Expert Evidence Office Building resize

Green and Rowley v RBS

Posted on 12/10/2013 · Posted in Expert Witness, Financial Litigation, Interest Rate Swap

Interest Rate Swap Case.

After months of anticipation and an intervention by the Financial Conduct Authority this case was quickly dealt with by the Court of Appeal, after an initial decision from the Mercantile Court QB Division in Manchester.

Business partners hotelier Paul Rowley and estate agent John Green had claimed compensation from the taxpayer-backed Defendant, the Royal Bank of Scotland (‘RBS’), for mis-selling them a complex financial product (an IRSA or IRHP commonly known as a ‘swap) linked to interest rates. It was held that the 6 year time limit (under the Limitation Act) on claims for mis-selling had elapsed and the appeal was dismissed. This means that the substantive issues of the case were never actually addressed. This is unfortunate as it was seen as a test case for thousands of other small and medium-sized businesses who accuse Britain’s largest banks of mis-selling them products which have cost them hundreds of thousands of pounds in charges they allege they were never warned about.

Experience is one thing you can’t get for nothing.”
Oscar Wilde

Despite the fact that it was eventually ruled out of time, the FCA took the opportunity to intervene in the case, thereby explaining its scope, its powers, its regulatory framework of rules, and its interpretation of them, to the Court of Appeal. In view of the fact that UK’s small business community has traditionally borrowed on a variable rate basis (unlike Europe and USA) and that the sale of IRHP’s to small businesses is a relatively new phenomenon (peaking in 2006-2008), an initial review of such sales was carried out by FCA. Poor disclosure of break costs was one of the specific concerns raised. The poor disclosure was aggravated by the fact that many small businesses were not sophisticated investors and that often they associated ‘break costs’ with early repayment charges on domestic mortgages, typically capped at a small percentage of the notional amount.

The FCA stresses that firms must always take reasonable steps to communicate with customers in a way which is clear, fair and not misleading. For private customers this would necessarily involve an assessment of that individual customer’s information needs. It should also be noted that the FCA’s regulatory requirements are drafted to extend far beyond the common law duty of a firm not to make misrepresentations when entering a contract.

Lord Justice Tomlinson determined that the applicants did not have a common law duty of care which involved taking reasonable care to ensure that they understood the nature of the risks involved in entering into the swap transaction after expiry of the relevant period of limitation. Hence the appeal was dismissed. Lady Justice Hallett and Lord Justice Richards agreed.

Link: Court of Appeal Judgment in Green and Rowley v RBS (EWCA) Civ 2013 1197

Interested in expert witness services?

Contact Us Now

Disclaimer: The above case summary is derived from publicly available information and is not intended to be anything more than a statement of the author’s views on the salient factors of the case. It is not intended and should not be understood to be legal advice of any sort. All views are solely those of the author and no use of the summary should be made without statements being checked against the source of information. Expert Evidence Limited takes no responsibility for the views expressed. The copyright of the summary is owned by Expert Evidence Limited but may be used with written permission which may be forthcoming on application through the contact us page. This news item is not intended to imply or suggest that Expert Evidence Limited was involved in the case, only that it is considered an interesting legal development.