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Agar v Ulster Bank (Irish case)

Posted on 13/07/2012 · Posted in Expert Witness, Financial Litigation, Interest Rate Swap, Investment

Mis-selling of interest rate swaps

Mr David Agar, a property developer, was the Claimant and Ulster Bank, a subsidiary of the Royal Bank of Scotland, was the Defendant. While predominantly an Irish case, use of the Royal Bank of Scotland’s London investment arm introduced a possible UK angle.

The Claimant had facilities of €47 million with the Defendant, a condition of which was adequate interest rate hedging. In order to fulfil the hedging requirement, the Claimant entered an interest rate swap agreement with the Defendant for a notional value of €87 million. When interest rates fell the Claimant became liable to the Defendant for significant payments under the swap and found he was not able to terminate it without incurring substantial break costs.

It was the Claimant’s case that the Defendant had mis-sold to him the swap. He contended that the Defendant had advised the purchase of the swap, but that the Defendant had not drawn his attention to the risks involved. In particular the Claimant submitted that he had not been made aware of the substantial break costs or of the payments the Claimant would need to make to the Defendant if, contrary to the Defendant’s view, interest rates did fall.

The Claimant sought to be relieved of his obligations under the Swap, and the Defendant counter-claimed for the appointment of a receiver due to the Claimant’s default under the facility. However, during trial the case was settled. While the terms of the settlement remain confidential, it is estimated that the Defendant  agreed to write off loans and swaps worth €30 million and agreed to pay approximately €1 million worth of legal fees incurred by the Claimant.

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