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Bank does not owe a contractual duty to its customers relating to its conduct during IRHP reviews

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 [2018] 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:

  1. misselling, for breach of duty of care in tort, misrepresentation and negligent misstatement in relation to the sale of the structured collars;
  2. breach of duty of care when conducting the IRHP review; and
  3. conspiracy and unlawful interference regarding the appointment of a receiver.

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:

  • the swaps that replaced the structured collar were mis-sold and had led to the consequential loss sought during the IRHP review; and
  • the bank's offer of redress gave rise to a contractual relationship, which it was alleged the bank had breached by:
  1. its conduct in the IRHP review;
  2. its failure to offer compensatory loss; and
  3. its failure to provide fair and reasonable redress which would have been payable had it complied with its review obligations.

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:

  1. causative link – the companies had failed to demonstrate any link between a breach of duty in misselling the swaps and in the consequential loss. Their pleaded loss only related to the misselling of the structured collars (which were barred due to the settlement agreement); and
  2. contractual obligation – there was no contract between the companies and the bank at the time the redress was offered. The bank conducted its review pursuant to the agreement with the FCA, which expressly exclude the rights of third parties. The acceptance of the redress offer, did not place an additional obligation on the bank for its conduct in the review.

Following the finding in CGL Group Ltd v Royal Bank of Scotland [2017] 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.

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