The High Court Has Confirmed The Effectiveness Of Contractual Carve-Out By Bank Of Duty Of Care And Advisory Relationship And That A Bank Did Not Owe A Fiduciary Duty

Facts Barclays Bank plc acted as agent and offshore security trustee under a Facility Agreement, whereby a syndicate of lenders, including Barclays Capital, lent US$45 million in late 2007 to Svizera, a Dutch company, with Maneesh, its Indian parent company, acting as guarantor.

Following a payment default under the Facility Agreement, Barclays served an acceleration notice on Svizera, but the balance remained outstanding. Barclays then served demand against Maneesh under the guarantee, but the demand was not satisfied.

Barclays issued a claim, on behalf of the lenders, against Svizera and Maneesh for US$35 million outstanding under the Facility Agreement, together with fees, costs and interest. It was important for Barclays to obtain a final judgment on the merits from the English High Court in order to enable it to enforce against assets of Svizera and Maneesh over which Barclays did not have security, in addition to those assets over which that it already held security. In their defence and counterclaim, Svizera and Maneesh pleaded a number of different arguments, including, inter alia, that Barclays misrepresented that it would obtain an INR/USD currency swap for Svizera to be entered into at the time of the Facility Agreement and that Barclays was in breach of an advisory duty. Barclays denied that any representation was ever made and relied upon a series of contractual terms and estoppels to defeat the breach of duty claim.

Held Mr Justice Flaux upheld Barclays' claim under the Facility Agreement in full and rejected Svizera and Maneesh's defences and counterclaim in their entirety and held that Barclays is entitled to recover in full the sums claimed. He rejected the defendants' evidence that there had been any representation in respect of an INR/USD currency swap; there was no documentation to suggest this had been the case and the judge did not accept that any such oral representations had been made either. Indeed, the judge commented in his judgment that Barclays' witness had provided "honest and straightforward" evidence and, in contrast, was highly critical of the defendants' witness' evidence, commenting that he did not regard him as a satisfactory witness and on several occasions referring to the evidence given as being untruthful.

On the alleged duty of care...