ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION (FINANCIAL LIST)
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE LONGMORE
LORD JUSTICE NEWEY
| PROPERTY ALLIANCE GROUP LIMITED
- and -
|THE ROYAL BANK OF SCOTLAND PLC
Richard Handyside QC, Adam Sher and Laurie Brock (instructed by Dentons UKMEA LLP) for the Respondent
Hearing dates: 29-31 January and 1, 5, 7 & 8 February 2018
Crown Copyright ©
Sir Terence Etherton MR, Lord Justice Longmore and Lord Justice Newey:
"The rate at which an individual Contributor Panel bank could borrow funds, were it to do so by asking for and accepting inter-bank offers in reasonable market size, just prior to 11:00 [am] London time".
The particular species of LIBOR to which the contractual arrangements at issue in this case were referenced was 3 month GBP (i.e. sterling) LIBOR.
"The Borrower shall ensure that an interest rate hedging instrument(s) acceptable to the Bank and at a level, for a period and for a notional amount acceptable to the Bank is entered into and maintained."
Both agreements also contained (as clause 10.9 in one instance and as clause 10.10 in the other) a provision in these terms:
"The Borrower authorises the Bank from time to time to obtain an up to date Bank instructed and addressed professional valuation of all or any of the Charged Properties from a valuer/surveyor acceptable to the Bank and the Borrower shall meet the cost of any valuations obtained by the Bank provided that the Borrower shall not be liable for the cost of more than one valuation for each of the Charged Properties in any one calendar year other than a valuation obtained following the occurrence of an Event of Default."
"Company [i.e. PAG] buys a 6.25%-5.25% Dual Strike Cap (Company protected at 5.25% until/unless 3 month LIBOR fixes at or above 6.25%, then company is protected at 6.25%) and sells a 5.25% Floor which is activated if 3 month LIBOR fixes at or below 3.30%".
"The cost to you of the overall structure is the sum of the cost of the borrowing and the net cost to you of the interest rate contract, whether this is a swap, cap, collar or any other interest rate hedging structure. This is illustrated below
You may have an interest rate swap under which you receive base rate and pay fixed. This is being used to protect interest rate risk on which you are paying base rate plus margin.
Your net pay/(receive) position under the swap is
In other words, the net effect of the First Swap and a loan of £10 million at a margin above LIBOR would be that PAG would pay the interest rate given in the swap (say, 5.25% if the 3 month LIBOR rate were 6%) plus the margin over LIBOR (say, 1%). On the assumed facts, PAG would thus, in all, pay 6.25%.
"You [i.e. PAG] are acting for your own account, and will make an independent evaluation of the transactions described and their associated risks and seek independent financial advice if unclear about any aspect of the transaction or risks associated with it and you place no reliance on us [i.e. RBS] for advice or recommendations of any sort."
"If interest rate derivative contracts are closed before their maturity, breakage costs or benefits may be payable. The value of any break cost or benefit is the replacement cost of the contract and depends on factors on closeout that include the time left to maturity and current market conditions such as current and expected future interest rates. This is illustrated below.
There will be a break cost to you if the interest rates prevailing on closeout are lower than the fixed rate of the swap (that you are paying) or below the floor rate of the collar. There will be a benefit to you if prevailing interest rates are higher than the fixed rate of the swap (that you are paying) or above the cap rate of the collar."
In the broadest terms, therefore, PAG would be liable to pay a break cost if interest rates declined but could stand to receive money if interest rates went up.
"(a) Non-Reliance: It is acting for its own account, and it has made its own independent decisions to enter into this Transaction and as to whether this Transaction is appropriate or proper for it based upon its own judgement and upon advice from such advisers as it has deemed necessary. It is not relying, and has not relied, on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into this transaction; it being understood that information and explanations related to the terms and conditions of this Transaction shall not be considered investment advice or a recommendation to enter into this Transaction, no communication (written or oral) received from the other party shall be deemed to be an assurance or guarantee as to the expected results of this Transaction.
(b) Assessment and Understanding: It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of this Transaction. It is also capable of assuming, and assumes, the risks of this Transaction."
"PAG Purchase a 5.25% Strike CAP
PAG Sells a 3.90% Strike FLOOR
If 3 month LIBOR fixes below 3.90% PAG pays the floor rate (3.90%) plus the difference between the floor strike (3.90%) and actual 3 month LIBOR fixing
3.90% + (3.90%-actual 3 month LIBOR fixing)
This is capped at 5.25%"
"The Lender [i.e. RBS] may, at any time, require the Valuer [i.e. Lambert Smith Hampton or such other valuer or surveyor as RBS might appoint] to prepare a Valuation of each Property [i.e. each of the properties over which RBS held security]. The Borrower [i.e. PAG] shall be liable to bear the cost of that valuation once in every 12 month period from the date of this Agreement or where a default is continuing."
Some Matters Relating to the Swaps
1) A claim that RBS is liable in tort for negligent misstatement as a result of failure to provide PAG with information about potential break costs ("the Negligent Misstatement Claim");
2) A claim that RBS falsely represented to PAG that each of the Swaps was a "hedge" and, hence, that it would reduce PAG's interest rate risk ("the Misrepresentation Claim");
3) A claim that RBS fraudulently made implied representations about LIBOR and how it was set which were false ("the LIBOR Claims"); and
4) A claim that RBS was wrong to have PAG's portfolio revalued in August 2013 ("the Valuation Claim").
"203. In any event, I have already found that PAG was aware of the potential for break costs which would vary according to market conditions and was also fully aware of the internal credit line necessary in relation to the Swaps. Further, it did not request any information about the extent of the MTM despite being aware of its existence. In my judgment therefore, not only was there no duty to reveal the extent of the break costs, the MTM at the outset or from time to time throughout the life of the Swaps but in any event, PAG did not enter into the Swaps as a result of the information having been withheld. I should add that to have any purpose or meaning it would have been necessary to provide information in relation to break costs on a regular basis, something which is not alleged.
204. What of the alleged duty to provide scenario analysis as part of a duty to explain fully? It seems to me that in the light of the unchallenged evidence that such scenarios were not generally provided at the time, and the conclusions that I have reached in relation to the wider duty of care, that there is no breach in this regard. Was RBS in breach of the duty not to misstate by failing to provide such scenarios? In my judgment, it was not. The information which was provided was not inaccurate. I consider the position to be the same in relation to break costs and MTM."
"it seems to me that in the context to which I have referred, the reasonable representee would not have understood the references to 'hedge' in the way for which PAG contends. In those circumstances, including, in particular, the non-advisory relationship arising from express contractual terms, in my judgment a reasonable representee would have considered the term to be generic and would not have understood the phrases used as a representation as to the quality of the transaction upon which they could rely".
The Judge commented (in paragraph 231) that that was "the more so because of the terms set out in the schedule to the ISDA Master Agreement and in each of the Confirmations/PTAs" and then said this in paragraph 232:
"Furthermore, and even if I am wrong about the nature of the 'Hedge Representation', and in addition, reference to a hedge should be construed in the narrow way put forward by Mr Virji [i.e. the expert called by PAG], I consider the evidence of Mr Wyse and Mr Russell to be fatal to their contention that they entered into the Swaps in reliance upon the Hedging Representations. In cross-examination, it was clear that neither gentleman understood a hedge in the way described by Mr Virji and relied upon for the purposes of this aspect of the claim. Accordingly, neither Mr Russell, PAG's ultimate decision maker, nor Mr Wyse its Finance Director could have relied upon the 'Hedge Representations' in the manner alleged. The cancellable nature of the Swaps was also fully understood by PAG. This was revealed, for example, in the discussion between Mr Malin and Mr Bescoby on the telephone. Therefore, PAG cannot have understood the reference to a 'hedge' to mean as Mr Virji suggests and to have relied upon it in that way. Furthermore, it seems to me that the appetite and eagerness for derivatives shown by PAG which sought quotations on numerous occasions in relation to various structures, rates and amounts, both from RBS and other banks, also weighs against reliance upon a representation that the Swaps were 'hedges' in the narrow sense. In my judgment, Mr Russell's conduct was much closer to speculation upon interest rates. The same reasoning applies in relation to the use of the word 'protect'."
The Negligent Misstatement Claim
"I have mentioned that the existence of a duty of care does not depend upon the existence of any misrepresentation justifying rescission, and that the duty alleged by DSS extends to explaining fully and properly to DSS the operation, terms, meaning and effect of the proposed swaps and the risks and financial consequences of accepting them. The allegations go wider than those of misrepresentation and collateral undertaking. The principle on which DSS founds itself here is contained in cases such as Barclays Bank plc v Khaira  1 WLR 623, Cornish v Midland Bank plc  3 All ER 513 and Box v Midland Bank Ltd  2 Ll Rep 391. In short, a bank negotiating and contracting with another party owes in the first instance no duty to explain the nature or effect of the proposed arrangement to that other party. However, if the bank does give an explanation or tender advice, then it owes a duty to give that explanation or tender that advice fully, accurately and properly. How far that duty goes must once again depend on the precise nature of the circumstances and of the explanation or advice which is tendered. Mr Milligan accepted that BTCo and BTI did in the present case owe a duty to take reasonable care not to misstate facts in any of the relevant meetings or letters. DSS alleges that explanations and advice were tendered which went beyond the mere statement of facts, and that BTCo and BTI owed correspondingly broader duties."
"The first is whether the defendant assumed responsibility for what he said and did vis-à-vis the claimant, or is to be treated by the law as having done so. The second is commonly known as the threefold test [in Caparo Industries plc v Dickman  2 AC 605]: whether loss to the claimant was a reasonably foreseeable consequence of what the defendant did or failed to do; whether the relationship between the parties was one of sufficient proximity; and whether in all the circumstances it is fair, just and reasonable to impose a duty of care on the defendant towards the claimant (what Kirby J in Perre v Apand Pty Ltd (1999) 198 CLR 180, para 259, succinctly labelled "policy"). Third is the incremental test, based on the observation of Brennan J in Sutherland Shire Council v Heyman (1985) 157 CLR 424, 481, approved by Lord Bridge of Harwich in Caparo Industries plc v Dickman  2 AC 605, 618, that:
"It is preferable, in my view, that the law should develop novel categories of negligence incrementally and by analogy with established categories, rather than by a massive extension of a prima facie duty of care restrained only by indefinable 'considerations which ought to negative, or to reduce or limit the scope of the duty or the class of person to whom it is owed'.""
"… the outcomes (or majority outcomes) of the leading cases cited above are in every or almost every instance sensible and just, irrespective of the test applied to achieve that outcome. This is not to disparage the value of and need for a test of liability in tortious negligence, which any law of tort must propound if it is not to become a morass of single instances. But it does in my opinion concentrate attention on the detailed circumstances of the particular case and the particular relationship between the parties in the context of their legal and factual situation as a whole."
"If interest rate derivative contracts are closed before their maturity, breakage costs or benefits may be payable. The value of any break cost or benefit is the replacement cost of the contract and depends on factors on closeout that include the time left to maturity and current market conditions such as current and expected future interest rates. This is illustrated below.
There will be a break cost to you if the interest rates prevailing on closeout are lower than the fixed rate of the swap (that you are paying) or below the floor rate of the collar. There will be a benefit to you if prevailing interest rates are higher than the fixed rate of the swap (that you are paying) or above the cape rate of the collar."
"can provide significant benefits but may involve a variety of significant risks … In the event the market has moved a transaction you have undertaken, you may incur substantial costs if you wish to close out your position … Entering into OTC derivatives can introduce significant liquidity risk and other risk factors of a complex character."
The Misrepresentation Claim
"the Swaps would hedge PAG against its exposure to interest rate rises under the Facilities (i.e. they would protect PAG from rises in interest rates above the relevant level in each of the Swaps)."
"repeatedly stated that … the Swaps would provide "hedging" or "protection" or a "solution" to [PAG's] interest rate risk under its facilities in the sense that they would protect [PAG] from rises in interest rates above the relevant levels in each of the Swaps."
"In short callable structures are just one of a number of solutions which GBM can provide to clients as part of an overall risk management strategy. They are not a hedge but can satisfy a desire for lower rate funding for a pre-determined period …"
"I note that at the end of my response I stated that such products were "not a hedge". By this I only meant that they do not provide a guaranteed hedge against interest rate risk for the full life of the trade."
The LIBOR Claims
"The rate at which an individual Contributor Panel bank could borrow funds, were it to do so by asking for and accepting inter-bank offers in reasonable market size, just prior to 11.00 [a.m.] London time."
It was at the material times set for ten currencies (including sterling, US dollars, Swiss francs and Japanese yen) and for 15 different "tenors" such as 3, 6, 9, 12 months etc. In all, therefore, there are 150 different LIBOR rates published each London business day by Thomson Reuters. The rate for the agreed swaps in the present case was 3 months sterling or, as described in the Swaps themselves, "GBP 3 months" or "GBP 3M".
"(a) On any given date up to and including the date of each of the Swaps: LIBOR represented the interest rate as defined by the BBA, being the average rate at which an individual contributor panel bank could borrow funds by asking for and accepting interbank offers in reasonable market size just prior to 11am on that date (LIBOR Representation 1);
(b) RBS had no reason to believe that on any given date LIBOR represented anything other than the interest rate defined by the BBA, being the average rate at which an individual contributory panel bank could borrow funds by asking for and accepting interbank offers in reasonable market size just prior to 11am on that date ("LIBOR Representation 2");
(c) RBS had not made false or misleading LIBOR submissions to the BBA and/or had not engaged in the practice of attempting to manipulate LIBOR such that it represented a different rate from that defined by the BBA (viz a rate measured at least in part by reference to choices made by panel banks as to the rate that would best suit them in their dealings with third parties) ("LIBOR Representation 3");
(d) RBS did not intend in the future and would not in the future: make false or misleading LIBOR submissions to the BBA; and/or engage in the practice of attempting to manipulate LIBOR such that it represented a different rate from that defined by the BBA (viz a rate measured at least in part by reference to choices made by panel banks as to the rate that would best suit them in their dealings with third parties) ("LIBOR Representation 4")."
1) there was no sufficient conduct on the part of RBS from which it could be implied that any representations were made (paragraph 407);
2) if there was such conduct, the only two representations which could be implied from that conduct were:
a) that the GBP 3 month LIBOR rate "was set at the date of the transactions and would be set throughout its term in accordance with … the BBA definition"; and
b) that RBS had not in the past made false or misleading submissions or attempted to manipulate the GBP 3 month LIBOR rate (paragraphs 408 and 410);
3) PAG had not established that those representations were false, that is to say that the GBP 3 month LIBOR rate was not correctly set at the date of the transactions and RBS had in the past made false or misleading submissions in relation to that rate (paragraphs 453-475);
4) therefore there was no question of any fraudulent or negligent representations (paragraphs 485-487); and
5) PAG did not rely on the alleged "extremely complex and intricate" representations because they did not know about the BBA definition, how submissions were made or even that RBS was a panel bank, let alone that LIBOR was capable of manipulation; it was not enough that they assumed (although they did so assume) that LIBOR would be set in a straightforward and proper manner (paragraphs 417-419).
"27. In the present case, however, the banks did propose the use of LIBOR and it must be arguable that, at the very least, they were representing that their own participation in the setting of the rate was an honest one. It is, to my mind, surprising that the banks do not appear to be prepared to accept that even that limited proposition is arguable.
28. It was also submitted that doing nothing cannot amount to an implied representation. But it is (arguably) the case that the banks did not do nothing in that they proposed transactions which were to be governed by LIBOR. That is conduct just as much as a customer's conduct in sitting down in a restaurant amounts to a representation that he is able to pay for his meal, see DPP v Ray  AC 370, 379D per Lord Reid.
30. The banks' submissions boiled down to saying that they were prepared to accept that they would do nothing dishonest or manipulative during the term of the contract and that should be enough for any counterparty. I can only say that, in my view, it is arguably not enough. If the day after the contracts had been made, the banks had told their counterparties that they had been manipulating LIBOR in the past and intended to do so in the future, but would be happy to pay any loss that their borrowers could prove, the borrower would (arguably) be sufficiently horrified so as to think he would be entitled to rescind the deal. The law should strive to uphold the reasonable expectations of honest men and women. If in the end it cannot do so, that should only be after a proper trial."
The alleged implied representations
"Where there is no express misrepresentation, the first question to ask is whether there has been any implied misrepresentation at all and, as with any other type of contract, the essential issue is whether in all the circumstances relating to the entering into of the contract of guarantee or indemnity, including in particular (a) the nature of the contract between the beneficiary and the principal debtor, (b) the conduct of the beneficiary and (c) express representations made by him to the surety, it has been impliedly represented to the surety that there exists some state of facts different from the truth. In evaluating the effect of the beneficiary's conduct a helpful test is whether, having regard to the beneficiary's conduct in such circumstances, a reasonable potential surety would naturally assume that the true state of facts did not exist and that, had it existed, he would in all the circumstances necessarily have been informed of it."
"In determining whether there has been an express representation and to what effect, the court has to consider what a reasonable person would have understood from the words used in the context in which they were used. In determining what, if any, implied representation has been made, the court has to perform a similar task, except that it has to consider what a reasonable person would have inferred was being implicitly represented by the representor's words and conduct in their context."
The Court of Appeal upheld the judge's decision that no express or implied representation had been made on the facts, see  2 Lloyd's Rep 449.
"whether a reasonable representee would naturally assume that the true state of facts did not exist and that, had it existed, he would in all the circumstances necessarily have been informed of it."
He held that on the facts, no implied representation had been made. In Casa di Risparmio della Repubblica di San Marino SpA v Barclays Bank Ltd Hamblen J also adopted the remarks of Toulson J in considering whether implied representations had been made (he held that they had not).
Scope of the representation
"It seems to me that it is a wholly artificial exercise to seek effectively to divide up the various LIBOR fixings or manipulations into separate currencies. It is quite clear that there was fixing not only of sterling LIBOR but also of dollar LIBOR and of EURIBOR, and that, as I said during the course of argument, there is inevitably scope for cross-infection here. It may be that in due course, when full disclosure has been provided, it will become apparent that one or other aspect of the LIBOR fixing assumes more significance, but it seems to me to be impossible to say that the representations that were impliedly being made should be limited in the way in which [counsel] suggests. Clearly, in terms of whether there is a real prospect of success, it is fully arguable that these representations were implicitly made to the claimants before they entered the various agreements."
1) she misunderstood the BBA definition of LIBOR because she thought that the submissions had to reflect the rate at which the submitting panel bank was prepared to lend money to other banks rather than the rate at which other banks would lend money to it;
2) the rate at which RBS was prepared to lend would naturally take into account the bank's own funding needs but that was an improper consideration for a LIBOR submitter to take into account;
3) as a result of her error, the Judge failed to appreciate that any discussion with RBS's derivatives and money market traders about RBS's funding needs was improper since both derivatives traders and money market traders were only concerned with the bank's own trading position;
4) this error also led the Judge to underrate the significance (and thus fail to deal with) important criticisms of RBS personnel contained in the FSA Final Notice relating to RBS, in particular:
a) Mr Walker's misconduct in connection with the bank's US dollar LIBOR submissions on 16 August 2007;
b) Mr Thomasson's misconduct in connection with the bank's US dollar LIBOR submissions while Mr Walker was away between 9 and 18 March 2010; and
c) Mr Walker's own misconduct or awareness of the misconduct of other RBS personnel arising from his assertions on 20 August 2007 (and other occasions) that people were "setting LIBORs to suit their books".
The importance of (b) above from PAG's point of view is that if it could show that Mr Thomasson was prepared to manipulate US dollar LIBOR, that might lead to the inference that he was prepared to do the same for sterling LIBOR;
5) In the light of those errors, the matters with which the Judge did deal were dealt with unsatisfactorily, in particular the evidence of Mr Thomasson's calendar entries in August and September 2009 should not have been accepted;
6) she also failed to appreciate the significance of the absence from RBS's evidence of any senior management personnel to explain (and be cross-examined about) their knowledge of the way the LIBOR submitters were making their submissions, especially in the light of:
a) an email of 30 April 2008 from Mr Johnny Cameron, Chairman of the Global Banking and Markets Division and a member of the Group Board of Directors stating that the Bank of England wanted banks to play US dollar LIBOR very "straight"; and
b) a telephone conversation in October 2008 in which Mr Cummins, the RBS Group Treasurer, said that he did not want RBS to be in a "gold medal spot" but did not mind being "in bronze medal spot" relative to other panel banks; and
7) she likewise failed to address PAG's alternative case that in November 2007 and July 2009 both Mr Thomasson and Mr Walker had reason to believe that other panel banks were making false sterling and dollar submissions.
(1-3) Misunderstanding of the BBA definition of LIBOR
"I also do not consider it appropriate to draw adverse inferences from the fact that the submitters were seated on the same trading floor with derivatives traders at the time and could contact those traders in numerous ways, including it would seem, by way of an unrecorded intercom. In this regard, I take account of the fact that although it is possible that improper communications were made in this way, it cannot be safe to assume it or draw some kind of adverse inference particularly in the light of the fact that despite the fact that the same means of communication was available to submitters and traders in other currencies, there is plenty of documentary evidence of their conduct."
These observations are apt and compelling.
(4) Failure to take account of FSA findings
"71. …[Mr Walker] observed to a Broker during the financial crisis that in the absence of liquidity, "people are just setting LIBOR to suit their books" and "its just where you've got your fixings really".
73. With respect to USD, on 16 August 2007, [Mr Walker] directed a junior Money Market Trader to make a USD LIBOR submission on his behalf that took into account the pricing of a large forthcoming floating rate transaction that would impact the USD money market book on 17 August 2007. Specifically, [Mr Walker] told a RBS colleague, "I've got massive fixing in ones, so I said to [Money Market Trader A, who was making RBS's USD LIBOR submissions on the day in question] I just want the really, really low ones, in case they do fucking cut. [Mr Walker]'s reference to "massive fixings" was a reference to a repeating USD 4 billion borrowing facility that was set to fix on 17 August 2007. On 17 August 2007, RBS's 1 month LIBOR submission was two basis points lower than 16 August 2007 and seven basis points lower than 15 August 2007. However, as many Panel Banks also reduced their 1 month LIBOR submissions on 17 August 2007, RBS's submission ranking relative to the Panel Banks only fell slightly on that day. On 20 August 2007, the date of its next submission, RBS's 1 month submission went back up 2 basis points (and its submission ranking moved up significantly).
74. Also, in relation to USD, between 9 March 2010 and 18 March 2010, [Mr Thomasson] made USD submissions which took into account the pricing of large forthcoming floating rate USD transactions. A communication on 9 March 2010 illustrates the consideration that Primary Submitters, including [Mr Thomasson], gave to these transactions. Specifically, on that date, Money Market Trader B, emailed [Mr Walker] whilst [Mr Walker] was on holiday and told him of a conversation he had had with [Mr Thomasson] who was filling in for [Mr Walker] and making RBS's USD LIBOR submissions. According to Money Market Trader B, [Mr Thomasson] told Money Market Trader B that even though Money Market Trader B wanted them higher, he [Mr Thomasson] "wanted to keep them [USD LIBORs] down because of some fixes". [Mr Walker] replied to Money Market Trader B's email and confirmed to him, "we do have some big fixes in London so suits for low libors". Notably, RBS's USD LIBOR submissions stayed low during this period when there were five large USD floating rate transactions (but they were unchanged from the rates submitted over the previous three weeks). RBS's USD LIBOR submissions went up after the last large transaction fixed."
1) she did explain in paragraphs 453 and 457 that she did not consider it appropriate to draw inferences from conduct in relation to one currency that the same conduct occurred in relation to a different currency. Since the Judge heard the relevant witnesses being cross-examined (an advantage which the FSA did not have) that approach, no doubt coloured by her subsequent comments in paragraph 453, cannot, in our judgment, be criticised and may well explain why she did not feel it necessary to engage directly with the findings in paragraphs 73 and 74 of the Notice which relate to US dollar submissions, which she had in any event recorded in paragraphs 348, 436 and 355-7 of her judgment respectively;
2) the FSA's reference to Mr Walker's dollar submissions could only be of marginal relevance to the question whether RBS (by Mr Thomasson or anyone else) was manipulating sterling LIBOR submissions;
3) as we have already observed, paragraph 74 of the Notice relates to events after the October 2008 financial crisis had intervened and are, at best, only a somewhat slender indication of manipulation at the time of the First Swap of 6 October 2004 and even of the Second to Fourth Swaps between 25 September 2007 and 16 April 2008. That consideration does not apply with similar force to the finding of the FSA in paragraph 73 but that only related to the dollar submitter (Mr Walker) making a dollar submission and is itself at best a slender basis of inferring that Mr Thomasson, the sterling submitter, was manipulating sterling LIBOR; and
4) no judge is bound to deal with every point made in a lengthy trial; it is moreover, far from the case that the Judge was unaware of PAG's case that any proved manipulation of US dollar LIBOR might lead to the inference that GBP LIBOR was being manipulated, see paragraphs 355-7, 421-3, 436-440, 453 and 457.
(5) Mr Thomasson's calendar entries in August and September 2009
(6) Absence of senior management witnesses
(7) "Awareness" of other panel banks' misconduct
Fraud and Reliance
Conclusion on LIBOR
The Valuation Claim
"It is plain from these authorities that a decision-maker's discretion will be limited, as a matter of necessary implication, by concepts of honesty, good faith, and genuineness, and the need for the absence of arbitrariness, capriciousness, perversity and irrationality. The concern is that the discretion should not be abused. Reasonableness and unreasonableness are also concepts deployed in this context, but only in a sense analogous to Wednesbury unreasonableness, not in the sense in which that expression is used when speaking of the duty to take reasonable care, or when otherwise deploying entirely objective criteria: as for instance when there might be an implication of a term requiring the fixing of a reasonable price, or a reasonable time."
"I would hold that there were terms to be implied in both agreements that the rates of interest would not be set dishonestly, for an improper purpose, capriciously or arbitrarily. I have no doubt that such an implied term is necessary in order to give effect to the reasonable expectations of the parties. I am equally in no doubt that such an implied term is one of which it could be said that 'it goes without saying'. If asked at the time of the making of the agreements whether it accepted that the discretion to fix rates of interest could be exercised dishonestly, for an improper purpose, capriciously or arbitrarily, I have no doubt that the claimant would have said 'of course not'."
Dyson LJ also accepted that it was an implied term that the lender would not exercise its discretion in a way that no reasonable lender, acting reasonably, would do, while noting that it would be "quite another matter to imply a term that the lender would not impose unreasonable rates" (paragraph 41).
"82 In each of the above cases the implied term was intrinsic. The contract would not make sense without it. It would have been absurd in any of those cases to read the contract as permitting the party in question to exercise its discretion in an arbitrary, irrational or capricious manner….
83 An important feature of the above line of authorities is that in each case the discretion did not involve a simple decision whether or not to exercise an absolute contractual right. The discretion involved making an assessment or choosing from a range of options, taking into account the interests of both parties. In any contract under which one party is permitted to exercise such a discretion, there is an implied term. The precise formulation of that term has been variously expressed in the authorities. In essence, however, it is that the relevant party will not exercise its discretion in an arbitrary, capricious or irrational manner. Such a term is extremely difficult to exclude, although I would not say it is utterly impossible to do so…."
On the facts of the case before it, the Court of Appeal unanimously concluded that there was no implied term.
"Contractual terms in which one party to the contract is given the power to exercise a discretion, or to form an opinion as to relevant facts, are extremely common. It is not for the courts to rewrite the parties' bargain for them, still less to substitute themselves for the contractually agreed decision-maker. Nevertheless, the party who is charged with making decisions which affect the rights of both parties to the contract has a clear conflict of interest. That conflict is heightened where there is a significant imbalance of power between the contracting parties as there often will be in an employment contract. The courts have therefore sought to ensure that such contractual powers are not abused. They have done so by implying a term as to the manner in which such powers may be exercised, a term which may vary according to the terms of the contract and the context in which the decision-making power is given."
"As a general rule, the scope of a contractual discretion will depend on the nature of the discretion and the construction of the language conferring it. But it is well established that in the absence of very clear language to the contrary, a contractual discretion must be exercised in good faith and not arbitrarily or capriciously: Abu Dhabi National Tanker Co v Product Star Shipping Ltd (No 2)  1 Lloyd's Rep 397, 404, per Leggatt LJ; Gan Insurance Co Ltd v Tai Ping Insurance Co Ltd (No 2)  2 All ER (Comm) 299, para 67, per Mance LJ and Paragon Finance plc v Nash  1 WLR 685, paras 39–41, per Dyson LJ. This will normally mean that it must be exercised consistently with its contractual purpose: Ludgate Insurance Co Ltd v Citibank NA  Lloyd's Rep IR 221, para 35, per Brooke LJ and Equitable Life Assurance Society v Hyman  1 AC 408, 459, per Lord Steyn, and p 461, per Lord Cooke of Thorndon."
"2. In relation to PAG, my understanding when I came to work on the file in early 2013 was that RBS was not inclined to continue financing PAG beyond the expiry of the 2011 Facility in June 2014.
38. As I mentioned above, it was my understanding when I came to work on the file in early 2013 that RBS was not inclined to continue financing PAG beyond the expiry of the 2011 Facility in June 2014, largely in view of PAG's high LTV [i.e. loan to value] ratio."
"If a party who has served a witness statement does not—
(a) call the witness to give evidence at trial; or
(b) put the witness statement in as hearsay evidence, any other party may put the witness statement in as hearsay evidence."
"[CPR 32.5] abrogates the old rule and makes permissive what the old rule prevented. It is then a matter for the discretion of the judge whether to permit it. In my judgment, however, there is nothing in this new rule to change the basic rules of the laws of evidence which existed before the new rule was introduced by the rule-makers, and which are still in force today."
Going on, Brooke LJ said (at page 1740):
"I know of no principle of the law of evidence by which a party may put in evidence a written statement of a witness knowing that his evidence conflicts to a substantial degree with the case he is seeking to place before the jury, on the basis that he will say straight away in the witness's absence that the jury should disbelieve as untrue a substantial part of that evidence."