High Court Grants Permission To Plead Fraud In LIBOR Claim

In the latest decision regarding LIBOR claims (Property Alliance Group Ltd v The Royal Bank of Scotland Plc [2015] EWHC3272 (Ch)), Property Alliance Group Ltd (PAG) has been allowed to amend its Particulars of Claim against The Royal Bank of Scotland (RBS) to include a plea for fraudulent misrepresentation.


PAG, a property developer, entered into four interest rate swap contracts with RBS between October 2004 and April 2008. This was to hedge the interest due under various loan facilities with RBS. Each of the swaps used GBP LIBOR as a reference rate. LIBOR is the rate at which banks are able to borrow funds from one another, and is set by banks making daily submissions on rates to the British Bankers Association. PAG brought a claim against RBS alleging that RBS mis-sold the swap contracts which amounted to a misrepresentation and breach of contract.

Following disclosure PAG sought to amend its Particulars of Claim to include a plea for fraudulent misrepresentation. It has been recognised by commentators that cases alleging LIBOR manipulation may encounter difficulties in calculating damages. Permission to plead fraudulent misrepresentation could therefore diminish this problem. This is because the court would have discretion to order rescission (restoring parties to the position before the contracts were entered into) and damages. In this case, this would include the sums paid under the swaps (about £5 million) and £8 million paid to RBS in June 2011 to terminate the swaps.

The Application

PAG applied on 16 October 2015 to amend its Particulars of Claim. PAG sought to introduce an amendment that RBS made LIBOR representations fraudulently. This arose from PAG's review of the disclosure given by RBS. In conjunction with this amendment, PAG applied for further disclosure. The court expressed that "allegations of fraud are subject to special scrutiny" and cited The Chancery Guide, paragraph 2.8 which requires "full particulars of any allegation of fraud to be set out". Relying on a long line of established authority including Belmont Finance v Williams Furniture [1979] Ch 250 and Three Rivers v Bank of England [2001] UKHL 16 the court was clear that "an inference of dishonesty...must be pleaded and proved". Thus, assertions of fraud are "easy to make but difficult to prove". This set a high threshold to satisfy in order to introduce a plea for fraudulent misrepresentation.

PAG asserted that RBS made the LIBOR representations...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT