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England and Wales High Court (Queen's Bench Division) Decisions

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Cite as: [2016] 2 Lloyd's Rep 420, [2016] EWHC 1601 (QB)

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Neutral Citation Number: [2016] EWHC 1601 (QB)
Case No: LM-2015-000166


Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
5 July 2016

B e f o r e :



- and -




Brian Hurst (directly instructed) for the Claimant
David Pope (instructed by Dentons UKMEA LLP) for the Defendant
Hearing date: 16 May 2016



Crown Copyright ©

    Mr Justice Phillips:

  1. The defendant ("the Bank") applies for summary judgment against the claimant ("Mr Marsden") or, alternatively, for an order that the claim be struck out.
  2. Mr Marsden's claim is that he was mis-sold two vanilla interest-rate swaps in the amortising amounts of £1.4m and £850,000, entered between Mr Marsden and the Bank on 10 September 2007 ("the Swaps") and cancelled on 16 March 2011. Mr Marsden further claims that the Bank, in conducting a review of the sale of the Swaps in 2013 and 2014 (pursuant to the Bank's agreement with the FSA/FCA to review such sales to non-sophisticated customers), breached alleged contractual duties owed to Mr Marsden, in particular in failing to allow him further time to make a claim for consequential loss.
  3. The Bank's primary contention is that all causes of action in relation to the Swaps were fully and finally compromised by a written settlement agreement signed by Mr Marsden on 3 March 2011 ("the Settlement Agreement"), so that the claim has no prospect of success. Mr Marsden accepts that he signed the document in question, but contends that it is arguable that (i) there was no valid consideration for the alleged compromise of his claim; (ii) his signature was procured by economic duress; and/or (iii) the agreement does not compromise claims in relation to the Bank's alleged fraud or other misconduct prior to the entry of Swaps, nor claims in relation to the subsequent review.
  4. The Bank further contends that, even if not compromised, certain of the causes of action pleaded by Mr Marsden are unarguable and should be struck out, further arguing that the Particulars of Claim are, taken as a whole, both prolix and deficient in proper particulars.
  5. It is common ground that the test on an application for summary judgment by a defendant is whether the claim has a realistic as opposed to a fanciful prospect of success, that is, one which carries some degree of conviction. It is open to the court to conclude that there is no real substance in factual assertions made by the claimant, but the court should not conduct a mini-trial. If the court has all the evidence necessary for the proper determination of a point, it should decide it.
  6. The background facts

    (a) Mr Marsden's business and previous swap transaction

  7. Between 1985 and 2012 Mr Marsden was in the business of purchasing, restoring and then selling public houses and small hotels, largely financed by loans from the Bank. Although certain of Mr Marsden's business was conducted through companies in his control, his dealings with the Bank described below were in his personal capacity.
  8. Mr Marsden first entered into an interest-rate swap with the Bank on 31 July 2006 as a hedge against the interest rate risk in respect of variable-rate loans of £750,000 and £850,000 advanced to him by the Bank to assist with the purchase of public houses in Suffolk and Derby respectively. That swap, in the amount of £1,592,113.17, was at a fixed rate of 5.15%. Mr Marsden terminated the swap on 19 July 2007, receiving a cancellation fee of £30,000 as interest rates had risen and were forecast to remain above the fixed rate.
  9. (b) The Swaps

  10. In May 2007 Mr Marsden sold the Suffolk property and repaid the £750,000 loan. The Bank then lent a further £1.4 million (in addition to the existing loan of £850,000) to assist in the purchase of another public house in Shropshire. The Swaps were entered as a hedge against the interest rate risk under the two outstanding loans, at the fixed rate of 5.63%. The terms of the Swaps were set out in confirmations dated 11 September 2007, countersigned by Mr Marsden on 17 September 2007.
  11. As interest rates fell in 2008, particularly after September, Mr Marsden was obliged to make payments to the Bank under the terms of the Swaps and his future exposure increased (as, correspondingly, did the cost of breaking the Swaps).
  12. (c) Mr Marsden's cashflow problems

  13. In 2009 Mr Marsden's business experienced significant cash flow problems, which Mr Marsden now attributes to having to fund the Swaps. Accountants jointly instructed by the Bank and Mr Marsden reported that Mr Marsden was unable to meet interest or capital payments due to the Bank as a result of the underperformance and high gearing of the business, although the report was hampered by the business' poor accounting records. In February 2010 the Bank agreed to suspend repayments on Mr Marsden's loans until August 2010.
  14. (d) The complaint to the Financial Ombudsman Service ("the FOS")

  15. In the meantime, on 10 August 2009, Mr Marsden (unknown to the Bank) had made a complaint to the FOS alleging that the Bank had mis-sold the Swaps to him by telling him that entering the Swaps was a condition of the Bank's lending to him. In that document Mr Marsden asserted that he had first raised the complaint with the Bank in April 2008, although emails at about that time reveal no complaint, but demonstrate that Mr Marsden's concern about the Swaps was the exposure of his estate if he died, a concern he addressed by obtaining life insurance of £400,000[1].
  16. As there was no evidence of a complaint to the Bank, the FOS returned the papers to Mr Marsden and informed him they would notify the Bank of the complaint. For reasons which are unclear, it appears that the FOS did not write to the Bank in respect of the complaint until 28 May 2010. The Bank met Mr Marsden and Clive Nurse (Mr Marsden's former solicitor, by then retired and assisting Mr Marsden as his agent), on 14 July 2010 to discuss the complaint, but rejected it in a detailed letter dated 16 July 2010.
  17. At the meeting on 14 July 2010 there was also discussion of a restructuring of Mr Marsden's indebtedness. In a letter dated 26 July 2010, Mr Nurse recorded that the Bank had stated that it would not agree to a restructuring whilst the complaint to the FOS remained unresolved. Mr Nurse asserted that this was economic duress. He concluded the letter by stating that Mr Marsden would only withdraw his complaint once the Bank's restructuring offer had been made and accepted.
  18. Mr Marsden repeated that he was prepared to drop his complaint on the basis that the Bank restructure his indebtedness in a phone call with Duncan Thompson of the Bank on 3 September 2010.
  19. On 20 September 2010 the FOS adjudicator wrote to Mr Marsden's solicitor informing him that the adjudicator was unable to recommend that the complaint be upheld, but reminding him of the right to ask an ombudsman to review the case. On 30 September 2010 Mr Marsden's solicitor informed both the Bank and the FOS that Mr Marsden was withdrawing the complaint and would not be pursuing it further with the FOS.
  20. (e) The restructuring of Mr Marsden's indebtedness

  21. By email to Mr Marsden dated 25 November 2010 the Bank proposed a restructuring of his indebtedness, refinancing eight accounts which were in default or overdrawn with a new loan. The outline terms included, as the first requirement, that there be a resolution satisfactory to the Bank in respect of Mr Marsden's complaint in relation to the Swaps. The Bank further required that the Swaps be broken and that the breakage costs be included in the restructured loan.
  22. On 27 January 2011, following negotiations between solicitors for the Bank and solicitors for Mr Marsden, the Bank formally offered Mr Marsden a new on-demand term loan of £3,671,374 (at an interest rate of 1.5% above base) to consolidate his and his companies' liabilities. It was a condition of the offer that the Swaps were broken. Mr Marsden countersigned the offer by way of acceptance on 4 February 2011.
  23. On 3 March 2011 Mr Marsden countersigned the Settlement Agreement, contained in a letter sent to Mr Marsden's solicitors by the Bank the day before. Mr Marsden thereby acknowledged and agreed that:
  24. "… the entry by the Parties into the facility letter dated 27 January 2011 with a loan amount of £3,671,374.00 is in full and final settlement of all complaints, claims and causes of action which arise directly or indirectly, or may arise, out of or are in any way connected with the Swaps."
  25. The Swaps were duly terminated on 16 March 2011 at a total cost to Mr Marsden of £352,728. The following day the new loan was drawn down.
  26. (f) Mr Marsden's bankruptcy

  27. Notwithstanding the restructuring, Mr Marsden's business continued to struggle, failing to make payments due to the Bank and to other creditors. One such creditor, Carlsberg, issued a statutory demand for £172,572.31. Mr Marsden was adjudged bankrupt on 8 May 2012 and a trustee in bankruptcy was appointed.
  28. (g) The Bank's review of the sale of the Swaps

  29. On 29 June 2012 the FSA (now known as the FCA) announced that the Bank (along with four other banks) had agreed to review its past sales of interest rate hedging products to certain categories of customers. The review process formally started in early 2013.
  30. The Bank wrote to Mr Marsden on 18 February 2013 inviting him to participate in the review, an offer Mr Marsden accepted. The Bank then realised that Mr Marsden was bankrupt. A similar letter was written to Mr Marsden's trustee in bankruptcy on 15 March 2013, but it was not until November 2013 that the Bank was notified that the trustee had assigned his rights of action in relation to the Swaps to Mr Marsden, enabling the Bank to proceed with the review.
  31. On 22 May 2014 the Bank, having reviewed the sale of the Swaps, made an offer of redress in the sum of £608,601.14, including compensatory interest at 8%. That sum, if accepted, was to be subject to an insolvency set-off against the much larger sum owing to the Bank. The offer provided that, if Mr Marsden wished to claim additional consequential losses as a result of being deprived of money, he should make any such claim within 40 days.
  32. In the event, the Bank agreed to extend Mr Marsden's time for submitting a claim for consequential loss, or to arrange a meeting in that regard, to 26 September 2014, then to 4 November 2014, the later extension being expressed to be final, unless there were exceptional circumstances. Notwithstanding these extensions, Mr Marsden did not submit a claim for consequential loss nor even seek to arrange a meeting by 4 November 2014. Instead, on that date, he requested a further extension of time.
  33. By letter dated 11 November 2014 the Bank refused a further extension and stated that its offer of redress had become final and that Mr Marsden's case had been closed. The offer of redress in the amount of £608,601.14 remained open.
  34. Mr Marsden's claim in these proceedings

  35. Mr Marsden alleges that he was mis-sold the Swaps in the course of sales presentations by (and other communications with) Denis Moriarty of Barclays Capital, dating back to March 2006. Mr Marsden no longer alleges (as he did in the FOS complaint) that he was told that entry of the Swaps was a condition of the Bank's lending. Instead he contends that Mr Moriarty made numerous statements to him to the effect that interest rates were about to rise or likely to rise. In common with many other mis-selling claims brought against banks in respect of interest rate hedging products, Mr Marsden alleges breach of statutory duty, negligence, breach of contract and misrepresentation. The Bank accepts that those are valid causes of action which would have been triable, had they not been compromised by the Settlement Agreement.
  36. Mr Marsden also advances claims (i) for restitution, on the grounds that the Swaps were void or voidable as being contrary to public policy or for failure to comply with "statutory preconditions"; (ii) for deceit; and (iii) breach of contract in conducting the review. The Bank contends that these causes of action are also covered by the Settlement Agreement, but in any event are hopeless, either as a matter of law or fact (or both).
  37. The effect of the Settlement Agreement

  38. The Settlement Agreement is worded in the very widest of terms, expressly compromising both existing and future causes of action arising out of or in any way connected with the Swaps. On its face, that wording plainly covers all aspects of the present claim.
  39. Mr Hurst, counsel for Mr Marsden, advanced a number of arguments as to why the Settlement Agreement was not an answer, or not a complete answer, to the claims advanced by Mr Marsden.
  40. (i) Consideration

  41. Mr Hurst pointed to the fact that the Bank's offer of a new loan was accepted by Mr Marsden on 4 February 2011. He submitted that there was therefore a fully concluded contract as at that date, a contract which did not contain a release of Mr Marsden's claims or require him to provide such release. On that basis, Mr Hurst submitted that Mr Marsden gave no consideration for the Settlement Agreement he countersigned almost a month later, the Bank having already entered a binding commitment to provide the agreed facilities (such commitment being past consideration).
  42. In my judgment there are two answers to that contention, each of which is independently conclusive. In the first place, it is clear from the Bank's email of 25 November 2010 and from the sequence of events in February and March 2011 that the loan agreement and the Settlement Agreement were part and parcel of the same overall transaction, structured by way of two agreements conditional on each other. Therefore, although the loan agreement was concluded on 4 February 2011, it was only after the Settlement Agreement was executed that the Swaps were cancelled and the new loan drawn down. It is clear that in such circumstances the Bank's agreement to provide new facilities was valid consideration for Mr Marsden's agreement to release his claims, even though the Settlement Agreement post-dated the apparently concluded loan agreement. As stated in Chitty on Contracts 32nd Ed. 4-027:
  43. "In determining whether consideration is past, the courts are not, it is submitted, bound to apply a strictly chronological test. If the giving of the consideration and the making of the promise are substantially one transaction, the exact order in which these events occur is not decisive."
  44. Second, the loan agreement was subject to standard terms which included, at clause 3.2, that the facility was repayable on demand and could be cancelled at any time by the Bank. It is no doubt because of those terms that the Bank did not consider it necessary to make it an express condition of the loan agreement that Mr Marsden execute a release as stipulated in the email of 25 November. The Bank could have cancelled the facility prior to drawdown had Mr Marsden not executed the Settlement Agreement and its forbearance from so doing was clear consideration for that latter agreement.
  45. It is therefore not arguable that the Settlement Agreement was unenforceable for want of consideration.
  46. (ii) Economic duress

  47. It was common ground that the ingredients of actionable duress are as set out by Dyson J (as he then was) in DSND Subsea Limited v Petroleum Geo Services ASA (unreported), 28 July 2000 at [131] as follows:
  48. there must be pressure, (a) whose practical effect is that there is compulsion on, or a lack of practical choice for, the victim, (b) which is illegitimate, and (c) which is a significant cause inducing the claimant to enter into the contract … In determining whether there has been illegitimate pressure, the court takes into account a range of factors. These include whether there has been an actual or threatened breach of contract; whether the person allegedly exerting the pressure has acted in good or bad faith; whether the victim had any realistic practical alternative but to submit to the pressure; whether the victim protested at the time; and whether he confirmed and sought to rely on the contract. These are all relevant factors. Illegitimate pressure must be distinguished from the rough and tumble of the pressures of normal commercial bargaining."
  49. It was also common ground that, although threats of lawful action may amount to "illegitimate" pressure for these purposes, such "lawful-act" duress will only be established in rare cases in commercial contexts, where the threat is coupled with a demand that goes "substantially beyond what is normal or legitimate in commercial arrangements": Chitty on Contracts (above) paras 8-046 and 8-047. In CTN Cash and Carry Limited v Gallaher Limited [1994] 4 All ER 715, the defendant had threatened to exercise its right to withdraw credit from the plaintiff company if it did not pay for goods which the defendant (wrongly) believed were at the plaintiff's risk. The plaintiff claimed that they had paid under duress. The Court of Appeal held that the threat was not illegitimate. Steyn LJ, with whom the other members of the Court agreed, stated at 719h:
  50. there are a number of cases where English courts have accepted that a threat may be illegitimate when coupled with a demand for payment even if the threat is one of lawful action … On the other hand, Goff and Jones Law of Restitution … observed that English courts have wisely not accepted any general principle that a threat not to contract with another, except on certain terms, may amount to duress.
    We are being asked to extend the categories of duress of which the law will take cognisance. … But it seems to me that an extension capable of covering the present case, involving 'lawful act duress' in a commercial context in pursuit of a bona fides claim, would be a radical one with far-reaching implications. It would introduce a substantial and undesirable element of uncertainty in the commercial bargaining process. Moreover, it will often enable bona fides settled accounts to be reopened when parties to commercial dealings fall out. The aim of our commercial law ought to be to encourage fair dealing between parties. But it is a mistake for the law to set its sights too highly when the critical enquiry is not whether the conduct is lawful but whether it is morally or socially unacceptable…
    Outside the field of protected relationships, and in a purely commercial context, it might be a relatively rare case in which 'lawful act duress' can be established …"
  51. Mr Hurst argued that there were two aspects of the Bank's conduct which amounted to duress (or otherwise "unconscionable conduct").
  52. First, Mr Hurst contended that the Bank 'told' Mr Marsden on 2 March 2011 (apparently by sending the letter of 2 March 2011 to Mr Marsden's solicitors) that it would refuse to comply with its contractual obligation to provide the loan pursuant to the offer accepted by Mr Marsden on 4 February 2011 unless Mr Marsden signed the Settlement Agreement. Mr Hurst argued that the alleged threat was not only to breach a concluded contract but was conduct "capable of supporting a criminal charge against those who forced him to sign".
  53. In my judgment that submission was without merit and the allegation of criminal conduct should not have been made. As explained above, the Settlement Agreement was plainly an integral part of the overall transaction, anticipated from the outset, not procured by the threat of breach of a concluded contract. But even if there was a concluded contract, the Bank had an express right to cancel the facility, just as the defendant in the CTN Cash case had the right to cancel existing credit facilities. I can see no arguable case that the Bank threatened a breach of contract, if indeed it made any demand at all. In fact, all that appears to have happened is that the Bank's solicitors sent the letter to Mr Marsden's solicitors and the latter arranged, as per the overall transaction, for Mr Marsden to sign it.
  54. It follows that the Bank's requirement that Mr Marsden sign the Settlement Agreement was part of a commercial negotiation of the terms on which the Bank would provide a large new loan to a defaulting debtor. To the extent that the Bank threatened not to provide the facility (or to cancel it) if Mr Marsden did not release outstanding claims, it was a threat to adopt an entirely lawful position, one which the Bank could hardly be criticised for taking. Further, there is no reason to suspect that the Bank did not believe that it was entitled to make such a demand. The result was a compromise entered by Mr Marsden for good commercial reasons and with the benefit of legal advice. I can see nothing which would arguably make this one of the rare cases in which a lawful action amounts to an illegitimate threat.
  55. Second, Mr Hurst argued that the Bank's earlier demand that Mr Marsden withdraw his complaint to the FOS before it would negotiate a restructuring of Mr Marsden's indebtedness was illegitimate, unconscionable conduct and also a criminal offence, placing particular weight on the fact that Mr Marsden had a 'statutory right' to complain to the FOS.
  56. In my judgment this second ground was also entirely without merit and, further, there was no proper basis for an allegation of criminal conduct. The Bank was under no obligation to negotiate a restructuring of Mr Marsden's debts and was perfectly entitled to refuse to do so whilst there was an unresolved complaint outstanding. It was a threat of entirely lawful inaction in the context of a commercial negotiation, where Mr Marsden had the assistance of a retired solicitor. There is no reason to suspect that the Bank did not believe that it was entitled to make the threat. Indeed, Mr Marsden made a corresponding threat – that he would not withdraw the complaint until the Bank had agreed to restructure his debts. Neither demand could conceivably be regarded as illegitimate, but rather two parties adopting apparently rigid positions in relation to their respective bargaining points.
  57. In the event Mr Marsden did withdraw his complaint, but it is clear that this was because it had ceased to be a serious bargaining chip after the FOS adjudicator had refused to recommend that it be upheld, not because his will had been overborne by illegitimate pressure from the Bank.
  58. It is therefore not arguable that the Settlement Agreement was procured by duress.
  59. (iii) The scope of the agreement

  60. In Bank of Credit and Commerce SA (In Liquidation) v Ali (No.1) [2002] 1 AC 251 the House of Lords considered whether a widely worded general release between employer and employee, expressed to include all claims that "may exist", prevented the employee from seeking damages for the stigma of having worked for an employer, subsequently found to have been operating a dishonest and corrupt business. It was recognised that the possibility of a 'stigma' claim could not have been anticipated at the date of the release.
  61. Lord Nicholls explained the issue which arose as follows:
  62. "The circumstances in which this general release was given are typical. General releases are often entered into when parties are settling a dispute which has arisen between them, or when a relationship between them, such as employment or partnership, has come to an end. They want to wipe the slate clean. Likewise, the problem which has arisen in this case is typical. The problem concerns a claim which subsequently came to light but whose existence was not known or suspected by either party at the time the release was given. The emergence of this unsuspected claim gives rise to a question which has confronted the courts on many occasions. The question is whether the context in which the general release was given is apt to cut down the apparently all-embracing scope of the words of the release."
  63. The House of Lords affirmed that question was one of construction of the general release according to usual principles, there being no special rules of interpretation applicable to a general release. Lord Bingham further stated as follows:
  64. "9. A party may, at any rate in a compromise agreement supported by valuable consideration, agree to release claims or rights of which he is unaware and of which he could not be aware, even claims which could not on the facts known to the parties have been imagined, if appropriate language is used to make plain that this is his intention ...
    10. But a long and in my view salutary line of authority shows that, in the absence of clear language, the court will be very slow to infer that a party intended to surrender rights and claims of which he was unaware and could not have been aware."
  65. Lord Nicholls emphasised that the question involved considering the subject-matter of the compromise to determine to which claims the agreement was addressed:
  66. "However widely drawn the language, the circumstances in which the release was given may suggest, and frequently they do suggest, that the parties intended, or, more precisely, the parties are reasonably to be taken to have intended, that the release should apply only to claims, known or unknown, relating to a particular subject matter. The court has to consider, therefore, what was the type of claims at which the release was directed … Echoing judicial language used in the past, that would be regarded as outside the "contemplation" of the parties at the time the release was entered into, not because it was an unknown claim, but because it related to a subject matter which was not "under consideration"."
  67. The House of Lords also recognised that, although not arising in that case, different considerations might arise if a party was seeking, by way of sharp practice, to exclude liability for a claim he knew about but which was unknown to the other party. Lord Nicholls stated:
  68. "32. Materially different is the case where the party to whom the release was given knew that the other party had or might have a claim and knew also that the other party was ignorant of this. In some circumstances seeking and taking a general release in such a case, without disclosing the existence of the claim or possible claim, could be unacceptable sharp practice. When this is so, the law would be defective if it did not provide a remedy."
  69. In Satyam Computer Services v Upaid Systems Limited [2008] EWCA (Civ) 487 the Court of Appeal held that the question remained one of construction of the general release, even in relation to whether it covered fraud claims which were unknown at the date of the release. But the court referred to the (obiter) view of Moore-Bick LJ in MAN Neufahrzeuge AG v Ernst & Young [2007] EWCA (Civ) 910 that the release in that case did not apply to claims based on fraud because neither party had the possibility of fraud in mind, and fraud was a thing apart because parties contract with one another in the expectation of honest dealing. In the Satyam case the court held that express words would have been necessary for a release of claims based on unknown forgery of documents.
  70. In the light of those legal principles, Mr Hurst advanced a number of arguments as to why the Settlement Agreement did not cover the causes of action pleaded in this case or at least certain of those causes of action.
  71. Mr Hurst first contended that the Bank had engaged in such widespread misconduct, in gross breach of its regulatory duties, in selling interest rate swaps to its customers, that the court should not countenance the proposition that claims arising from that misconduct had been released or were intended to be released. I do not accept that proposition. The Settlement Agreement was plainly designed, by lawyers acting for each party, to draw a line under all claims, present or future, in relation to the Swaps, as part of a restructuring exercise of considerable utility to Mr Marsden. The subject matter was very clearly defined and relatively limited, but the release in relation to that subject-matter was extremely wide. It is plain that it was intended to encompass all claims, however put (except possibly in fraud, as discussed below), in relation to the alleged mis-selling of the Swaps, the agreement being required precisely because Mr Marsden had made a formal complaint in that regard. It is not arguable that the fact that mis-selling may have been more widespread, involved regulatory breaches and may even have been systematic affects the interpretation of the Settlement Agreement, designed as it was to address the relationship between Mr Marsden and the Bank. The effect of the House of Lords decision in BCCI v Ali was to re-affirm the freedom of a party to contract to release claims for valuable consideration, including to release unknown claims. The gist of Mr Hurst's argument, that it was simply not possible for Mr Marsden to release his claims in relation to the Swaps in 2011, is directly contrary to that approach.
  72. Mr Hurst's second argument was that the Settlement Agreement did not encompass the Bank's allegedly egregious and unconscionable conduct, applying the principle that 'fraud unravels all'. In so far as this is just another way of formulating the first argument addressed above, it plainly fails for the same reason: the Settlement Agreement, on its true construction, was plainly intended to encompass mis-selling the Swaps to Mr Marsden, no matter how that mis-selling came about or its regulatory or other context.
  73. The more difficult question is whether the Settlement Agreement, on a true construction, covers a claim in deceit. It is clear from the authorities referred to above that even very wide wording will not usually be sufficient to show that the parties intended to settle fraud claims, unless express words are used. But it remains a question of construction of the words used in their proper context. In the present case Mr Marsden had already made an allegation that he had been mis-sold the Swaps, connoting that the Bank had misrepresented matters to him. In his letter dated 16 July 2010 to the Bank, at the start of discussions leading up to the restructuring and the Settlement Agreement, Mr Nurse referred to an allegedly false statement by Mr Moriarty to Mr Marsden to the effect that it was a condition of a mortgage deed that Mr Marsden enter a new swap. Mr Nurse stated "This may have been a mistake on Mr Moriarty's part or it may have been deliberate but it created potential for enormous losses …" That was an express reference to a potential claim in deceit. In that context, the Settlement Agreement's reference to "all causes of action which arise directly or indirectly …" would seem not only wide enough but clearly intended to encompass the existing threat of misrepresentation claims, including those in deceit.
  74. Mr Hurst's third argument was that this was a case of sharp practice, the Bank knowing of claims which were unknown to Mr Marsden, in particular because it must have been aware of regulatory breaches which were subsequently investigated by the FSA. I see no merit at all in that argument. The gist of Mr Marsden's claim, although put in many and varied ways by Mr Hurst, is that he was mis-sold the Swaps. That was the very allegation in contemplation at the time of the Settlement Agreement. Mr Marsden was represented by solicitors who were fully able to take instructions as to what had occurred and to assess and advise as to the claims which might arise in consequence, including breaches of regulations. Given that Mr Marsden was just as aware of the relevant facts as the Bank and had access to legal advice, no question of sharp practice on the part of the Bank can arise.
  75. The fourth argument advanced by Mr Hurst was that the Settlement Agreement does not release claims for breach of a contract between the Bank and Mr Marsden as to the conduct of the review of the Swaps undertaken in 2013-2014. Any such further contract would by definition create new rights and obligations which could not sensibly be given effect if they were treated as unenforceable by reason of a compromise entered several years earlier. I therefore accept that, if the parties had entered a new contract as alleged, claims in relation to such a contract would not be covered by the Settlement Agreement. However, for the reasons set out in paragraphs 67 to 71 below, I am satisfied that the review process did not give rise to a new contract.
  76. The disputed causes of action

  77. In view of my conclusions above, the Settlement Agreement is a complete answer to all of the causes of action pleaded by Mr Marsden, save for the allegations of breach of a new contract in relation to the review. Nevertheless, for the sake of completeness, I propose to consider each of the disputed causes of action below.
  78. (i) Public policy/statutory preconditions

  79. Mr Hurst puts Mr Marsden's case in this regard in many varied and overlapping ways, but his basic contention is that the Swaps were illegal or contrary to public policy due to the Bank's massive mis-sale of interest rate hedging products, acting contrary to the principles, rules and guidance of the regulatory regime. He asserts that the Bank acted with a lack of probity and that, accordingly, to allow the Swaps to stand would be to permit the Bank to profit from its own wrong.
  80. The immediate difficulty facing the above argument is that the Swaps are private contracts, in respect of which the parties have well recognised rights and remedies, including recognised causes of action for breach of statutory duty. It is not arguable that regulatory failings, however widespread, entail that contracts are void or illegal, not least because the regulatory regime expressly provides to the contrary. What is now section 138D of the Financial Services & Markets Act 2000 provides a specified right of action for contravention of regulatory rules and what is now section 138E states that "No [contravention of a rule made by the FSA/FCA] makes any transaction void or unenforceable".
  81. Mr Hurst attempted to plead the same alleged causes of action, by way of amendment, on behalf of the claimant in Marshall v Barclays Bank plc [2015] EWHC 2000 (QB). HHJ Stephen Davies found that the claims were not arguable, stating:
  82. "49. … In my judgment it cannot credibly be said by the claimant that, even if there was - which I am prepared to assume for the purposes of the argument but without deciding that is at least arguable - a wholesale systematic, deliberate, even dishonest, non-compliance with the regulatory regime in relation to the entry into this and other swap agreements, the consequence is that the swap agreement itself is made void for illegality or otherwise being contrary to public policy. Whilst I appreciate that such a conclusion might at first blush be said to produce an unfair or unreasonable result against Mr. Marshall if the facts are as Mr. Hurst contends, the answer in my judgment is that the law holds that illegality or other cases of conduct contrary to public policy results in agreements being held void only in very limited circumstances. In a case such as the present, where one party is saying that his entry into an agreement was accompanied by and would not have occurred without widespread breaches of the applicable regulations by the other, that is not one of those circumstances which could result in the agreement being invalidated on grounds of public policy. Instead it would afford the claimant, if he was right, the ability to have that agreement unravelled on one or more of the bases which Mr. Marshall would have been entitled to advance in this case, but for the settlement.
    50. It seems to me that illegality or other breach of public policy simply does not avail the claimant in this case. The reality is that either a claimant in the position of Mr. Marshall can rely on breaches of regulations which he can establish afford him a civil remedy, which here he could do so but for the effect of the general release, or he cannot, because the statutory framework does not, on its true construction, allow him to do so, and no amount of repeated reference to wholesale, systematic, deliberate or even dishonest breach of the regulations will alter that fundamental position.
    51. Furthermore, even if I was wrong about that, it appears to me, despite what Mr. Hurst submitted, that the effect of what is now s.138E(2) of the Financial Services Act 2012, which specifically provides that no such contravention - that is a contravention of a rule made by a regulator - makes any transaction void or unenforceable, quite clearly means that it is simply not possible to advance an argument that, even in the case of alleged wholesale, widespread, systematic, deliberate and even dishonest breaches of the regulations, the underlying transaction is rendered void. I was, I am afraid, not remotely convinced by Mr. Hurst's appeal to what he characterised as the golden rule approach to statutory construction, whereby one can adopt a non-literal meaning to a statutory provision in such cases."
  83. It will be apparent that I am in full agreement with that reasoning. Permission to appeal HHJ Davies' decision was refused by the Court of Appeal following an oral hearing in May 2016.
  84. It follows that I am satisfied that the public policy arguments advanced by Mr Hurst do not have a real or any prospect of success.
  85. (ii) Deceit

  86. Paragraph 80 of the Particulars of Claim makes the following allegation, under the heading "Deceit":
  87. "The statements of fact and opinion in respect of the movement in interest rates were made recklessly as to whether they were true or false. The bank was reckless as to whether the representations in its marketing material and as made by the Approved Person were supported by information and facts sufficient to enable such an opinion to be expressed to a customer. At all material times the bank and the Approved Person well knew:
    (1) that the derivatives market had discounted future interest rates for a sufficient period to enable the bank to profit from the intended trade;
    (2) that there was no material risk to warrant the customer entering into [a swap]; or risk or likelihood of interest rates materially rising above the rate at the date of the trade, or if so to an extent that might commercially damage the borrower within the timescale of the [swap]."
  88. The Bank's first objection to that allegation is that, far from being a distinct and properly particularised pleading of fraud, it is no more than a generalised allegation against the Bank as a corporate entity, without identifying the individual or individuals alleged to have been reckless and without providing any particulars to support their state of knowledge, let alone any fraudulent intent.
  89. Mr Hurst, in oral submissions, acknowledged that his pleading was "not clear", that words were omitted and that it was "clumsy". In my judgment it goes further than that. The allegation, as pleaded, amounts to no more than the broadest assertion that "the Bank" was fraudulent, referring indistinctly to statements and opinions and asserting no more than that unidentified persons knew (on unspecified dates) that there was no material risk of interest rates increasing, without identifying the basis for attributing such knowledge. It is a wholly insufficient plea of fraud which must be struck out on that basis alone.
  90. The Bank's second contention is that the allegation of deceit is unsustainable as a matter of fact, pointing to the following:
  91. i) Mr Marsden's pleaded claim places considerable reliance on a written presentation provided to him by the Bank dated 1 June 2006, prior to his entry into the first swap. That presentation does not, though, appear to support the contention that the Bank represented that interest rates were about to rise, instead stating that the future movement of interest rates was unclear, referring to the fact that there were "divergent opinions" on the subject.

    ii) In the event, the Bank of England base rate rose 5 times between June 2006 and July 2007, indicating that if a view had been expressed in June 2006 that rates would rise, that view was entirely vindicated. It also puts in context the sustainability (or lack thereof) of an allegation that the Bank must have known that rates were unlikely to rise in September 2007, when the Swaps were entered. At that time base rate had been rising since July 2003 (apart from a one-day reduction in August 2005) and did not fall again until December 2007.

  92. Mr Hurst did not address the above matters, let alone explain how the plea in deceit could survive in the light of them. I am satisfied that the deceit claim also has no real prospect of success.
  93. (iii) Claim in relation to the conduct of the review

  94. The pleaded case is that the FCA review scheme was intended to create legal relations between the Bank and participants in the review process (such as Mr Marsden). In his skeleton argument Mr Hurst further asserted that "If there was a contract to carry out the review, business efficacy implied a term that the bank would act with probity and with due skill and care."
  95. Mr Hurst attempted to make the same allegation (that the review created contractual relations between the Bank and a participant), by way of amendment, in Marshall (above). HHJ Stephen Davies again refused to permit the amendment on the ground that it was not arguable, stating:
  96. "… I heard considerable argument about whether or not it could arguably be said that the review process amounted to a contract as between Mr. Marshall and the bank, as opposed to a non-contractual review process undertaken by the bank pursuant to an agreement with the FSA and with the consent of Mr. Marshall. If the latter, then the case based on contractual obligation simply could not run. It seems to me to be plain from the documents to which I have referred that it could not possibly be regarded as contractual as between Mr Marshall and the Bank. It also seems to me that, despite Mr Hurst's attempt to argue that Mr Marshall gave consideration for the Bank agreeing to undertake a review by forbearing to sue, in fact on any true analysis there was no consideration which could give rise to contractual relations in this case. The reality is that Mr Marshall was simply the beneficiary of the review. He did not give anything away nor did he suffer any detriment nor agree to do anything different as a result of being afforded that review. Therefore, the contractual argument simply cannot run ..."
  97. Mr Hurst did not refer in his skeleton arguments or in his oral submissions to the documents underpinning the review process, in particular the agreement between the FSA and the Bank and its Annexes, which were considered in detail by HHJ Stephen Davies and informed his conclusion that there was no contract between the Bank and a participant in the review. Neither did he engage in the 'considerable argument' on the issue that took place in Marshall. Mr Hurst no doubt took the realistic view that there was no prospect of persuading me to take a different view to that reached by HHJ Stephen Davies, particularly as an application for permission to appeal his judgment was refused by the Court of Appeal following oral argument.
  98. Mr Hurst did refer to the recent decision of the Divisional Court in R (Holmcroft Properties) v KPMG [2016] EWHC 323 (Admin), in which the court had raised with the parties the question of whether a contractual relationship might arise between a bank and the participant in the review process. However, the court did no more than note the response that the issue had been raised in numerous mis-selling cases and concluded that it could not assume (for the purposes of deciding the very different public law issues in that case) that any such contractual rights arose. The case therefore provides no support for Mr Hurst's pleading in that regard.
  99. On the basis of the evidence I have seen, in particular the letters from the Bank inviting participation in the review, I fully agree with the conclusion in Marshall that the Bank undertook the review process as part of its regulatory obligations and agreement with the FCA, but did not intend to contract with the participants. The review process was plainly required to be and was gratuitous, requiring nothing from the participant by way of agreeing to terms and conditions or agreeing to forbear from taking other action. That is all the more obviously the case where a participant such as Mr Marsden had already, at least on the face of matters, compromised his claims against the Bank.
  100. In the course of oral argument Mr Hurst mentioned that Judges in the Bristol and Manchester Mercantile Courts had reached opposite conclusions on the question of whether it was arguable that the Bank assumed a tortious duty of care to a participant in relation to a review. Mr Hurst stated that, in view of the negative view expressed by HHJ Bird in Manchester, he had not pleaded such a duty in the present case and was not applying to amend. The issue therefore does not arise for consideration.
  101. But in any event, even if the Bank did owe a duty of care to Mr Marsden in relation to the conduct of the review, either in contract or tort, it is not remotely arguable that the Bank breached such duty. The Bank pursued the review process with diligence and some persistence in the face of difficulties arising from Mr Marsden's status as a bankrupt and made an offer of redress with which Mr Marsden does not take issue. His real (and possibly his only) complaint is that he was not permitted a proper opportunity to make a claim for consequential loss. However, he was given more than one generous extension of time to pursue such a claim, being required to do no more than arrange a meeting to preserve his position. In my judgment it is not arguable that the Bank acted unreasonably in refusing a further extension beyond 4 November 2014 for him to respond.
  102. It follows that Mr Marsden's case based on an alleged breach of duty in relation to the review is not reasonably arguable.
  103. Challenge to the Particulars of Claim

  104. In view of my decisions above on the substantive issues, as a result of which the claim will be dismissed, it is not necessary for me to rule on the challenge to the form, length and content of the Particulars of Claim. It is appropriate, however, to express some concern about the document.
  105. The claim is, essentially, that the Bank mis-sold the Swaps to Mr Marsden in 2007, involving relatively limited factual allegations. The Particulars of Claim, however, extends to 108 paragraphs, covering 32 pages. In March 2015 the Bank's solicitors, having been sent the Particulars of Claim in draft, pointed out that in the Mercantile Court (where it was proposed to issue the claim) statements of case may not exceed 20 pages without permission of the court and must be as succinct as possible, citing the decision of Leggatt J in Tzchenguiz v Grant Thornton UK LLP [2015] EWHC 405 (Comm). No alterations were made to the Particulars of Claim, but the proceedings were in fact issued in the Central Office of the Queen's Bench Division.
  106. The reason for the length of the document is not a detailed recital of relevant facts, because the key allegations are largely unparticularised. It is rather that the pleader has made a large number of repetitive and overlapping assertions, setting out copious quotations from regulations, making it difficult to ascertain the gist of the case, let alone understand its detail. HHJ Stephen Davies made similar criticism of the proposed 'public policy' amendment in Marshall. Given that Mr Hurst received that criticism in June 2015, it is perhaps surprising that the Particulars of Claim remain in their current state in these proceedings, particularly given that the proceedings were transferred to the London Mercantile Court in September 2015 and that the form of the Particulars of Claim was an express limb of this application to strike out, issued in October 2015. Had the claim survived this application I would have required the Particulars of Claim to be completely re-pleaded or struck out in default.
  107. Conclusion

  108. For the reasons set out above, all of Mr Marsden's valid causes of action in relation to the sale to him of the Swaps were fully and effectively compromised by his signature of the Settlement Agreement so that they have no real prospect of success. To the extent that he has pleaded a purported cause of action which falls outside the scope of that agreement, I am satisfied that that allegation is not valid as a matter of law or otherwise has no real prospect of success on the facts.
  109. Accordingly the Bank is entitled to summary judgment in its favour. The claim will therefore be dismissed.

Note 1   Mr Marsden states in his witness statement in opposition to this application that he first complained to the Bank about the Swaps in 2010.    [Back]

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