The Court of Appeal has refused permission to appeal the High Court's decision in the case of Elite Property Holdings Ltd and another v Barclays Bank PLC  EWCA Civ 1688.
The decision re-confirms previous decisions that there is no contractual duty of care arising between a bank and its customer in relation to the bank's review of the sale of Interest Rate Hedging Products (IRHPs).
However, this is the first time the Court of Appeal has considered this issue. Therefore, despite permission being refused, the judgment has been cited.
Two associated companies entered structured collars with the bank. Following allegations of misselling the lending was restructured; the structured collars were terminated and replaced with swaps. A settlement agreement was entered to record that any issues in relation to the structured collars were fully resolved.
The bank agreed with the FCA's predecessor, the FSA, to carry out a review of its sale of IRHPs. A term of this review was to provide appropriate redress to customers. Following the bank's review an offer of redress (excluding consequential loss) was accepted by the companies. Subsequently, the companies' claim for consequential loss was rejected.
The companies issued claims for:
The companies accepted that their claim for misselling of the structured collars was barred under the settlement agreement and applied for permission to amend their particulars of claim. This amendment was on the basis that:
Permission to amend the particulars of claim was refused and the claim was struck out. The companies applied for permission to appeal.
Permission to appeal was refused on the following grounds:
Following the finding in CGL Group Ltd v Royal Bank of Scotland  EWCA Civ 1073 (CGL) the Court recognised that the bank did not owe customers a duty of care in tort in relation to its conduct of the IRHP review. The companies therefore did not prove this ground.
This judgment builds on the recent decision in CGL, which held that the bank's contract in relation to the IRHP review was with the FCA and it was not 'fair, just or reasonable' to impose a duty of care on banks in relation to their conduct of the reviews.
This case is the first time the Court of Appeal has considered whether a bank owes a contractual duty to its customers in relation to the IRHP reviews and confirms the decisions of previous cases; that the reviews are undertaken by banks in accordance with their regulatory obligations, with no intention that the banks are contracting with customers, or that a duty of care arises to the customers.
Contributor: Emma Davey
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at August 2018. Specific advice should be sought for specific cases. For more information see our terms & conditions.