to a synthetic collateralised debt obligation arranged by Credit Suisse. After the notes lost their value, Loreley alleged fraudulent and negligent misrepresentations concerning the underlying residential mortgage-backed securities, their credit ratings and Credit Suisse’s conduct. It also advanced an alternative unlawful-means conspiracy claim based on alleged breaches of Irish prospectus legislation.

The claim was issued on 15 November 2018. The principal issues were whether the claims were postponed by sections 32 or 14A of the Limitation Act 1980, whether the alleged representations were made and relied on, whether the underlying misconduct and dishonesty were established, and whether the Irish statutory breaches could support conspiracy.

1. Limitation. The claims in deceit and negligence were prima facie time-barred. Under section 32 of the Limitation Act 1980, the claimant bore the burden of showing that it could not, with reasonable diligence, have discovered the fraud or concealment. The inquiry was objective but informed by the actual claimant’s status and business. It was sufficient to know enough to plead a complete cause of action; every detail and evidence capable of proving the case at trial were unnecessary.
2. By September or October 2011, and in any event by late 2011, Loreley had a trigger requiring investigation. Public material, the Clayton reports, the Financial Crisis Inquiry Commission material, other litigation and the 2011 IKB proceedings supplied sufficient information to plead a fraud case of essentially the same nature. Sections 32 and 14A were therefore unavailable. The limitation defence was all or nothing because the claim concerned unwinding a single transaction.
3. Misrepresentation. An implied representation had to be inferred objectively from clear words or conduct in context. The contractual documents, sophisticated nature of the transaction, information barriers and disclaimers were important. The helpful test from Geest plc v Fyffes [1999] 1 All ER (Comm) 672, as approved in Property Alliance Group v Royal Bank of Scotland [2018] 1 WLR 3529, was not a standalone test and could not convert non-disclosure into misrepresentation.
4. The alleged CDO representations were not made. There was no clear factual basis for representations directed specifically to the seven Credit Suisse RMBS among the 100 reference obligations. The representations were also inconsistent with the detailed contractual documentation and disclaimers. The claims would therefore have failed at the first stage.
5. Reliance and negligence. Reliance required a causal bridge between the representation and the claimant’s conduct. The representation had to be received, understood and actively present in the relevant sense, although the precise form of awareness depended on the circumstances. The counterfactual of truth was evidential only and could not replace awareness or distinguish representation from assumption. The negligence claim also failed: there was no sufficient duty of care in the circumstances of this sophisticated transaction, and no adequate breach case.
6. Conspiracy. A breach of foreign law might in principle constitute unlawful means, subject to public policy and comity considerations. However, the non-actionable breach of a non-criminal civil statute relied on here could not supply the unlawful means. The claim in conspiracy consequently failed. The claim in misrepresentation, the negligence claim and the alternative conspiracy claim were dismissed.

The judgment is a first-instance decision. No prior appellate decision is stated.