Held, appeal dismissed. (1) What amounted to a misstatement in the context of a duty not carelessly to misstate depended on the circumstances of the relationship and identification of the matter for which the defendant had assumed responsibility in relation to the claimant. It was an elastic duty, was factually sensitive, and was premised on the voluntary proffering of representations by the defendant, which might require further elucidation or the correction of misleading impressions on the claimant. The starting point was that a bank negotiating and contracting with another party owed in the first instance no duty to explain the nature or effect of the proposed arrangement to that other party. Concentration should be on the responsibility assumed in the particular factual context as regards the particular transaction or relationship. The parties were agreed that, in explaining the terms of the proposed swaps to the claimant, the bank had been under a duty not to misstate. The documentation and other evidence at the trial made clear that the claimant had been made fully aware that breaking any of the swaps could carry adverse financial consequences. The size of those consequences would depend on interest rates at that time, and the precise calculation of any amount to be paid by the claimant would take into account the extent to which the floating-rate payable by the bank under the swaps was lower than the fixed interest payable by the claimant. There was no proper basis for holding that there had been any assumption of responsibility for the disclosure by the bank of the CLU or any similar indication of the possible size of future costs, or for holding that it was fair, just or reasonable to impose on the bank an advisory duty requiring such disclosure. The judge had been entitled to reject the claim of breach of duty by the bank and the existence of any wider duty which might include the duty to disclose the CLU figure (paras 56, 64, 66–68, 72, 75, 77, 78, 80–83).

Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, HL(E) applied.

Dictum of Mance J in Bankers Trust International plc v PT Dharmala Sakti Sejahtera [1996] CLC 518, 533 considered.

(2) The critical feature of the factual context in relation to alleged hedge misrepresentation was that under each loan facility agreement the bank required the claimant to enter into and maintain an interest rate hedging agreement acceptable to the bank, the purpose of which was to ensure that the claimant would be protected against increases in interest rates which might otherwise undermine its ability to pay the interest due on its loans from the bank. Since the claimant had been fully aware that the swaps extended beyond the period of the relevant loans, and that the bank would exercise its cancellation rights if the swaps became unattractive to it as a result of interest rate rises, the judge had been justified in concluding that a reasonable representee would not have understood that the bank used the word “hedge” with a meaning which accorded with that put forward by the claimant’s expert witness, namely, that an interest rate hedge was a product which if transacted mitigated the adverse consequences of changes in rates and would reduce the risk of loss, and thus in the bank’s dealing with the claimant there had been no misrepresentation. In any event, the judge had also been entitled to conclude from the evidence that the claimant had not entered into the swaps relying on its expert’s hedging definition. A close examination of the evidence of the bank’s witnesses showed the judge had not ben entitled to make any finding of fraudulent misrepresentation against the bank (paras 89–91, 95–97,101, 111).

(3) Since a party to a contract containing a swap needed to be certain of the counterparty’s honesty at the beginning of the deal and throughout its course, the requirement was for clear words or clear conduct of the representor from which any relevant representation could be inferred. A helpful test for the existence of an implied representation was to consider whether a reasonable representee would naturally assume that the true state of facts did not exist and that, if it did, he would necessarily have been informed of it. The bank had undoubtedly been proposing the swap transactions with their reference to LIBOR as transactions which the claimant could and should consider as fulfilment of the obligations contained in the loan contracts, and the most feasible formulation of any representation in the circumstances was that the bank had been representing that, at the date of the swaps, it was itself not seeking to manipulate LIBOR and did not intend to do so in the future. Although no such representation had been made expressly, it could be inferred and to that extent the judge rhad eached the wrong conclusion. The implied representation could not legitimately extend further than the particular transactions, which referred to sterling LIBOR and thus could not relate to other LIBOR currencies with which they were not concerned. Nevertheless, the judge had found there was no evidence of manipulation, which was essentially a question of fact, and it would be impossible for the court to hold that there had been such manipulation against the judge’s conclusion, having heard many witnesses over many days. Her familiarity with the issues and evidence in the case was no basis to reverse her findings that the bank had not made false or misleading submissions in relation to the LIBOR rate. It was therefore unnecessary for the court to resolve whether there had been a fraudulent misrepresentation by the bank (paras 122–123, 125, 132–134, 137–141, 143, 144, 157, 158).

Dicta of Colman J in Geest plc v Fyffes plc [1999] 1 All ER (Comm) 672, 683 approved.

Decision of Asplin J [2016] EWHC 3342 (Ch) affirmed.