His Honour Judge Roger Kaye QC:
- There are two applications before me:
• First, an application by the defendant dated 1 September 2015 to strike out the claim or for summary judgment in its favour ("the Strike Out Application");
• Second, an application dated 1 October 2015 by the claimant to amend its Particulars of Claim mainly to add a new claim based on alleged negligent performance of obligations allegedly owed to the claimant under a review process known as the Interest Rate Hedging Product Review ("IRHPR") conducted by the defendant in accordance with arrangements put in place by the Financial Conduct Authority ("FCA") following allegations against a number of High Street Banks of mis-selling interest rate hedges or swaps ostensibly in order to mitigate against the risk of interest rate fluctuations applicable to the loans of borrowers from the banks ("the Amendment Application").
- These two applications first came before me on 8 October 2015 when it was apparent, first, that the claimant, WW Property Investments Ltd, wished to consider further amending the Particulars of Claim so as to amend the pleading in respect of the IRHPR but also to amend allegations that the hedge and swap agreements entered into between the claimant and defendant (as set out below) amounted to wagering contracts and secondly, that the half a day then allowed was going to be insufficient time for the hearing. I accordingly adjourned the hearing to 11 January for two days (including pre-reading time) and permitted the claimant to bring forward a further draft of the proposed Amended Particulars of Claim provided a copy was provided to the defendant before 22 October, which was done.
- It is common ground that if the defendant is to succeed in its Strike Out Application the case it has to meet is that based on the proposed draft Amended Particulars of Claim in their current form.
- As will become apparent, that was not however, the end of the matter since there was a late attempt by the claimant during the hearing to adjourn the proceedings yet again to consider still further amendments to the draft Amended Particulars of Claim. For reasons given in a previous ruling, I refused this application.
- The background for present purposes may be summarised as follows:
• Between 2004 and 2010 the claimant borrowed money from the defendant. Over the same period, it entered into four interest rate hedging contracts or Collars (Collar 1, Collar 2 and Collar 3) plus, in 2010, a Swap agreement following the close-out of each of the three Collar agreements;
• Despite the attempts of Professor Roberts to argue to the contrary (even after the draft judgment was handed down), the contracts were plainly all intended to hedge the claimant's exposure to interest obligations arising from the loans made by the defendant to the claimant; in simple, terms, by fixing the loan interest at a fixed rate whatever base rate fluctuations took place over the period of the agreement (save, in the case of the Collars, where the rates dropped below a certain level);
• Each of the hedges had a market value at day 1 (referred to as a Day 1 MTM) in favour of the defendant.
• These agreements – with hindsight (though the claimant says this was anything but obvious) - were (having regard to the prevailing low interest rates after 2008) disadvantageous to the claimant and advantageous to the defendant.
• In 2014, the hedges were reviewed (along with similar contracts entered into by borrowers with a number of banks) as part of the IRHPR conducted by the defendant pursuant to a Review Agreement entered into by the defendant (and other banks) with the Financial Services Authority (FSA), now known as the Financial Conduct Authority (FCA). An integral part of this process was the involvement of an independent firm of reviewing accountants, suitably qualified to carry out the review, and known as "the Independent Reviewer".
• In accordance with the terms of the IRHPR so far as concerned the claimant, the Collars were categorised as Category A business, resulting in the automatic provision of redress to the borrowing customer, in this case the claimant, subject to the assessment process. This resulted in offers being made in August 2014 by the defendant to the claimant.
• The claimant initially challenged the redress offer in respect of Collar 1 which was then re-assessed with the agreement of the Independent Reviewer but confirmed in December 2014.
• The claimant accepted the offer and received redress of over £420,000 from the defendant. Although excepting and reserving the right to claim for "additional losses" under the IRHPR, the claimant, with this exception, in accepting the offer of redress signed a compromise agreement, in "full and final settlement" of "any claims, actions, liabilities, costs or demands" it might have against the defendant "arising under or in any way connected with the sale" of the Collars applicable to "any past, present or future claims, actions, liabilities, costs or demands, regardless of whether you [i.e. the claimant] are aware of them at the date of this letter" [of acceptance]. A claim for such additional or consequential losses was duly made by the claimant and, after some toing and froing, ultimately rejected by the defendant with the sanction of the Independent Reviewer in November 2015 (largely, and briefly, on the grounds of lack of evidence and failure to meet the relevant factual and legal tests).
• The Swap was categorised as Category B business meaning redress was not automatic unless the sale of the Swap failed to meet the appropriate standards. The defendant invited the claimant in November 2013 to include the Swap in the IRHPR process, which was accepted. The eventual outcome in December 2013 (again with the agreement of the Independent Reviewer) was, following yet another challenge by the claimant, that the defendant had met the standards applicable and hence no redress was appropriate.
- This process was followed by the commencement of the present action on 6 March 2015. Particulars of Claim were not served until 1 July 2015. No Defence has been served or filed but, instead, the defendant made the Strike Out Application as previously indicated. The response was service of a proposed first draft Amended Particulars of Claim on 25 September and the Amendment Application followed by the revised draft as previously mentioned. Both applications have been supported by copious witness statement evidence.
- In the result I have two large bundles of over 700 pages. The draft proposed revised Amended Particulars of Claim are over 25 pages.
- Notwithstanding the length of the draft proposed revised Amended Particulars of Claim, the claimant's proposed claims against the defendant bank may be summarised as follows:
• First, the Wager Claim: I deal with the constituent elements of this below, but essentially the argument is that the interest rate hedge agreements amount to contracts for differences and accordingly are to be characterised as wagers at law but, since the non-zero Day 1 MTM was neither disclosed nor of equal uncertainty to both sides, this means that the defendant is guilty of "cheating" with the result that the contracts are voidable or vitiated at law and the defendant is liable in damages on the basis that the contracts would never have been entered into at all.
• Second, the LIBOR claim: this is essentially a claim based on an implied term or representation that the defendant would not manipulate LIBOR rates. This only related to the Swap Agreement since the Collars were not referenced to any LIBOR rate.
• Third, the claimant seeks rescission of a "Property Participation Agreement" ("the PPA") entered into in 2009 between the claimant and a subsidiary of the defendant, West Register (Investments) Ltd ("West Register") and also of guarantees given by the claimant's directors and shareholders ("the PPA and Guarantees Claim").
• Fourth, the claimant also now alleges that the defendant owed it a tortious duty of care in connection with the manner in which it conducted the IRHPR ("the Tort Claim").
- Having regard to these claims, it is also common ground that there are, for present purposes, five issues for determination:
• First, have the claims in respect of the three Collars been compromised under the redress agreement above-mentioned ("the Compromise Issue");
• Second, does the Swap agreement amount in law to a wager, and if so with what consequences ("the Wager Issue");
• Third, does the claimant have any sustainable claim in respect of the alleged LIBOR manipulation ("The LIBOR Issue");
• Fourth, does the claimant have any sustainable claim in respect of the PPA and Guarantees Claim;
• Fifth, does the claimant have any sustainable claim in respect of the Tort Claim ("The Tort Issue").
Strike Out and Summary Judgment
- I have mentioned "sustainable" claim above but it has to be remembered (and it is also common ground) that in order to strike out a claim or enter summary judgment against a claimant the conditions required by CPR 3.4 or 24 (as the case may be) must be met. Under the former (CPR 3.4) the court may strike out a claim where the statement of case discloses no reasonable grounds for bringing it, if it is an abuse of the court's process, if it is otherwise likely to obstruct the just disposal of the proceedings, or if there has been a failure to comply with a rule, practice direction or court order. Under the latter (CPR Part 24), the court may award summary judgment against a claimant whose claim has no real prospect of success.
The Compromise Issue
- This argument extends to the claimant's claims in respect of the Collars but not the Swap. It arises on the basis that as part of the process of recovering redress compensation under the IRHPR the claimant entered into a binding settlement agreements with the defendant in return for which the claimant accepted and received the redress and compensation it did in excess of £420,000. The terms were set out in the initial offer letters of 15 August 2014 and signed acceptance form sent under cover of the claimant's solicitors letter of 9 January 2015 as set out or referred to above.
- Mr Mitchell QC for the defendant described this as a complete answer to the claimant's claims arising or in respect of the three Collars.
- The claimant claims £1,176,668.82 plus interest at 8% as "direct and consequential losses". It was also alleged that the defendant's failure to provide redress for these losses was as a direct result of its breach of duty "to determine appropriate redress on the basis of what is fair and reasonable in the circumstances". Quite what this meant was unclear and seemed more to relate to the Tort Issue. Moreover, how the sum of £1,176,668.82 was calculated was wholly unclear.
- Professor Roberts argued that this settlement did not exclude the possibility of the claimant claiming for losses such as an alleged loss caused by the claimant having to sell its business at an undervalue to meet the claims of the defendant. Mr Mitchell agreed (as set out above) that additional or consequential losses could be claimed but only within the IRHPR process which the claimant signed up to and which claims were rejected, and rightly rejected with the sanction of the Independent Reviewer.
- I agree with Mr Mitchell. The claims arising in respect of the Collars were indeed compromised on the terms set out above. I further agree with Mr Mitchell that insofar as the the balance of the claimant's claim can only concern the Swap, it follows that the Wager Issue, the LIBOR Issue and the Tort Issue can only concern the Swap agreement.
The Wager Issue
- I accordingly now turn to the so-called Wager Issue in relation to the Swap agreement (although Professor Roberts deployed the same argument in respect of the Collars). It formed the largest part of Professor Roberts' arguments.
- The claimant's case that the Swap agreement was a wagering contract in relation to this issue can be broken down into the following propositions (as to which I again gratefully largely adopt Mr Mitchell's – in my judgment, correct - formulation):
• All the interest rate hedges amount to contracts for differences, and all contracts for differences are wagers at common law;
• As such, they are subject to implied terms, as an incident of all such contracts, that the chances are equal, and that the parties possess equal ignorance and/or equal knowledge about the odds;
• These implied terms apply to the Swap agreement (and, the claimant would argue also to the Collars agreements) since these contracts are not betting contracts regulated under the Gambling Act 2005;
• The agreements each had a market value at day 1 (the Day 1 MTM) in favour of the defendant instead of zero; put another way the defendant had greater knowledge than the claimant and more favourable chances. Indeed Professor Roberts, on behalf of the claimant says that this was completely unknown to it. Failure to disclose such knowledge, submitted Professor Roberts, amounted to cheating or skewing the odds in breach of the defendant's duty not to cheat or skew the odds;
• In consequence, the defendant is liable for damages.
- Again, quite how the damages are to be calculated is impossible to ascertain on the claimant's pleadings.
- It is important to emphasise that these claims and these arguments have all been raised (or had the opportunity to have been raised) on a number of previous occasions, two of them at least by Professor Roberts and his legal team, all without success even to the point of the Court of Appeal rejecting on no less than three occasions applications for permission to appeal.
- The two cases in which the Wager Issue was previously argued by Professor Roberts were Nextia Properties Ltd v Royal Bank of Scotland and Anor  EWHC 3167 (QB) (HHJ Behrens sitting as a judge of the High Court) and Derek Gladwin Ltd v Barclays Bank plc  8th July, unreported (a transcript of which I have seen) (HHJ Mark Raeside QC also sitting as a judge of the High Court). The former was a decision of this court, and the latter, a decision in the Chancery Division. In both cases contentions identical to or substantially similar to the points now put forward by Professor Roberts with respect to the Wager Issue were struck out.
- In Nextia, the decision of HHJ Behrens was then subjected to no less than three attempts to obtain permission to appeal including one attempt to re-open the hearing of the application for permission under CPR 52.17, all of which failed.
- First, permission was refused on paper by Christopher Clarke LJ giving detailed reasons including in relation to this issue in the following terms:
"There is no realistic prospect of Nextia establishing: (a) that the Swap contract was a wagering contract, given that it was made for the commercial purpose of hedging the risk of increases in Base Rate (the avoidance of an increase in the floating element of Nextia's borrowing costs being the major consideration for the making of the Swap contract) over the five year period for which it was contemplated that Nextia would be a borrower: Morgan Grenfell v Welwyn  1 AER 1. Even if it was a wagering contract it was not unenforceable and there was no requirement to disclose the Day 1 MTM value. …. "
- Second, permission was refused at a renewal hearing before Vos LJ who upheld the decision of Christopher Clarke LJ (see  EWCA 740).
- Vos LJ noted that Professor Roberts' argument (as here) was that Hobhouse J was wrong in the case referred to by Christopher Clarke LJ, namely Morgan Grenfell v Welwyn Council, to conclude that the test for whether a contract for differences was a wager was whether the purpose and interest of the parties was something other than wagering, i.e. a business purpose. He held that from a perusal of the entirety of the Gambling Act 2005 it was perfectly clear that the legislature intended to replace the entire common law regime as to wagering with that legislation and that the regulation in the Financial Services and Markets Act 2000 replacing the Financial Services Act 1986 was indeed intended to take the place of the common law regime. His lordship accordingly refused permission to appeal.
- Third, Nextia then attempted a third time to re-open the application for permission to appeal. Vos LJ described this third attempt as "impermissible". The Court of Appeal had simply upheld the judge at first instance in deciding that there was no realistic prospect of Nextia establishing that the swap contract was a wagering contract.
- In Gladwin Professor Roberts raised the wager argument again on behalf of the borrower, asserting that the contract between the borrower and the bank should be rescinded on grounds of a wager. The defendant, Barclays Bank plc in that case, applied to strike out the claim. It goes without saying that although the legal team for the claimant in that case was identical to the team acting for the borrower in Nextia and in the instant case, the parties are all different (save that NatWest was a party in Nextia and in the present case; the facts, though otherwise similar with the same alleged wager issue arising, were not of course precisely the same).
- HHJ Raeside QC emphatically struck out the claim against the bank in Gladwin. Although involving different parties and a different contract, it was materially identical to that in Nextia and was therefore, having regard to the history of appeals, applications and identical arguments in Nextia, an abuse of process. The judge noted (as has been the case here) the attempt to undermine the decision of Hobhouse J in the Morgan case which failed at each attempt to raise it before HHJ Behrens, before Christopher Clarke LJ and before Vos LJ (in the latter case on two occasions). The decision of HHJ Raeside too was the subject of an application to the Court of Appeal for permission to appeal and dismissed shortly before I heard this case in January by Briggs LJ. Indeed I was only told of this because I asked Professor Roberts and his team as to the outcome of the application.
- Like HHJ Raeside QC I regard this yet further attempt to raise substantially the same arguments as on previous occasions, especially, on this aspect of the case as raised in Gladwin, albeit involving different parties and a different contract, as pointless, expensive, and wasteful litigation to the detriment of the courts time and resources and needs of other litigants. The arguments of Professor Roberts were substantially and materially raised and answered in Nextia (and in Gladwin) both at first instance and in the Court of Appeal (albeit in the latter instance at the permission stage).
- Professor Roberts seeks to argue that the Court of Appeal decisions are not technically binding on me as they were only concerned with applications for permission to appeal or to re-open an appeal. So that may be, but it does not entitle me, absent very good reason, blithely to ignore previous, at the very least highly persuasive, one-way decisions of this court or of three Lords Justices (Christopher Clarke, Vos and Briggs LJJ) to the effect that the still further attempt to raise the same wager argument has no real prospect of success.
- He also seeks to argue that he is now raising not quite the same argument. In my judgment that was a wholly misconceived argument. Ultimately it came down to the same point as argued before HHJ Behrens, HHJ Raeside and the Court of Appeal, however dressed up, namely that Swap agreements required disclosure of any skewing of the odds and failure to do so was cheating, precisely and ultimately the point argued here and which failed in all the previously mentioned cases. Morgan Grenfell sets out the modern test that an interest rate swap agreement is not a wager where at least one party entered into the contract for a genuine commercial purpose and not to speculate. That cannot be contradicted as applicable in the present case. The decision has never been disputed in any subsequent case and as Christopher Clarke LJ made clear the contrary argument that it was wrongly decided has no real prospect of success. In any event, insofar as any part of Professor Roberts's arguments were not raised before on the Wager Issue, he had ample opportunity to present them.
- Accordingly, in my judgment, the claimant has no real prospect of success and Mr Mitchell accordingly succeeds on this issue also.
The LIBOR Issue
- The allegations in respect of this aspect are contained in paragraphs 9, 12, 15, 18 and 19 of the draft proposed revised Amended Particulars of Claim. Quite apart from the fact that the allegations are repetitive, vague, couched in highly generalised terms, and, as with many other allegations, unclear, opaque or difficult to comprehend to say the least, nevertheless the thrust of these allegations seems to be as follows:
• That the defendant made an implied representation that "the integrity of the LIBOR reference benchmark would not be imperilled, at all events not by its own actions" [para. 9.3];
• That it was an implied term of the Swap agreement that the defendant had not previously and would not in future "seek to manipulate any LIBOR index in any currency" or "any GBP LIBOR index" or "any LIBOR index" [paras. 12.1-12.3];
• That the defendant had, in breach, manipulated LIBOR indices, and continued to do so for its own advantage before and after the Swap was concluded [para. 15.1];
• Because of this manipulation (as well as skewing the odds (above)), the claimant claimed the entire net payments under the Swap as a direct loss [para 18] but also rescission "of the agreement" (which agreement was not identified) and also damages [para. 19].
- This, in my judgment, is wholly vague and imprecise pleading bordering on what used to be identified as embarrassing or impossible to plead to. It is unclear as to whether what is being alleged is a representation as to past fact as opposed to future conduct, or a representation of present fact as to the defendant's future conduct or intentions. Moreover, the allegation is hopelessly wide. The only relevant LIBOR rate applicable to the claimant's borrowing from the defendant was £ sterling (GBP), where a one-month GBP LIBOR rate was specified (save for the first and last moths). There is no allegation that the defendant was manipulating the GBP LIBOR, no clear allegation of breach, and no particularised coherent loss or consequences claimed.
- It is not even clear in what context or for what precise reason rescission is claimed or of what. The implied representation aspect of the claim is not fully or properly pleaded: no reliance is alleged nor is the contract to be rescinded identified nor is the relevant relief sought in the prayer. In any event, it is plain that the claimant affirmed the contract by making payments under the Swap, by participating in the IRHPR and by the claim in these proceedings (on the premise that the Swap was valid and binding).
- Even as a so-called implied term, the case for necessarily or obviously implying such a wide term as alleged is not made out on the pleaded case (see the recent Supreme Court decision in Marks & Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd  UKSC 72; 3 WLR 1843). Nor is any relevant breach unequivocally and clearly alleged.
- Mr Mitchell submits that this aspect of the case is incoherent. I agree. In short, it too has no real prospect of success.
The PPA and Guarantees Claim
- The draft Amended Particulars of Claim (paragraph 21.2) seeks "Rescission of the PPA agreement and of the personal guarantees". The former relates to an alleged Property Participation Agreement under which a subsidiary (presumably of the defendant) took a stake in the claimant's property, the latter to personal guarantees taken from the claimant's directors and shareholders. Quite apart from the fact that none of these additional persons are parties to the action, why these agreements should be rescinded is wholly unclear. No legal basis or cause of action is pleaded in support of the claim in this regard.
The Tort Claim
- In brief this is a new allegation included at a later stage in the draft revised Amended Particulars of Claim in substance alleging that the defendant owed a duty of care in carrying out its functions under the IRHPR review process including an obligation to take account of its compliance with "the Sales Standards", that it breached that duty by failing to consider those Sales Standards, in particular in the manner in which it sold (or mis-sold) the Collars and Swap, and that in consequence the claimant was "deprived of effective redress in the Review scheme" for which the claimant claims damages.
- Faced with these wholly vague and rather incoherent allegations, Mr Mitchell initially argued that the claimant was owed no duty of care in respect of the IRHPR by the defendant. In brief, his argument was that the defendant was bound to comply with the rules, principles and guidance set by the FCA and the relevant provisions of the Financial Services and Markets Act 2000 including s 404 thereof entitling the FCA to make rules requiring firms to establish and operate consumer redress schemes. Since the IRHPR was set up and operated in accordance with those rules and guidance (and overviewed by the Independent Reviewer) there was no scope for a duty of care.
- Professor Roberts then advanced a case in argument wholly different from that pleaded or rather proposed to be pleaded which, as drafted, had nothing whatever to do with the way the redress scheme was operated and more to do with the way in which the Collars and Swap were originally marketed or sold. His case as now advanced was based on material on the FCA website (despite the material apparently being confidential) suggesting, as I understood him, that the defendant had not complied with the requirements of the scheme in assessing the redress nor had any explanation been given as to how the figures were worked out.
- Mr Mitchell understandably objected. It was not the case he had come to meet. Professor Roberts, as I understood him, accepted that his draft would need still further thought and amendment on this point. I refused a still further attempt by Professor Roberts to put his house (and pleadings) in order for reasons previously indicated. In any event it seemed and seems to me that this aspect of the case too is wholly incomprehensible as pleaded and has nothing to do with a so-called breach of duty in carrying out the IRHPR. As ventilated it also seems to me to fall by reason of the Compromise Issue (above) at least so far as the calculation of redress under the Collars was concerned. Moreover, the Independent Reviewer was, apparently, totally satisfied with the way in which the review had been carried out so far as the claimant was concerned.
- Mr Mitchell generously conceded that given the way this part of the claim was presently formulated, there was nothing in principle stopping the claimant attempting by fresh proceedings to bring a still further separate and independent claim against the defendant bank based on alleged deficiencies in operating the IRHPR but as to which he would be free to argue no duty of care was owed.
- That seemed and seems to me a wholly constructive approach. The way this part of the case is presently drafted is simply incomprehensible, does not seem to be the case Professor Roberts wishes to advance and is almost impossible to plead to. It has, in my judgment, no real prospect of success as currently formulated.
- Accordingly, I shall refuse permission to amend and shall strike out the claimant's claim in its entirety.