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Cite as: [2013] EWHC 471 (Comm)

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Neutral Citation Number: [2013] EWHC 471 (Comm)
Case No: 2011 Folio 1199; 2012 Folio 464


Rolls Building
Fetter Lane, London EC4A 1NL
28 February 2013

B e f o r e :


(3) BBK B.S.C.
- and -

- and -



Richard Handyside QC and Adam Zellick Instructed by Allen & Overy LLP, on behalf of the Claimant in the Lenders' Action (Claim No. 2011 Folio 1199)
Mark Hapgood QC, Timothy Howe QC and Adam Sher Instructed by Freshfields Bruckhaus Deringer LLP, on behalf of the Claimant in the Swap Action (Claim No. 2012 Folio 464)
John Brisby QC , Alastair Tomson and Michael D'Arcy Instructed by Stephenson Harwood LLP on behalf of the Defendants:
Hearing date: 28th February 2013



Crown Copyright ©

    Mr Justice Cooke:

  1. In these two actions, the swap action and the lenders' action, the defendants, UGL and Unitech, seek permission to amend their statements of case, the defence and counterclaim in each action. The claimants in each action resist on the basis that the case raised by the proposed amendments has no realistic prospect of success.
  2. The proposed amendments arise at this stage because of the publicity given to allegations of manipulation of LIBOR by a number of banks, including the first claimant, DB AG. Material obtained from investigations into this alleged manipulation and press cuttings have been garnered by the defendants which suggest that DB AG was involved in the manipulation of the yen LIBOR rate and possibly other LIBOR rates at some stage in the period between 2005 and 2011. The allegations are denied and there are factual issues raised which cannot be determined by the court at an interlocutory stage, as all the parties recognise. The claimants say, however, that the case, as prospectively pleaded, cannot succeed regardless of any issues of fact which arise in relation to the manipulation of such rates.
  3. In the lenders' action, the claimants claim against UGL under a credit facility agreement of 24 September 2007 as amended by a term sheet dated 22 October 2010 and against Unitech as UGL's parent company guarantor. $150 million was advanced and, as a result of various alleged failures to pay instalments due, or other events of default, repayment was accelerated so that the total is allegedly due to the lenders. The second to ninth claimants are said to have acceded to the credit facility agreement by virtue of an assignment or transfer of rights or novation pursuant to clause 29 of that agreement.
  4. DB AG claims $11 million, approximately, from Unitech under the same guarantee of UGL's obligations in respect of an interest rate swap agreement, which incorporated the terms of the ISDA master agreement and the 2000 terms. The defendants' case is that this swap agreement was proposed by DB AG as a hedge for UGL against interest rate fluctuations and that the credit facility agreement and the swap agreement were part of a package deal. Unitech and UGL contend that the swap agreement was represented and recommended as suitable for UGL when it was not, particularly by reference to the terms of the credit facility agreement itself. It is alleged that the misrepresentations induced the two agreements and were made in breach of a duty of care owed by DB AG.
  5. The credit facility agreement provided for payment of interest by reference to LIBOR, which was defined in the definitions section by reference to the applicable screen rate as displayed for the relevant currency and term, or overdue amount, on the appropriate page of the Reuters or Telerate screens.
  6. Under the interest rate swap confirmation, the obligations under the floating rate payment provisions were determined by reference to the six month US dollar LIBOR rate, as set out in the annex to ISDA 2000:
  7. "The rate for a reset date will be the rate for deposits in US dollars for a period of the designated maturity, which appears on the Telerate, page 3750, as of 11.00 am London time on the day that is two London banking days preceding that recent date. If such rate does not appear on the Telerate page 3750 the rate for that reset date will be determined as if the parties had specified US dollar LIBOR reference banks as the applicable floating rate option."
  8. The evidence produced to the court by DB AG includes the following in a statement of Ms Eastwood, paragraph 6:
  9. "The Defendant's proposed amendments rely upon the allegation that DB was itself involved in the manipulation of LIBOR and knew that other panel banks were also involved in LIBOR manipulation. …
    9. LIBOR refers to a series of benchmark reference rates published each trading day by Thomson Reuters on behalf of the British Bankers' Association. Other, similar but distinct, benchmarks exist and are administered by other banking organisations, such as Euribor and Tibor.
    10. There are currently LIBOR reference rates for ten different currencies. For each currency there is a rate for each of 15 different maturity periods (or 'tenors') ranging from overnight to one year. There are, therefore, 150 different LIBOR rates in total.
    11. The only LIBOR rate specifically referenced in and relevant to the swap is the six month USD LIBOR rate.
    12. The LIBOR rate is used across the world in relation to a wide range of financial products. There is no comprehensive data available on the extent of LIBOR's use but the Wheatley Review of LIBOR published in September 2012 considered a number of sources and estimated that contracts with a notional value in excess of $300 trillion use the LIBOR rate (including $10 trillion of syndicated loans and $165 to $230 trillion of interest rate swaps). The Wheatley Review also recognised that some estimates put the true figure as high as $800 trillion.
    13. Prior to February 2011, the USD LIBOR panel consisted of 16 contributor banks and the USD LIBOR rates were calculated in the following manner:
    (1) Each contributor bank would submit its USD LIBOR submissions to Thomson Reuters based on the following question: 'at what rate could you borrow funds, were you to do so by asking for and then accepting inter-bank offers in a reasonable market size just prior to 11 am?
    (2) Upon receiving submissions from the contributor banks, Thomson Reuters would exclude the four highest and the four lowest rates. The remaining (eight) rates were, arithmetically averaged to produce the USD LIBOR rates.
    (3) Accordingly, higher and low 'outlying' submissions were excluded from the published LIBOR rates.
    14. In 2009, the BBA published a two page set of guidelines 'intended to provide a reference for contributing banks' ... As the 2009 BBA guidelines state, a 'bank's LIBOR submissions are its own perception of where it could take funds' in a reasonable market size. LIBOR submissions are therefore a subjective assessment of inter-bank borrowing by a panel bank."
  10. The proposed amendments in both actions consist of the same essential allegations against DB AG with additional allegations in the lenders' action against each of the second to ninth claimants, who are said to be successors to DB AG's rights. As appears hereafter, there is a significant difference between DB AG's position and the other claims inasmuch as Deutsche Bank participated in LIBOR panels but none of the other claimants did.
  11. The new common allegations to both actions consist of four misrepresentations which are said to have induced UGL to enter into the credit facility agreement and the swap agreement. Now, for convenience they have been labelled as A to D and they were entitled by UGL and Unitech as "The LIBOR Representations". If UGL and Unitech had been aware of the falsity of these representations, it is said that the transactions would not have been concluded. Alternatively, it is said that the LIBOR representations were made negligently, in breach of a duty of care and dishonestly; and that in making the LIBOR representations, DB AG:
  12. "... gave an implied warranty that the representations were true."

    There were, thus, claims under the Misrepresentation Act, claims under Hedley Byrne and claims for breach of contractual warranty.

  13. The new plea of the LIBOR misrepresentations is founded upon two paragraphs in each pleading which refer, first, to the part played by DB AG in the assessment of LIBOR, and then to the reference to LIBOR in the credit facility agreement and swap agreement. Thus in the lenders' action the following appears, under the heading "The LIBOR Misrepresentations":
  14. "5GA. At all material times the First Claimant [that is DB AG] was a member of the panel of banks ('the Panel') which reports rates to Thomson Reuters on behalf of the British Banking Association ... which are used in setting the published London Inter-Bank Offered Rates. LIBOR is determined by a daily poll carried out on behalf of the BBA that asks banks on the Panel to estimate how much it would cost them to borrow from each other in a reasonable market size shortly before 11 am London time on that day for different periods and in different currencies.
    5GB. Pursuant to clause 8.1 of the Credit Agreement the First Defendant's liability to pay interest on the Loan was determined by reference to LIBOR. Further, the basis of the First Claimant's obligations under the Swap, being the Floating Rate Option as set out in the Long Form Confirmation, was determined by reference to USD-LIBOR-BBA."
  15. The pleas of the LIBOR misrepresentations followed the words "in the premises" which appear at the very beginning of clause 5GC in the lenders' action. DB AG by its conduct and/or impliedly is said to have represented to the defendants that:
  16. "(1) LIBOR was a genuine average of the estimated rate at which members of the Panel could borrow from each other in a reasonable market size just prior to 11 am London time on any given day, as set out in the last sentence of paragraph 5GA above.
    (2) The LIBOR rate itself was a rate based on the respective Panel member banks' submissions to Thomson Reuters which were good faith accurate estimates of the rate at which they could actually borrow from each other in a reasonable market size just prior to 11 am London time on any given day, as set out in the last sentence of paragraph 5GA above.
    (3) The First Claimant had not itself acted, was not acting, and had no intention of acting, in a way which would, or would be likely to, undermine the integrity of LIBOR.
    (4) The first claimant was not aware of any conduct (either its own, or of other banks on the Panel) which would, or would be likely to, undermine the integrity of LIBOR."
  17. As the claimants point out, this plea has a number of remarkable features. It is a plea of representation by conduct or implication unattached to any plea of any express representation of any kind. It is not a plea of an implied promise not to manipulate the LIBOR rate in the future, which if broken could result in alteration of the interest payable under the loan, or the operation of the interest rate swap payment obligations. That, it might be thought, would be a more logical plea to make than a series of implied representations by conduct said to be made by entering into two deals by reference to a specific LIBOR rate and as a result of being one of a number of contributors who reported to Thomson Reuters for the setting of a number of different LIBOR rates. The damages which might flow from breach of an implied promissory term of this kind as opposed to a breach of the alleged warranty might be hard to establish because of the limited role any one contributor might have (although a much larger conspiracy might be shown with significant impact) and and because the impact on the two particular transactions might be limited in itself. What UGL and Unitech allege, however, is intended to give rise to more wholesale relief in relation to the loan, namely rescission or discharge of liability, though how that could be achieved is fraught with some difficulty, as appears hereafter.
  18. What is also not alleged is that Unitech's obligations under the swap were, in fact, affected by any manipulation of LIBOR by DB AG or any other entity. No specific loss is said to be suffered from the misrepresentations, but it is alleged that the deal would not have been consummated if those representations had not been made. The effect of the deal being made was, however, the receipt by UGL of $150 million by way of loan, due for repayment in accordance with the terms of the facility agreement, but which it has not yet repaid. If the transaction were to be set aside or rescinded, then presumably restitution of that sum would be required, whatever other consequences might follow in relation to contractual repayment obligations and questions of payment of interest.
  19. For a representation to be actionable, it must be a representation of existing fact or law. Silence on its own is, as is recognised, not enough. The claimants refer to Lord Justice Mance, as he then was, in Primus Telecommunications v MCI WorldCom International [2004] EWCA Civ 957, where the objective nature of the test is set out:
  20. "As I presently see the position, whether there is a representation and what its nature is must be judged objectively, according to the impact that whatever is said may be expected to have on a reasonable representee in the position and with the known characteristics of the actual representee. Just as contractual interpretation depends on ascertaining the meaning which the documents would convey to a reasonable person, having all the background knowledge which would reasonably have been available to the parties and the situation in which they were at the time of the contract."
  21. So far as the test for implied representations is concerned, the claimants rely upon a passage in IFE Fund v Goldman Sachs International [2006] 2 CLC 1056 where Mr Justice Toulson, as he then was, said:
  22. "In determining whether there has been an express representation, and to what effect, the court has to consider what reasonable person would have understood from the words used in the context in which they were used. In determining what, if any, implied representation has been made, the court has to perform a similar task, except that it has to consider what a reasonable person would have inferred was being implicitly represented by the representor's words and conduct in their context."
  23. Most implied representations, I think it is fair to say, do arise in the context of express representations, but none are here alleged. There are certain well recognised categories of implied representation, such as those which arise where an opinion is given and there is an implied representation that the opinion given was honestly held. A further example is the implication of facts that can sometimes arise where an opinion is given, the fact being that the representor believes that facts exist which reasonably justify the opinion expressed.
  24. Representations by conduct could, likewise, arise if there were express representations or surrounding circumstances which mean that the conduct on an objective basis would be taken as such a representation by a reasonable person in the position of the alleged representee.
  25. I accept the submission of DB AG that the court must consider whether a reasonable representee in the position of and with the known characteristics of Unitech would reasonably have understood that an implied statement was being made and being made substantially in the terms or to the effect alleged, by reason of the facts which are relied on by Unitech, to which I have already made reference, namely that DB AG was a LIBOR panel bank and entered into the swap which was linked to LIBOR or the credit facility agreement as the case may be. Whilst that was the limit of the pleading, the evidence before the court showed draft term sheets exchanged in negotiations, with the same or similar references to LIBOR rates. Mr Brisby QC relied on that evidence too.
  26. I am unable to see how, on the basis of the two factors relied on by UGL and Unitech, any such representation could be spelt out. Moreover, as both DB AG and the other acceding lenders point out, the documents comprising the transactions militate against such representations, although this factor is of much less weight in a situation where dishonesty is alleged. Mr Brisby QC relies on the maxim "Fraud unravels all" in this context.
  27. Nonetheless, the position is as follows: (i) The draft term sheets and the final term sheet for the swap contained a disclaimer of responsibility for any representations as to information provided in the document itself:
  28. "This term sheet does not constitute an offer, an invitation to offer or a recommendation to enter into any transaction ... DB transacts business with counterparties on an arms-length basis and on the basis that each counter party is sophisticated and capable of independently evaluating the merits and risk of each transaction. DB is not acting as your financial adviser or in any other fiduciary capacity with respect to this proposed transaction unless otherwise expressly agreed by us in writing, therefore this document does not constitute advice or a recommendation. This transaction may not be appropriate for all investors and before entering into any transaction you should take steps to ensure that you fully understand the transaction and have made an independent assessment of the appropriateness of the transaction in the light of your own objectives and circumstances, including the possible risks and benefits of entering into such a transaction. You should also consider seeking advice from your own advisers in making this assessment. If you decide to enter into this transaction, you do so in reliance on your own judgment ... although we believe the contents of this document to be reliable, we make no representation as to the completeness or accuracy of the information."

    (ii) The confirmation of the swap included an entire agreement clause by virtue of the incorporation of the ISDA master agreement:

    "This agreement constitutes an entire agreement and understanding of the parties with respect to its subject matter. Each of the parties acknowledges that in entering into this agreement it has not relied on any order or written representations, warranty or other assurance, except as provided for or referred to in this agreement, and ways or rights or remedies which might otherwise be available to it in respect thereof, except that nothing in this agreement will limit or exclude any liability of a party for fraud."

    (iii) The confirmation also contained a representation by UGL in relation to non reliance:

    "UGL is acting for its own independent decision to enter into this transaction and as to whether this transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisors as it has deemed necessary. UGL is not relying on any communication, written or oral, of DB as investment advice or as a recommendation to enter into this transaction, it being understood that information and explanations relating to the terms and conditions of this transaction would not be considered investment advice or a recommendation to enter into this transaction. No communication, written or oral, received from DB shall be deemed to be an assurance or guarantee as to the expected results of this transaction.
    Assessment and understanding. UGL is capable of assessing the merits of and understanding on its own behalf or through independent professional advice and understands and accepts the terms and conditions and risks of this transaction. Status of the parties, DB is not acting as fiduciary for or an adviser for UGL in respect of this transaction."

    (iv) The term sheet for the loan contained the following statement:

    "This document does not constitute an offer or recommendation to enter into any transaction. We have sent you this document in our capacity as a potential counterparty acting at arm's length; we are not acting as your financial advisor or in a fiduciary capacity in respect of this proposed transaction or any other transaction with you unless expressly agreed by us in writing. Before entering into any transaction, you should take steps to ensure that you understand the transaction and have made an independent assessment of the appropriateness of the transaction. In the light of your own objectives and circumstances including the possible risks and benefits of entering into such transaction. You should also consider seeking advice from your own advisers in making this assessment."
  29. As DB AG submit, it was made clear to UGL and Unitech, and accepted by them, that DB AG was acting on an arms length basis and not as their adviser or fiduciary; that DB AG was not making any recommendation and it was Unitech's and UGL's sole responsibility to understand the transaction and make its own independent assessment of its appropriateness. Unitech and UGL were relying on their own judgment and DB AG was not making any representation as to the completeness or accuracy of the information in the term sheets.
  30. What, in such circumstances, could a reasonable representee in the position of UGL and Unitech see as a representation in relation to the LIBOR provisions of either the loan or the swap agreement? Both those agreements referred to a LIBOR rate as it appeared on a screen at a particular time. Where and on what basis could a representation be spelt out about the way in which that figure came to be found there, or the manner in which it came to be calculated?
  31. The terms of the LIBOR representations A and B, as pleaded, are concerned with the manner in which the figure on the screen came to be compiled. Each of those two alleged representations seeks to place in the mouth of one bank, that is known to make a report to Thomson Reuters, a statement about the overall integrity of the system or of all the individual bank's contributions to it; neither of which lay solely within the control of any individual bank. As pleaded, every bank participating in any panel on any one of the 150 LIBOR rates would be taken as making this representation about the whole system and the parts played by every bank within it. That, in my judgment, is unrealistic and does not meet the test to which I have already referred.
  32. In the absence of any express representation, the question of representations as to process cannot arise and the width and uncertainty of those representations run far beyond anything that any reasonable representee could imagine. DB AG puts it this way in relation to these two representations. They say that what these representations really amount to is as follows:
  33. "None of the banks on any of the ten reporting panels for any of the ten currencies in which LIBOR was published had ever made a submission which did not constitute a good faith accurate estimate of their borrowing costs in a reasonable market size just prior to 11 am London time on any given day, and none of the banks on any of those ten panels would ever in the future make a submission which did not constitute a good faith estimate of their borrowing costs in a reasonable market size just prior to 11 am London time on any given day."
  34. Representations C and D look a little more promising at first blush, being at least linked to DB AG's acts, intentions or knowledge, but again one has to ask the question why, in the absence of any express representation, and in the context of the two transactions that merely had referred to LIBOR rates on screen, (and/or draft documents exchanged earlier which made similar references), any representation of any kind arises in relation to the means by which the figure is compiled, even allowing for the reporting contribution that DB AG made to that process.
  35. Again, there is a measure of uncertainty in the alleged representation, though Mr Brisby QC says that this is more of a forensic point than anything else. The question arises as to what is meant by "Undermining the integrity" of LIBOR and reference is made to the number of LIBOR submissions per year being of the order of 446,250. How many panel banks must be involved before integrity is undermined? How many submissions must be made, other than in good faith for that to occur? Does the conduct have actually to affect the published rate for it to undermine the integrity of LIBOR, and would manipulation on a single day be sufficient? Furthermore, if a submission was made other than in good faith that related to yen LIBOR or Australian dollar LIBOR would that undermine the integrity of LIBOR for the purposes of the representation.
  36. There is, to my mind, a real difference when entering into a transaction which is based on a particular LIBOR rate, between an implied term of the contract that a party will not manipulate the specific LIBOR rate that is referred to in it, which might well be said to go without saying and, on the other hand, a separate non contractual representation that nothing has been done in the past, or is now being done, to impact on any of the many LIBOR rates calculated in the past or a representation as to intention as to the future. A promise to do nothing that would jeopardise the ordinary and proper assessment of the relevant particular LIBOR rate to which the transaction is linked can, it seems to me, albeit without hearing argument, be readily spelt out of the existing provisions in the contract, but an implied representation of fact when no representation relevant to it is expressly made, whether in the contract or elsewhere, and when disclaimers or other clauses in the agreement militate against such implication, cannot be found simply on the basis of the two features upon which UGL and Unitech alone rely, namely that DB AG was a panel bank and entered into a financial transaction linked to LIBOR. If representations C and D were made, that would effectively impose upon DB AG and any other LIBOR panel bank which entered into a LIBOR linked derivative with the counterparty a positive duty to disclose to the counterparty any information which it had which might undermine the integrity of LIBOR, whatever that expression really means, and a failure to do so would amount to an implied misrepresentation. That does seem a very wide duty to impose.
  37. It is plain, in my judgment, that linking a payment obligation to a LIBOR rate cannot be enough to give rise to a representation about how that LIBOR rate was, is, or will be, compiled; otherwise every contracting party on either/or both sides of a contract would make such a representation in the multitude of transactions where such reference is made. How, then, does the fact that one party is a panel bank and contributes to reporting for one or more of such rates in itself give rise to the implied representation? If that party participates in the scheme for assessment of the relevant rate to which the contract refers an implied promise not to fix the rate by reference to extraneous considerations might be inferred since it would specifically relate to proper performance of the contract, but I do not see how representations of fact of the kind suggested can be spelt out just because a bank does have a reporting function.
  38. No specific precontractual conduct is relied on in the pleading, nor any statements of any kind. It is merely the offer of a product and/or the conclusion of a transaction by a panel member which refers to LIBOR which, in themselves, are said to give rise to the implied statements. In my judgment, that is unsustainable and such a plea has no prospect of success.
  39. In Graiseley v Barclays Bank [2012] EWHC 3093 Comm, Mr Justice Flaux allowed amendments to add claims for fraudulent misrepresentation against Barclays in relation to LIBOR. In paragraph 9 of the judgment, he referred to the draft pleadings which set out representations and how they were made by agents of the bank, those being managers and staff in the local branches in the black country. The representations were said to have been made both in documents, including drafts of the various agreements which referred on a number of occasions to LIBOR, and to the setting of the so-called screen rate, and a series of e-mails passing between the bank and the claimants and meetings. How different that was from the current case is not apparent, save that there was some material which was expressly pleaded, whereas there is none in the present case beyond the two features to which I have referred.
  40. At paragraph 15, Mr Justice Flaux referred to the principles upon which a court decides whether any given representation has been made, as summarised by Mr Justice Popplewell in Mabanga v Ophir Energy [2012] EWHC 1589 Comm at paragraphs 25 to 28. He said it was by reference to those principles that the defendants in the Barclays case sought to argue that the amendments had no prospect of success.
  41. I refer to Mr Justice Popplewell's judgment, first to paragraph 25, where he said this:
  42. "Whether any and, if so, what representation was made has to be judged objectively, according to the impact that whatever is said may be expected to have had on a reasonable representee in the position and with the known characteristics of the actual representee."

    Then at paragraph 28:

    "In the case of an implied representation, the court has to perform a similar task, except that it has to consider what a reasonable person would have inferred was being implicitly represented by a representor's words or conduct in that context. IFE Fund SA v Goldman Sachs and Raiffeisen ZentralBank v RBS, paragraph 83."
  43. Mr Justice Flaux was, therefore, conscious of the test to be applied, but his judgment does not record how it was that he applied it to the facts of the case before him. He had self-evidently different materials to those which are before me. What he did say, however, was this, at paragraph 16:
  44. "So far as the first objection is concerned, which is whether it is appropriate to apply the alleged representations at all, the United States Department of Justice found that, at paragraph 32 of its statements of facts, expressly accepted by Barclays, as is recorded by the Department of Justice, albeit in the context of the activities of derivative traders, that certain of those traders and rate submitters who had engaged in efforts to manipulate LIBOR submissions were well aware of the basic features of the derivative products tied to these benchmark interest rates. Accordingly, they understood that to the extent they increased their profits or decreased their losses in certain transactions from their efforts to manipulate rates, their counterparties would suffer correspondingly adverse financial consequences in relation to those particular transactions."
  45. In my judgment, the awareness of the representor of the consequences of manipulating LIBOR on contracts that refer to it has no bearing on the test to be applied in accordance with the dicta of Mr Justice Toulson and Mr Justice Popplewell. I gain, therefore, no help from that paragraph of Mr Justice Flaux's judgment.
  46. At paragraph 17 he went on to say that in his judgment what applied to derivative traders as to their knowledge or understanding should, arguably, hold for senior management of Barclays who were responsible for manipulation of LIBOR. He went on to say that in those circumstances the attempts by the defendants to argue that the implied representations do not reach the level of "Real prospect of success" for the purpose of allowing the amendments was doomed to failure. He said that whether the implied representations would in fact be made out would depend on factual issues which could only be decided at trial and it could not be said that Barclays had an unanswerable case that the implied representations were not made. It was, therefore, quintessentially a factual question for determination at trial.
  47. In the circumstances, I can derive no assistance from the judgment of Mr Justice Flaux in relation to the allegations with which I have to deal, and the factual premises upon which it is suggested that representations should be implied. Every case will turn upon its own facts when the test falls to be applied, but applying it to what is pleaded in the draft amendments here results in the conclusion that it cannot be met. One cannot look at what the banks knew and what the banks did in order to spell out what a reasonable person in the position of the defendants would have inferred was being implicitly represented as existing fact by DB AG when contracting by reference to a LIBOR rate. What the parties had in mind was the LIBOR rate as it came to be shown on the screen in the future, not what had been done in the past in setting that rate, nor how it would be done in the future, nor what any panel banks' intentions were at the time. Those thoughts would not have crossed their minds as being representations of existing fact being made by DB AG simply by virtue of contracting by reference to LIBOR and by virtue of DB AG being a panel bank.
  48. The negligence claim is dependent upon the representations being impliedly made or made by conduct, regardless of any issue which might arise on duty of care. As no foundation has been laid to show the representations being made, this claim in the amendments falls in limine. Given the terms of the disclaimer in the swap confirmation and the other contractual provisions to which I have referred, I do not see how a duty of care could be established either. Reference can there be made to Lord Justice Waller in IMP v GSI [2007], EWCA 881. Although, of course, if dishonesty were established the position would be seen differently.
  49. The warranty claim in the new amendments seems to me to be oddly pleaded. As framed, it seemed to me to amount to a claim that there was a collateral contract in the shape of the alleged warranty-collateral to both the swaps confirmation and the credit facility agreement. This, of course, would conflict with the entire agreement clause in the swaps confirmation insofar as it is said to be a collateral contract with UGL, and no allegation is made that it was a contract collateral to the guarantee.
  50. Mr Brisby told me that it was intended to be a plea of an implied term of the facility agreement and swap agreement themselves, which would again conflict with the entire agreement clause. Equally, however, the warranty is in the same terms as the misrepresentations relating to past facts, present practice and present intention vis a vis LIBOR globally. With contracts of the kind in question and the terms to which I've referred, I do not see how such warranties could be implied into the contract in question by reference to the test set out by Lord Hoffman in the Attorney General of Belize or to any of the forms of words he used to illustrate that test. Whether one refers to the question, whether the provision "spells out in express words what the instrument read against the relevant background would reasonably be understood to mean" or looks for an implied term which is "obvious" or "necessary solely to give business efficacy", or one which "goes without saying" makes no difference. I cannot see how any of these criteria could be in any way satisfied.
  51. This is, as I say, very different from saying that an obligation not to manipulate the relevant LIBOR rate in the future is a term which goes without saying. Even a representation of current intention is not the same as a future obligation not to jeopardise the proper process of LIBOR assessment by self-interested action. In my judgment, none of the existing pleas of misrepresentation can stand as implied warranties, though there is, I suspect, room for an implied term which, during the course of argument, Mr Brisby had it in mind to allege and may yet be the subject of a future application to amend.
  52. I am, of course, conscious of all the questions of fact which can arise in relation to matters of this kind, but one can only proceed on the basis of what is pleaded as the factual premises upon which the implication of representations or terms are said to arise
  53. A new plea is proposed which alleges that because there was no genuine LIBOR rate, the interest claimed under the facility agreement is irrecoverable. Alternatively, this plea is put on the basis of public policy. The LIBOR rate on screen is what is referred to in the swap agreement and the credit facility agreement. If there is no representation as to how it was to be calculated, then the screen rate applies and there is no basis put forward, absent a plea of breach of contractual promise, why that rate should not be applied. A plea of public policy, moreover, without particularisation will not do. If such a plea is to be made, the policy reasons must be spelt out.
  54. I turn, then, to the question of relief or remedy that is sought in the amendments. I am conscious of the Williams v Humbert point that is made by Mr Brisby in the context of matters that are, in any event, going to be the subject of investigation at trial, particularly in the context of the suitability misrepresentation. Nonetheless, the matters to which I have already adverted form a discrete area of subject matter and they deserve to be dealt with as a matter of principle on their own terms. It is in that context that one then considers the question of relief or remedy also.
  55. The basis upon which the proposed pleas seem to be made is that they have the consequence of relieving UGL and, therefore, its guarantor, Unitech, of contractual liability under the credit facility agreement and the swap agreement. At paragraph 36G in the swap action and paragraph 5FB and 5GG in the lenders' action, the allegation is made that UGL and Unitech have been irretrievably prejudiced and stand discharged from the swap agreement, the credit facility agreement, the guarantee and the indemnity. The basis in law for this allegation is unknown.
  56. Moreover, if there is a breach of warranty as opposed to a misrepresentation act or tortious form of misrepresentation, the measure of damages is, ordinarily, based on the assumption that the representations and statements are true as opposed to them never having been made. That gives rise to damages which essentially reflect the difference between any manipulated LIBOR rate applied to the contract and that which would have applied in the absence of such manipulation, not relief from the basic obligation of repayment of the loan.
  57. Similarly, repudiation of the agreements is not alleged, but if it was, damages would be of the same kind and the loan of the principal sum of $150 million would then fall to be taken into account, dwarfing, I suspect, any possible damages which could conceivably be alleged by UGL or Unitech.
  58. Additional complications arise in the lenders' action, because the second to ninth claimants were not panel members and acceded to the credit facility agreement under clause 29 by transfer or novation. UGL and Unitech allege in paragraph 5G1(2) to paragraphs G1.4 that there was a second LIBOR warranty given in the context of the transfer/novations, either forming a collateral contract to those transfers or novations or as part of them.
  59. No separate basis is pleaded for this, so that the pleas fall with my earlier conclusions.
  60. The alleged second LIBOR warranty accords with representations A and B alone, to which I have already referred. As none of the second to ninth claimants was a LIBOR panel member, one of the two building blocks for the alleged implied misrepresentation is absent, and for the reasons given earlier, no representation can be implied simply from the conclusion of the transaction by a party by reference to LIBOR. How can any accession change that or improve the defendant's position as compared with that of DB AG? The second to ninth claimants would know nothing of the actual processes by which LIBOR rates were actually set, and whether any panel members' submissions were good faith accurate estimates or not. How could any such representation arise on their accession to the credit facility agreement, whatever the mechanism for that accession?
  61. Here the documents show that there were transfers by way of novation, or by way of assignment, assumption and release, to all of which UGL agreed in advance by virtue of clause 29 of the credit facility agreement. Two particular transfers, those to the seventh claimant and to the third claimant, were expressly effected by novation. The effect of novation is, as is known, not simply to assign or transfer a right or liability, but to extinguish the existing agreement and create a new contract. Now, the importance of that is said to be that any right to rescind, which the defendants might have had in relation to the original credit facility agreement, was lost when that agreement was extinguished and replaced by new, novated, agreements. That must be right.
  62. Furthermore, reference is made to the principle that rescission is unavailable where the rights of third parties are involved, if those third parties have acquired rights in the subject matter of a contract. In a multi-lateral contract situation, where some parties are innocent, there is also a problem in asserting rescission, because it cannot be effected against one party but not another. That too is correct.
  63. The other claimants appear to have acquired rights by way of "Assignment, assumption and release". Those are said to be also a form of novation, to which the same principles apply, but it matters not in the current context because of the two particular claimants to whose position I have already referred.
  64. Paragraph 5FA of the draft amendments to the defence in the lenders' action asserts an assumption of liability or responsibility by the acceding parties for any representations, or breaches of express or implied terms by DB AG or an implied term of the novations to the same effect. There is, however, nothing in the terms of any of the novation documents which have been produced which could give rise to any implication or assumption and there is no plea of any other factual basis upon which these matters could arise.
  65. Clause 29 of the credit facility agreement provides for both methods of 'transfer', whether by novation or assignment, assumption and release, to be effected by use of a transfer certificate to which the old lenders, the new lenders and the facility agent are parties. That was the method that was employed in each case for each of these claimants, as is clear from the evidence adduced and the exhibits to it.
  66. The terms of clause 29(5) provide for the new lender to assume the rights and obligations of DB AG expressed to be the subject of the novation or assumption in the transfer certificate itself. That transfer certificate, in each case, expressly provided for the assumption of "Obligations equivalent to those obligations of DB AG under the facility agreement," not to any obligation under any collateral contract nor obligations arising from misrepresentation. This pleas cannot succeed.
  67. A final difficulty is raised by Mr Handyside in his skeleton at paragraphs 60 through to 64 in relation to the remedy of damages which is sought under the Misrepresentation Act because of the terms of section 2.2 of that Act which provide that an award of damages can be given under the act in lieu of the remedy of rescission. But such an award can only be given where rescission is still available, as the authorities which he cites show.
  68. That, I think, deals with all the amendments that are currently sought, unless there is something that I have failed to notice and to which my attention can be drawn. But, as matters stand, despite the low threshold which Mr Brisby rightly says is to be applied by the court in allowing amendments, despite the early stage at which these amendments are sought, and despite the absence of any limitation problem, the application of the appropriate test, of no reasonable prospect of success, means that none of those amendments, at least in their current form and on the basis of the facts put forward to justify them, can be justified. They are, therefore, not allowed.

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