|[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]|
England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Marme Inversiones 2007 SL v Natwest Markets Plc & Ors  EWHC 366 (Comm) (25 February 2019)
Cite as:  EWHC 366 (Comm)
[New search] [View without highlighting] [Printable PDF version] [Help]
QUEEN'S BENCH DIVISION
BUSINESS & PROPERTY COURTS
Strand, London, WC2A 2LL
B e f o r e :
| MARME INVERSIONES 2007 SL
- and -
|(1) NATWEST MARKETS PLC
(2) HSH NORDBANK AG
(3) BAYERISCHE LANDESBANK
(4) ING BANK NV
(5) CAIXABANK SA
David Quest QC, Laura John and Max Evans (instructed by Simmons & Simmons LLP) for the First Defendant, NatWest Markets PLC.
Timothy Howe QC and Adam Sher (instructed by Allen & Overy LLP) for the Second to Fifth Defendants, HSH Nordbank AG, Bayerische Landesbank, ING Bank NV and Caixabank SA.
Hearing dates: 3-5 October, 8-11 October, 23-24 October and 5-7 November 2018.
Draft judgment supplied to the parties: 18 February 2019
HTML VERSION OF JUDGMENT APPROVED
Crown Copyright ©
THE HON. MR. JUSTICE PICKEN:
Introduction - Background to these proceedings - An outline of Marme's case - An outline of the defences raised - The Defendants' claims for declaratory relief - EURIBOR - Factual witnesses - Marme's misrepresentation claim - Implication: applicable legal principles - Implication: this case - Falsity - Barclays communications - RBS communications - Conclusions on direct evidence - Criminal proceedings - EU Commission Decision - Other secondary material - Fraud - Reliance - Awareness - Causation - Conclusion  Rescission - Affirmation - Partial rescission - Damages - Applicable legal principles - Bargaining power - Counterfactual 1 – PIK Loan Structure - Counterfactual 2 – Swap Discount Structure - Liability of the Non-RBS Banks: Agency - Apparent authority – the law - Preliminary observations - The Senior Loan - The Swaps - Reliance - Conclusion  The Defendants' claims for declaratory relief - Conclusion -
Background to these proceedings
The Ciudad Financiera transaction
Financing the Transaction
Bayern as sole MLA
Bayern, HSH and RBS as joint MLAs
Terms of the financing
"Name of Original Lender Commitments
Bayerische Landesbank €150,000,000
HSH Nordbank AG €309,000,000
The Royal Bank of Scotland plc €366,000,000
Deutsche Postbank AG €200,000,000
ING Real Estate Finance SE E.F.C., S.A. €75,000,000
ING Bank N.V. €75,000,000
Caixa d'Estalvis i Pensions de Barcelona
'la Caixa' €200,000,000
Raiffeisen [sic] Zentralbank Österreich
From and including the Utilisation Date the company must maintain Hedging Arrangements satisfactory to the Majority Lenders in accordance with this Subclause.
(i) The Interest Hedging Arrangements must:
(A) be with a Company; and
(B) have a notional principal amount not less than the aggregate amount of the Loan.
(ii) All Hedging Arrangements must be:
(A) in form and substance satisfactory to the Facility Agent; and
(B) the subject of security under a Hedging and Account Security Agreement.
Purported termination of the Swaps and procedural history
An outline of Marme's case
(1) RBS had not at the time material to the Transaction sought to manipulate EURIBOR, was not seeking to do so at the date of the Swaps, and did not intend to do so in the future. ('EURIBOR Representation 1').
(2) RBS had no reason to believe that any other banks had at the time material to the Transaction sought to manipulate EURIBOR, were seeking to do so as at the date of the Swaps, or would seek to do so in the future. ('EURIBOR Representation 2').
(3) RBS had not at the time material to the Transaction conducted itself in such a way as to undermine the integrity of EURIBOR, was not conducting itself in such a way as at the date of the Swaps, and did not intend to do so in the future. ('EURIBOR Representation 3').
(4) RBS had no reason to believe that any other banks had at the time material to the Transaction conducted themselves in such a way as to undermine the integrity of EURIBOR, were not conducting themselves in such a way as at the date of the Swaps, and did not intend to do so in the future. ('EURIBOR Representation 4').
(5) RBS had at all times material to the Transaction acted honestly, was acting honestly at the date of the Swaps, and intended to act honestly in the future, in relation to the EURIBOR rate-setting process. ('EURIBOR Representation 5').
An outline of the defences raised
The Defendants' claims for declaratory relief
Setting of EURIBOR
"Euribor was established with a view to creating a new benchmark interest rate for interbank lending in that currency. It was in effect designed as a counterpart to, indeed competitor of, Libor. Further (and just as with Libor) Euribor might be, and commonly is, designated as the reference rate for interest rate swaps or other derivative transactions."
He continued at :
"For the purposes of setting the daily Euribor rate for each respective period (or 'tenor') submissions are received prior to 11 am CET on each day from banks who are on a designated panel. The number of such panel banks has fluctuated from time to time: but around 44 would be representative. At all relevant times Deutsche Bank was on the panel. Put shortly, the Euribor daily rate was fixed by averaging the submissions of each panel bank for the respective tenor, but with the highest and lowest 15% of the respective submissions being excluded. No panel bank was permitted to see any other panel bank's submissions during the relevant window before 11 am. The daily rate would then be published via Thomson Reuters."
He, then, added at :
"Because of the size and volume of many of the derivative transactions linked to Euribor even a very small percentage difference of 0.01% in the rate as set potentially could have a significant implication, in terms of profit and loss, for relevant underlying transactions."
"Euribor was devised, at the time of the creation of the euro in 1999, to provide participants in euro denominated transactions with a benchmark comparable to those found in many money markets. It was principally devised by the European Banking Federation ('EBF') representing national banks and the Financial Markets Association ('ACI') representing European Banks. Two entities (Euribor - ECF and Euribor - ACI) were established, under Belgian law, to supervise the operation of Euribor. The Code was prepared for the purposes of the Euribor setting process; this was replaced in 2008, but in essentially similar terms. The Code was then comprehensively revised in 2013, following a report known as 'the EBA/ESMA Report'. However, the latter Code post-dates the matters the subject of the indictment."
Davis LJ went on at  to explain that the Code, in its 1999 version, stated in the Preface as follows:
"The EURO Interbank Offered Rate – 'EURIBOR' – is the new money market reference rate for the euro. This Code lays down the rules applicable to EURIBOR and the banks which will quote for the establishment of EURIBOR.
EURIBOR is the rate at which euro interbank term deposits are being offered within the EMU zone by one prime bank to another at 11.00 am. Brussels time ('the best price between the best banks'). It is quoted for spot value (two Target days) and on actual/360 day basis."
He, then, referred at  to Article 1 setting out:
"… the various criteria for qualifying as, and remaining, a panel bank. It was specifically stated, among other things, that panel banks 'must be of first class credit standing, high ethical standards and enjoying an excellent reputation."
Davis LJ, then, set out Article 6 ("ARTICLE 6: OBLIGATIONS OF PANEL BANKS") at :
"1. Panel banks must quote the required euro rates:
- to the best of their knowledge, these rates being defined as the rates at which euro interbank term deposits are being offered within the EMU zone by one prime bank to another at 11.00 am. Brussels time ('the best price between the best banks'):
- for the complete range of maturities as indicated by the steering committee;
- on time as indicated by the screen service provider;
- daily except on Saturdays, Sundays and Target holidays;
- accurately with two digits behind the comma.
2. Panel banks must commit themselves to transmit to the European System of Central Banks all the necessary figures to establish an effective overnight euro rate, and in particular their aggregate loan volume and the weighted average interest rate applied.
3. Panel banks must make the necessary organisational arrangements to ensure that delivery of the rates is possible on a permanent basis without interruption due to human or technical failure.
4. Panel banks must take all other measures which may be reasonably required by the steering committee or the screen service provider in the future to establish EURIBOR.
5. Panel banks must subject themselves unconditionally to this Code and its enclosures, in their present or future form.
6. Panel banks must promote as much as possible EURIBOR (e.g. use EURIBOR as reference rate as much as possible) and refrain from any activity damageable to EURIBOR."
The EU Commission Proceedings
Other investigations concerning RBS
The criminal proceedings
The factual witnesses
Marme's factual witness – Mr Glenn Maud
"was very much opposed to the idea of having an IRS as we believed at the time that the pressure on interest rates over the short to medium term was downwards."
He went on:
"However, I accepted the idea as, potentially, a necessary evil … During BayernLB's period as lead arranger, I sought to persuade it (and by extension the other banks committed to the syndicate) that an IRS was not in fact necessary. I was making some headway: BayernLB reported to me that a number of banks were willing to proceed without an IRS and that BayernLB itself had an open mind."
There is, however, no evidence that Marme ever objected to having a swap. On the contrary, the swap concept was included in what was proposed from the beginning and there is no evidence that Marme ever sought to remove it. In fact and tellingly, as I shall explain later, in his second witness statement, Mr Maud stated that Marme "expected" that swaps would be required.
RBS's factual witnesses
Mr Christopher Bates
Mr Christopher Andrews
Mr Sean Goodwin
"… So far I've done all the running and taken the ISDA process to completion. Bayern and HSH not done anything so if it looks like they'll be coming in on the execution I'm going to suggest they start fielding the queries I've been taking from the other banks and produce terms sheets etc. I'll also be in a big huff".
Three days later, on 8 September 2008, Mr Goodwin, then, referred to "… other banks swappers" having done nothing and the next day he remarked that "… the Bayern and HSH swap guys have brought absolutely nothibg [sic] to the table". When Mr Saini QC put these exchanges to Mr Goodwin in cross-examination, Mr Goodwin said that he was simply suggesting that he had made more progress on the RBS Swap than the Non-RBS Banks had made on their swaps. I agree with Mr Saini QC, however, that this somewhat underplays his evident thinking at the time, suggesting a keenness on Mr Goodwin's part not to say anything in evidence which might undermine the Banks' agency case. However, I do not consider that this justifies a conclusion that Mr Goodwin was less than frank. He was defensive certainly but that is not the same thing.
Mr Edwin Rood
The Non-RBS Banks' factual witnesses
Mr Mark Greenland
Mr Alan Grey
Mr Samir Samhan
Mr Elmer Feenstra
The effect of the passage of time
"Speaking from my own experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses' motives, and to the overall probabilities, can be of very great assistance to a Judge in ascertaining the truth. I have been driven to the conclusion that the Judge did not pay sufficient regard to these matters in making his findings of fact in the present case."
These observations are apt in the present case. It would be wrong, however, to place no weight on the witnesses' recollections since the events in question are not so distant as to make that appropriate.
Marme's misrepresentation claim
Implication: applicable legal principles
"In determining whether there has been an express representation, and to what effect, the court has to consider what a 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."
This passage has been applied variously by Christopher Clarke J (as he then was) in Raiffeisen Zentralbank Osterreich AG v RBS  EWHC 1392 (Comm) at ; Popplewell J in Moto Mabanga v Ophir Energy PLC and anor  EWHC 1589 (QB) at ; and in PAG by Asplin J (as she then was) at first instance, at  and by the Court of Appeal at .
"A representation is a statement of fact made by the representor to the representee on which the representee is intended and entitled to rely as a positive assertion that the fact is true. In order to determine whether any and if so what representation was made by a statement requires (1) construing the statement in the context in which it was made, and (2) interpreting the statement objectively according to the impact it might be expected to have on a reasonable representee in the position and with the known characteristics of the actual representee: see Raiffeisen, supra, at ; Kyle Bay Ltd v Underwriters Subscribing under Policy No. 01957/08/01  1 CLC 164, at -, per Neuberger LJ."
This statement applies equally where the facts relied upon for the implication of the representation consist of conduct rather than a statement. Hamblen J went on at  to say this:
"In a deceit case it is also necessary that the representor should understand that he is making the implied representation and that it had the misleading sense alleged. A person cannot make a fraudulent statement unless he is aware that he is making that statement. To establish liability in deceit it is necessary 'to show that the representor intended his statement to be understood by the representee in the sense in which it was false' – per Morritt LJ in Goose v Wilson Sandford & Co.  Lloyd's Rep PN 189 at para. 41. In other cases of misrepresentation this is not a requirement, but one would generally expect it to be reasonably apparent to both representor and representee that the implied representation alleged was being made."
"Where there is no express misrepresentation, the first question to ask is whether there has been any implied misrepresentation at all and, as with any other type of contract, the essential issue is whether in all the circumstances relating to the entering into of the contract of guarantee or indemnity, including in particular (a) the nature of the contract between the beneficiary and the principal debtor, (b) the conduct of the beneficiary and (c) express representations made by him to the surety, it has been impliedly represented to the surety that there exists some state of facts different from the truth. In evaluating the effect of the beneficiary's conduct a helpful test is whether, having regard to the beneficiary's conduct in such circumstances, a reasonable potential surety would naturally assume that the true state of facts did not exist and that, had it existed, he would in all the circumstances necessarily have been informed of it."
The Court of Appeal considered this test in PAG at , observing as follows:
"The present case appears to be the first in which Colman J's test has been considered by the Court of Appeal. We do think it is a helpful test, in relation to the existence of an implied representation, to consider whether a reasonable representee would naturally assume that the true state of facts did not exist and that, if it did, he would necessarily have been informed of it. To that extent we would approve the dicta of Colman J in Geest plc v Fyffes plc 1 All ER (Comm) 672 but that is not to water down the requirement that there must be clear words or clear conduct of the representor from which the relevant representation can be implied."
"The meaning of 'no support' is, in any event, unclear. If, as RZB contends, it means that there was no support of any kind it is extremely wide. The representation would be falsi?ed if RBS had any arrangement with anyone which would or might provide it with any compensation if the value of the shares fell or was not realised or any particular rate of return was not achieved. If the scope of the implied representation is to be narrowed the ambit of the reduction is not clear. 'No support' could signify no contractual undertaking or something different. If it means the former, which would be consistent with the sense in which RBS used the expression 'support' in relation to the Sutton Bridge transaction …, there would have been no misrepresentation. This elasticity of possible meaning is a factor against regarding the representation that there was 'no support' as necessarily implied."
"The alleged 'technology price representation' appears nowhere on the face of an IM. One cannot infer a complex and contentious representation of this kind, still less one involving vague concepts such as 'reasonable relationship' and 'true value'. The basis of the acquisition cost is set out in the IM. No statement beyond that was made."
He went on at (5) to observe that:
"As to the alleged 'technology rights valuation representation' there is a statement in most of the IMs that the Technology had been independently valued. Where such statement was made it was true. No statement was made that it had been 'properly' valued. It is unclear what that means and any representation to this effect, in so far as it is a matter of fact, would need to be clearly spelt out, which it is not."
An alleged representation that the Technology rights, the proposed business, its prospects, funding, proposed operators and advisers had been assessed with "appropriate due diligence" was also rejected on the ground, at , that:
"There is no basis for inferring such a contentious and far reaching representation. Issues of this kind are properly the subject matter of negotiation and, if agreed, a promissory warranty. What is 'appropriate' or what is 'due diligence' is a matter of evaluation and judgment, not a statement of fact."
"The Term Sheets do not refer to any of these matters and they are vague, imprecise and inherently implausible statements for a selling bank to make. The vague and uncertain nature of the statements mean that they are ill-suited to constitute actionable statements. What, for example, is meant by a 'true hedge', a 'proper hedging strategy' and how, precisely, is a bank meant to judge whether the benefits for its counterparty of any transaction outweigh the risks? A reasonable person would not have understood that SCB was making representations in such vague and ill-defined terms."
Mr Quest QC highlighted Hamblen J's focus here on the vague and uncertain nature of the representations, noting, further, that the Court of Appeal in PAG (at ) found that the expressly pleaded representations were too wide or complex to be implied and went on to reformulate the representation as a result.
(1) First, it is possible for a representation to be made expressly or impliedly through words or conduct. For a representation to be implied, silence or mere assumption is not usually enough as there is no general duty of disclosure. It is necessary to view the words or conduct objectively to determine whether an implied representation has been made, although the natural assumptions of the reasonable representee will be helpful in assessing whether an implied representation has been made through the conduct of the representor.
(2) Secondly, whether or not a representation is implied is ultimately a question of fact to be determined in the circumstances of the particular case: see also Deutsche Bank AG v Unitech Global Ltd  EWCA Civ 1372 per Longmore LJ at .
(3) Thirdly, more may be required, in terms of words or conduct, for a representation which is wide in meaning or complex to be implied.
(4) Fourthly, it is less likely that a representation that is vague, uncertain or ambiguous would be objectively understood to have been made from words or conduct.
It is with these principles in mind that I now consider the EURIBOR Representations which have been alleged in these proceedings.
Implication: this case
"It is common in this court to find intricate cases of implied representations being advanced. Often these are more a reflection of the ingenuity of the pleader than reality or the evidence. There is an element of that in this case. The evidence should lead the pleading; not the other way round."
It is undeniably the case that the EURIBOR Representations have undergone several mutations. At the time of issue of the Claim Form in September 2014, Marme pleaded four implied representations. The Particulars of Claim (in May 2015) contained 11 implied representations. In August 2017 (after the first instance decision of Asplin J in PAG), four further implied representations were pleaded. In March 2018 (after the Court of Appeal's decision in PAG and the close of disclosure), Marme replaced all of the pleaded representations with the current five EURIBOR Representations. Further, Marme's Particulars of Claim originally contained allegations that RBS itself had been making false submissions in respect of EURIBOR (Mr Quest QC suggested that this may have been a misinterpretation of the EU Commission press release dated 4 December 2013 which announced that RBS had been fined for participation in a "cartel aimed at distorting the normal course of pricing components for [euro interest rate] derivatives") only for these allegations to be removed once RBS put in its Defence (and gave disclosure) and once the EU Commission Decision had become public so that it became known that, as Marme now accepts, there is no evidence that ABN AMRO had made any false EURIBOR submissions. That said, however, it is important to be alive to the fact that implied representations will almost invariably, to some extent, amount to a 'lawyer's construct'. This is because, by their very nature, implied representations are not expressed in words. As such, it will almost always, for practical purposes, be the lawyer's task to put the conduct relied upon into words. That will involve the lawyer analysing the evidence and taking into account decided cases. The key question in every case will be whether the evidence justifies the conclusion that the implied representation was made. If that is the position, then, the fact that a lawyer has helped construct the implied representation case is unobjectionable. It is only if the evidence does not support the implied representation case that there is a difficulty.
(1) EURIBOR Representation 1: "No RBS employee had during the period of no less than around 2 years preceding the date of the Senior Loan Agreement and the Swaps, i.e. September 2006 to September 2008, engaged in conduct intended to lead to a higher or lower Euribor rate on any particular day as compared to the Euribor rate that would have pertained without the attempted manipulation, including the submission by any Euribor panel bank of a false rate even if that submission did not lead to a material increase or decrease in the Euribor rate on any particular day, no RBS employee was seeking to do so as at the date of the Swaps, and no RBS employee intended to do so in the future."
(2) EURIBOR Representation 2: "No RBS employee had reason to believe that any other banks had during the period of no less than around 2 years preceding the date of the Senior Loan Agreement and the Swaps, i.e. September 2006 to September 2008, engaged in conduct intended to lead to a higher or lower Euribor rate on any particular day as compared to the Euribor rate that would have pertained without the attempted manipulation, including the submission by any Euribor panel bank of a false rate even if that submission did not lead to a material increase or decrease in the Euribor rate on any particular day, were seeking to do so as at the date of the Swaps, or would seek to do so in the future."
(3) EURIBOR Representation 3: "No RBS employee had during the period of no less than around 2 years preceding the date of the Senior Loan Agreement and the Swaps, i.e. September 2006 to September 2008, conducted himself or herself in such a way as was likely to lead submitting banks not to submit in accordance with the EURIBOR Code, no RBS employee was conducting himself or herself in such a way as at the date of the Swaps, and no RBS employee intended to do so in the future."
(4) EURIBOR Representation 4: "No RBS employee had reason to believe that any other banks had during the period of no less than around 2 years preceding the date of the Senior Loan Agreement and the Swaps, i.e. September 2006 to September 2008, conducted themselves in such a way as was likely to lead submitting bank not to submit in accordance with the EURIBOR Code, were conducting themselves in such a way as at the date of the Swaps, or intended to do so in the future."
(5) EURIBOR Representation 5: "All RBS employees had during the period of no less than around 2 years preceding the date of the Senior Loan Agreement and the Swaps, i.e. September 2006 to September 2008, acted honestly, were acting honestly as at the date of the Swaps, and intended to act honestly in the future, in relation to the EURIBOR rate-setting process."
It is worth noting, in this context, that, in view of Marme's definition of what amounts to undermining integrity, it was common ground as between Mr Quest QC and Mr Saini QC by the time of closing that EURIBOR Representations 3 and 4 really add nothing to EURIBOR Representations 1 and 2 given that EURIBOR Representations 1 and 2 also relate to conduct intended to lead to a higher or lower EURIBOR rate. That this is obviously the case is borne out by the fact that Article 6 of the EURIBOR Code of Conduct includes an obligation on panel banks to submit rates which "to the best of their knowledge" are being offered. Not doing this would plainly amount to "conduct intended to lead to a higher or lower Euribor rate on any particular day as compared to the Euribor rate that would have pertained without the attempted manipulation" as described in EURIBOR Representations 1 and 2.
"(1) There was no sufficient conduct on the part of RBS from which it could be implied that any representations were made …;
(2) If there was such conduct, the only two representations which could be implied from that conduct were: (a) that the three-month LIBOR rate 'was set at the date of the transactions and would be set throughout its term in accordance with ... the BBA definition; and (b) that RBS had not in the past made false or misleading submissions or attempted to manipulate the three-month LIBOR rate …;
(3) PAG had not established that those representations were false, that is to say that the three-month LIBOR rate was not correctly set at the date of the transactions and RBS had in the past made false or misleading submissions in relation to that rate …;
(4) Therefore there was no question of any fraudulent or negligent representations …; and
(5) PAG did not rely on the alleged 'extremely complex and intricate' representations because they did not know about the BBA definition, how submissions were made or even that RBS was a panel bank, let alone that LIBOR was capable of manipulation; it was not enough that they assumed (although they did so assume) that LIBOR would be set in a straightforward and proper manner … ."
"(a) On any given date up to and including the date of each of the swaps: LIBOR represented the interest rate as defined by the BBA, being the average rate at which an individual contributor panel bank could borrow funds by asking for and accepting interbank offers in reasonable market size just prior to 11 a m on that date ('LIBOR representation 1').
(b) RBS had no reason to believe that on any given date LIBOR represented anything other than the interest rate defined by the BBA, being the average rate at which an individual contributory panel bank could borrow funds by asking for and accepting interbank offers in reasonable market size just prior to 11 a m on that date ('LIBOR representation 2').
(c) RBS had not made false or misleading LIBOR submissions to the BBA and/or had not engaged in the practice of attempting to manipulate LIBOR such that it represented a different rate from that defined by the BBA (viz a rate measured at least in part by reference to choices made by panel banks as to the rate that would best suit them in their dealings with third parties) ('LIBOR representation 3').
(d) RBS did not intend in the future and would not in the future: make false or misleading LIBOR submissions to the BBA; and/or engage in the practice of attempting to manipulate LIBOR such that it represented a different rate from that defined by the BBA (viz a rate measured at least in part by reference to choices made by panel banks as to the rate that would best suit them in their dealings with third parties) ('LIBOR representation 4')."
"As we have already mentioned the judge called the pleaded representations 'extremely complex and intricate' … . This is not an unmerited description. The first alleged representation is not only intricate but appears to amount to a representation that no bank had ever made inappropriate submissions to Reuters as to the rate at which LIBOR should be set and is an impossibly wide representation; much the same criticism can be rightly made of the second representation. The third and fourth representations are also unnecessarily complex and during the argument, the court endeavoured to reduce their complexity to something simpler. The most feasible formulation seems to us to be that RBS was representing that, at the date of the swaps, RBS was not itself seeking to manipulate LIBOR and did not intend to do so in the future. With some justification Mr Handyside complained that no such representation had been pleaded in terms. But it seems to us that our formulation captures the essence of what has been pleaded and we will proceed on that basis."
The Court of Appeal decided, however, at , that a different implied representation would be justified:
"In the present case there were lengthy discussions between PAG and RBS before the swaps were concluded as set out by the judge in the earlier part of her judgment. … RBS was undoubtedly proposing the swap transactions with their reference to LIBOR as transactions which PAG could and should consider as fulfilment of the obligations contained in the loan contracts. In these circumstances we are satisfied that RBS did make some representations to the effect that RBS itself was not manipulating and did not intend to manipulate LIBOR. Such a comparatively elementary representation would probably be inferred from a mere proposal of the swap transaction but we need not go as far as that on the facts of this case in the light of the lengthy previous discussions."
(1) First, there is the fact that EURIBOR Representations 2 and 4 concern whether RBS had "reason to believe" that other banks (in other words, not RBS itself) were involved in EURIBOR misconduct. Although Mr Saini QC sought to suggest that representations similar to EURIBOR Representations 2 and 4 were not considered in PAG, that the sole issue in PAG was whether RBS itself had been undertaking manipulation of the relevant benchmarks, and so that the Court of Appeal in PAG should not be regarded as having decided that such representations were not capable of having been made, that is not right since, in fact, the Court of Appeal approached matters on the basis that the first two representations alleged in PAG (as set out at [118(a) and (b)]) similarly went beyond RBS's own conduct and extended to the conduct of other banks. Therefore, far from assisting Marme, PAG is actually an authority which points in the other direction.
(2) Secondly but in similar vein, it should also be borne in mind that, whereas the EURIBOR Representations extend to the past (specifically two years prior to the Transaction), the representation formulated by the Court of Appeal in PAG was not concerned with the past but only with the present and the future. This is because the Court of Appeal expressly rejected an argument that it would be appropriate to imply a representation that no bank had ever made inappropriate submissions – as demonstrated by the observations at  (as previously quoted) that the first and second representations amounted "to a representation that no bank had ever made inappropriate submissions to Reuters as to the rate at which LIBOR should be set" and that such a representation would be "impossibly wide". Again, therefore, in this sense PAG is authority which not only does not support Marme's case but which is directly at odds with it.
(3) Thirdly, the EURIBOR Representations extend beyond actual manipulation to embrace also attempted manipulation which would not have had any effect on the obligations of the parties. Nowhere in PAG is there a suggestion that a mere attempt could be the subject of a representation; on the contrary, the Court of Appeal did not accept LIBOR Representation 3 which included reference to "the practice of attempting to manipulate".
(4) Fourthly and building upon the first and third points, in PAG "manipulation" referred to the making of false submissions by RBS's LIBOR submitters on the basis that the evidence considered in that case went only to the conduct of the RBS submitters whereas, in contrast, the EURIBOR Representations are concerned with all other conduct intended to influence the EURIBOR rates.
(5) Lastly, as for EURIBOR Representations 3 and 5 in particular, Mr Quest QC and Mr Howe QC observed, with justification, that these introduce concepts of undermining integrity and dishonesty in relation to the rate-setting process, neither of which was considered by the Court of Appeal in PAG.
"(3) Barclays had not on any given date, up to and including the date of the Swap and the Collar:
(a) made false or misleading LIBOR submissions to the BBA and/or
(b) engaged in the practice of attempting to manipulate LIBOR, such that it represented a different rate from that defined by the BBA, (viz a rate measured at least in part by reference to choices made by panel banks as to the rate that would best suit them in their dealings with third parties); and
(4) Barclays did not intend in the future to
(a) make false or misleading LIBOR submissions to the BBA and/or
(b) engage in the practice of attempting to manipulate LIBOR, such that it represented a different rate from that defined by the BBA. (viz a rate measured at least in part by reference to choices made by panel banks as to the rate that would best suit them in their dealings with third parties)."
Mr Saini QC drew attention to the fact that two of the representations which the claimants in the Deutsche Bank appeal wished to plead included the concept of undermining integrity. These were set out by Longmore LJ at :
"(C) 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.
(D) 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."
The Court of Appeal concluded that permission to amend should be given, on the basis that the proposed pleas of implied representations in both cases were arguable (see ), Longmore LJ going on in the paragraphs which followed to explain his reasoning at :
"Put very shortly, I consider that any case of implied representation is fact specific and it is dangerous to dismiss summarily an allegation of implied representation in a factual vacuum. If the LIBOR scandal had occurred before these cases were begun and what are now the proposed pleas had been incorporated in original pleadings, they would not, in my view, be amenable to a strike out application and it is not surprising that Barclays did not, at first, seek to appeal Flaux J's decision."
He continued at :
"In the present case, however, the banks did propose the use of LIBOR and it must be arguable that, at the very least, they were representing that their own participation in the setting of the rate was an honest one. It is, to my mind, surprising that the banks do not appear to be prepared to accept that even that limited proposition is arguable."
He, then, said this at :
"It was also submitted that doing nothing cannot amount to an implied representation. But it is (arguably) the case that the banks did not do nothing in that they proposed transactions which were to be governed by LIBOR. That is conduct just as much as a customer's conduct in sitting down in a restaurant amounts to a representation that he is able to pay for his meal, see DPP v Ray  AC 370, 379D per Lord Reid."
He added at :
"The banks' submissions boiled down to saying that they were prepared to accept that they would do nothing dishonest or manipulative during the term of the contract and that should be enough for any counterparty. I can only say that, in my view, it is arguably not enough. If the day after the contracts had been made, the banks had told their counterparties that they had been manipulating LIBOR in the past and intended to do so in the future, but would be happy to pay any loss that their borrowers could prove, the borrower would (arguably) be sufficiently horrified so as to think he would be entitled to rescind the deal. The law should strive to uphold the reasonable expectations of honest men and women. If in the end it cannot do so, that should only be after a proper trial."
He, then, stated at :
"The banks are, no doubt, on much stronger ground in relation to the first alleged representation in the Graiseley case and representations (A) and (B) in the Deutsche Bank case. They can say with considerable force that the proposed representations amount to statements about the conduct of banks other than themselves and no one could expect any statement to that effect to be made by one bank proposing LIBOR. But I do not consider it the function of this court at this stage of the proceedings to be too selective about the precise representations which the parties wish to advance. The trial judge should be able to discern and, if necessary, judge between the various alleged representations once he has a full picture of the disputes between the parties. For the same reasons I would not refuse the subsidiary amendments relating to negligent misrepresentation and breach of warranty."
Mr Saini QC emphasised that permission to amend was given in respect of all the representations, including those going to attempted manipulation and undermining integrity. He emphasised, in particular, that the Court of Appeal had no apparent difficulty with the concept of integrity as there was no express discussion of the concept in the judgment (although Mr Tomson, who appeared in the case, observed that there had, in fact, been an issue about the meaning of integrity). Mr Saini QC stressed, too, that the Court of Appeal gave permission to amend to plead representations as to historical conduct, highlighting the observations which Longmore LJ made as to the reasonable expectations of honest men and women (as referred to at ). I bear this in mind. It would, nonetheless, be wrong to regard what was decided in that case as having too great a significance since it is important to keep in mind that the only question which the Court of Appeal had to answer in that case was whether the points sought to be advanced were arguable. Longmore LJ himself emphasised that he did not "consider it the function of this court at this stage of the proceedings to be too selective about the precise representations which the parties wish to advance." Furthermore, the most that was stated by Longmore LJ at  was that there was "considerable force" in the submission that no one would expect a bank proposing a transaction linked to LIBOR to be making any statement about the conduct of banks other than itself. Indeed, as the Court of Appeal observed in PAG at , having cited the observations of the Court in Graiseley:
"These were, of course, only interlocutory observations and it now falls to this court to determine the extent to which, if at all, they represent the law."
"What then does the law say about such a situation? Outside the insurance context, there is no obligation in general to bring difficulties and defects to the attention of a contract partner or prospective contract partner. Caveat emptor reflects a basic facet of English commercial law (the growth of consumer law has been moving in a different direction). Nor is there any general notion, as there is in the civil law, of a duty of good faith in commercial affairs, however much individual concepts of English common law, such as that of the reasonable man, and of waiver and estoppel itself, may be said to reflect such a notion. In such circumstances, silence is golden, for where there is no obligation to speak, silence gives no hostages to fortune. If, however, the contractor speaks, then he may have to live up to what he says; so also where what is unsaid is sufficiently closely connected with what he has said to render what has been left unsaid misleading. In general, however, there is no duty of disclosure. … For the same reason it is not possible to set up an estoppel on the basis of an omission to disclose unless a duty to disclose can be established in the particular circumstances of the case. Tacit acquiescence in another's self-deception does not itself amount to misrepresentation, provided that it has not previously been caused by a positive misrepresentation."
Rix LJ went on at  to add this:
"Nevertheless, particular circumstances can make a difference, and it is possible to formulate a general principle as to why that should be so. Thus in Moorgate Mercantile Co Ltd v Twitchings  AC 890, 903 Lord Wilberforce, in a dissenting speech but which in this respect has borne fruit, spoke of the possibility that, in a particular situation which affected two parties, a reasonable man would expect the other party, 'acting honestly and responsibly' either to make something known or face the consequences of not doing so. In Republic of India v India Steamship Co Ltd (The Indian Endurance and The Indian Grace) (No 2)  AC 878, 914 Lord Steyn approved Lord Wilberforce's observation as "helpful as indicating the general principle underlying estoppel by acquiescence". As Bingham J had put it some years earlier in Tradax Export SA v Dorada Cia Naviera SA (The Lutetian)  2 Lloyd's Rep 140, 157, after citing Spencer Bower & Turner, Estoppel by Representation, 3rd ed (1977), p 49:
'More recently, Lord Wilberforce in Moorgate ... provided persuasive authority for the proposition that the duty necessary to found an estoppel by silence or acquiescence arises where a reasonable man would expect the person against whom the estoppel is raised, acting honestly and responsibly, to bring the true facts to the attention of the other party known by him to be under a mistake as to their respective rights and obligations. (Lord Wilberforce dissented on the outcome, and expressed the principle in proprietary terms appropriate to that case, but neither of these things in my judgment diminishes the significance of what he said.)' ... ."
Mr Saini QC submitted that the core principle identified by Rix LJ is that the reasonable man "expect[s] the other party 'acting honestly and responsibly' either to make something known or face the consequences…". He suggested that this supports the proposition that the law should give effect to this type of expectation. I am not persuaded, however, that ING provides any assistance in the present context, given that Rix LJ was alone in referring to implied representation (as opposed to estoppel by convention) and in making the observations which he did. Indeed, it should be noted that in PAG, at , despite recording her acceptance that a term would be implied into the swaps that the parties would conduct themselves honestly when performing the swap contracts, Asplin J, nonetheless, did not accept that this meant that the implied representations contended for in that case should be implied – and nor did the Court of Appeal apparently think differently. It needs to be remembered that the case which Marme advances is not a non-disclosure case but is an implied representation case. This is for good reason: the circumstances in which a 'duty to speak' arises under English law are limited, and this is not such a case.
"Again, there is a measure of uncertainty in the alleged representation… 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 444,250.
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?
… If [this representation] 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."
The comparable yearly figure for EURIBOR submissions is 170,000, assuming that all the submitting banks made submissions on 257 submitting days for each of the 15 different EURIBOR 'tenors'. It follows that Cooke J's concerns apply similarly in the present case. The fact that the Court of Appeal in Unitech allowed an amendment to plead a representation involving concepts of integrity on the basis that "integrity" is an ordinary word does not seem to me to necessitate a different conclusion since, as Mr Quest QC submitted, it is important to have in mind that the viability of an implied representation needs to be considered not as some sort of sterile drafting exercise but in order to work out whether there has been a breach of the implied representation alleged.
"consider[ed] that at every step of that process, in which RBS was seeking agreements that it expected to be highly profitable for it and the other banks, it was impliedly or by conduct representing that it was not and had never been involved in the wrongful manipulation of EURIBOR and that it had no knowledge of such wrongful manipulation."
In his second witness statement, Mr Maud stated that he "believed that Euribor was an honest, objective benchmark rate", something which he reiterated a number of times in cross-examination as illustrated by the following exchange, for example:
"Q. Now, thinking back to 2008, presumably it wouldn't have occurred to you at that time that any bank might put in a false quote into the EURIBOR process?
Q. I mean, in fact in 2008 you wouldn't have spent any time really thinking about the process by which EURIBOR was set at all?
A. No, I thought EURIBOR represented a true and honest rate.
Q. Right. But you wouldn't have spent any time thinking about the process by which it was set?
A. Well, I knew the process it was set, but I can't say I laid awake at night contemplating it, no.
Q. No. I mean, you had a lot of other things to think about in 2008.
A. Yeah, but obviously I understood how both LIBOR and EURIBOR rates were arrived at. But I – I just believed it was a true and honest rate; I had no belief otherwise.
Q. I mean, you didn't start thinking about how EURIBOR might have been manipulated, presumably, until you started reading about the rate-setting scandal in the press some time later?
Q. And you didn't really start thinking about the process by which EURIBOR might be manipulated until you read about it later?
Q. Yes that's right?
A. That's right.
Q. And until you read about these issues in the press, presumably the possibility of manipulation of EURIBOR hadn't really occurred to you?
A. Well, as I say, I – yes, I hadn't considered that EURIBOR was anything but a true rate. Although obviously I had become aware of other scandals involving particular RBS and GRG and so forth."
When pressed further by Mr Quest QC as to whether he was conscious of RBS impliedly making the alleged EURIBOR Representations by conduct as he was not thinking about manipulation at all, Mr Maud's response was merely that:
"they told me that this is the EURIBOR rate and I accepted it as being true and honest. If that's not by conduct, I don't know what is".
Self-evidently, Mr Maud gave no thought at the time to how EURIBOR was set. It did not occur to him that anything was being represented concerning the possibility that it might be manipulated.
"Q. Was it obvious to you in 2008 that RBS was not seeking to manipulate EURIBOR?
A. Yes, it was obvious, yeah.
Q. So obvious that it goes without saying?
Q. And so obvious that if that wasn't true, you would have expected RBS to tell someone?
Q. Okay. Secondly, was it obvious to you, again to go without saying, that you had no reason to believe that other banks were manipulating EURIBOR?
Q. Again, was it obvious to you at that time, again so it goes without saying, that RBS hadn't done anything itself to undermine the integrity of EURIBOR?
Q. Again, was it obvious to you at the time, so that it goes without saying, that RBS didn't have any knowledge that other banks were seeking to manipulate or undermine the integrity of EURIBOR?
Q. Finally, was it obvious to you, so that it goes without saying, that as at the date of the swaps in particular, your bank was acting honestly?
"1. … any relevant and non-privileged documents from the following categories:
a. The 6,398 documents tagged as relevant by RBS in its internal review into Euribor misconduct but which were not provided to, or requested by, the European Commission as part of the EIRD Investigation.
b. 11 documents requested by the De Nederlandsche Bank following its review of the CFTC Productions.
c. 48 "noteworthy" documents identified as privileged as a matter of US law in the First and Second Euribor Productions to the CFTC.
2. Human Resources documents relating to Euribor misconduct, including any information relating to Phillipe Moryoussef's joining or leaving RBS, his bonus payments or his contractual arrangements with RBS where those documents relate to any Euribor misconduct.
3. Papers and minutes of the RBS board and relevant committees, and internal reports, reviews, and summaries that are relevant to the issues in these proceedings.
4. Relevant and substantive communications between RBS and relevant regulators as to their EURIBOR investigations, including any submissions RBS provided to the regulators in that disclosure."
That Order was complied with, and there was no subsequent suggestion until trial that RBS had somehow failed to provide documentation which ought to have been disclosed. In these circumstances, I cannot accept that, if criticism were intended of RBS as regards disclosure (and it was not clear, ultimately, whether Mr Saini QC meant to criticise), that criticism is justified and would add that I decline, in particular, to draw any adverse inference from RBS's reliance on legal privilege in respect of certain categories of documents given that there is clear authority that no such inference should be drawn where legal privilege is asserted (see Edwards-Tubb v JD Wetherspoon  1 WLR 1373 at ).
"EURIBOR settings cannot possibly avoid the glaring spotlight recently turned on Libor settings, and we believe therefore that this state of affairs is unlikely to continue much longer. Under increased regulatory scrutiny, banks will be forced to submit settings in both Euribor and Libor which more closely reflect their true price of funds. 6m setting will increase relative to the 3m strip, and basis swaps will inevitably trade higher."
The note continued:
"The integrity of LIBOR & euribor settings is critical to the financial health of the planet. It is in everybody's best interest that they reflect what they are supposed to: unsecured interbank lending rates. An important new feature of today's market is widespread demands for increased transparency, regulation, and accountability. Dodgy 6m Euribor settings will not survive this clamour."
Mr Saini QC highlighted how, having been sent this note, Mr Moryoussef forwarded it to three other RBS employees (Mr Steve Ashley, Mr Andrew Bruce and Mr Jonathan Linton), clearly demonstrating, as Mr Quest QC accepted, that, at a minimum, Mr Moryoussef and others were, in all probability, aware of the arbitrage opportunity which had arisen.
"I told them – look, you have an arbitrage opportunity. You need to be brutal with them … pay the 6 month cash in the market at this rate if you can … Because, if they do this, they pay 6 month cash with the risk of 1 basis point below 2 times the 3 month … it is extraordinary for them … to pay the 6 month 'for free', so they have to 'lift it', they pay it, and if it is paying in the market it will go up … And then this time they started to think about it". Mr Esper continued by saying "In fact this is what should be sold, in this way, I think, the Treasuries have to be told ok, look, you can pay 6 month cash and trade at the level of Euribor, you trade the 3 month in 3 months 'for free' and against that to hedge the curve risk, you don't want to bet on rate hikes, you buy the September EURIBOR futures contract … At a stroke this will make September go up as well as the 6 month cash…".
Mr Moryoussef, then, stated "I'm going to tell them", Mr Saini QC submitting that this shows that the trading positions of both Mr Moryoussef and Mr Esper would benefit from higher, 6-month EURIBOR rates and so Mr Moryoussef's involvement in actual or attempted manipulation. So, too, he submitted, does another telephone conversation that day during which Mr Moryoussef and Mr Bittar discussed "l'arbitrage" and Mr Bittar told Mr Moryoussef that "you should put pressure on the people you know", with Mr Moryoussef replying by saying that "I have already told everybody. I called. I called".
Conclusions on direct evidence
"(1) In any civil proceedings the fact that a person has been convicted of an offence by or before any court in the United Kingdom or [of a service offence (anywhere)] shall (subject to subsection (3) below) be admissible in evidence for the purpose of proving, where to do so is relevant to any issue in those proceedings, that he committed that offence, whether he was so convicted upon a plea of guilty or otherwise and whether or not he is a party to the civil proceedings; but no conviction other than a subsisting one shall be admissible in evidence by virtue of this section.
(2) In any civil proceedings in which by virtue of this section a person is proved to have been convicted of an offence by or before any court in the United Kingdom or [of a service offence] —
(a) he shall be taken to have committed that offence unless the contrary is proved; and
(b) without prejudice to the reception of any other admissible evidence for the purpose of identifying the facts on which the conviction was based, the contents of any document which is admissible as evidence of the conviction, and the contents of the information, complaint, indictment or charge-sheet on which the person in question was convicted, shall be admissible in evidence for that purpose."
"Philippe MORYOUSSEF, Carlo PALOMBO, Colin BERMINGHAM and Sisse BOHART (employees of Barclays Bank) and Achim KRAEMER (employee of Deutsche Bank), between 1st January 2005 and 31st December 2009, conspired together and with Christian BITTAR (employee of Deutsche Bank), and with other employees of Deutsche Bank, Barclays Bank, Societe Generale and other banks, to defraud in that:
(1) Knowing or believing that the abovementioned Banks were party to trading referenced to the Euro Interbank Offered Rate (Euribor),
(2) They dishonestly agreed to procure or make submissions of rates into the Euribor setting process by one or more Euribor Panel Banks which were false or misleading in that they:
a. were intended to create an advantage to the trading positions of employees of one or more of the abovementioned banks and
b. deliberately disregarded the proper basis for the submission of those rates
Thereby intending that the economic interests of others may be prejudiced."
"Provided you are sure in the case of the defendant you are considering that he or she agreed at some stage that the conspiracy should be carried out, and that he or she would play his or her part, it does not matter precisely where his or her involvement appears on the scale of seriousness or precisely when he or she became involved, he or she is guilty is charged."
It follows that, in convicting Mr Moryoussef, the jury should not be taken as having convicted him in respect of the time when he was no longer at Barclays but had moved to RBS. Mr Saini QC characterised this as a "desperate argument" but I cannot agree with that characterisation since, on the contrary, in my view, HHJ Gledhill QC was, obviously, right to direct the jury as he did, and Mr Quest QC was, equally obviously, right to make the submission which he did.
"I have, however, come to the conclusion that I should not rule out the admission of the transcripts at this stage on the ground that they are bound to be irrelevant. The purpose of a summing up is not to repeat the evidence, which the jury has already heard direct from the witnesses. It is to sum up the respective cases of the prosecution and the defence so that the jury will understand as best they can the factual issues they have to decide in order to arrive at their verdict. The summing up will include directions to the jury as to the relevant law. It will ordinarily include references to, or summaries of, parts of the evidence which has been given. It will or may include statements of what the parties have agreed or admitted in the course of the trial. It will or may identify with a clarity which might not otherwise appear from a mere consideration of transcripts of the evidence what the defences are: for example, they may depend on matters to be inferred from the evidence, or on whether the defendant had the knowledge required for a conviction. It will or may include specific directions to the jury as to the particular facts on which they have to be certain before they can arrive at a verdict of guilty. These factors suggest to me that a consideration of the transcript of a judge's summing up at the end of a criminal trial is likely to be of relevance in identifying the factual basis on which a defendant was convicted of the offence with which he was charged."
"tells you that even though Mr Moryoussef has gone over to RBS, he is still in contact with his old colleagues in discussions about the interest rates. And indeed, as we'll see from time to time, making suggestions as to what Carlo Palombo, for instance, should ask of Sisse Bohart about submitting particular rates."
As Mr Saini QC also pointed out, the prosecution, in addition, referred to a "further conversation … about the rates, even though, as I've said, Mr Moryoussef has moved on to a different institution. He still can't resist intervening in the business of Barclays interest rate setting". Mr Saini QC, furthermore, (again, perhaps, not altogether permissibly) highlighted an extract from the cross-examination of Mr Bermingham in relation to one of his communications with Mr Moryoussef on 29 May 2008, and so after Mr Moryoussef had moved to RBS. Mr Saini QC submitted that this demonstrates that the criminal trial was not restricted to Mr Moryoussef's activities whilst he was at Barclays. In truth, however, these were isolated references which, as such, provide only scant support for the proposition that the criminal case against Mr Moryoussef included his time when employed by RBS.
"You committed the offence in 3 ways: intrabank collusion, that is by asking the submitters of your bank – Deutsche Bank – to make high or low Euribor submissions, intending to advantage your trading positions. Two: interbank collusion, by asking others employed by other banks, including Moryoussef at Barclays, and later at the Royal Bank of Scotland, and Stephane Esper at Societe Generale, to do the same. And thirdly: by cash pushing, that is by offering cash to the market with the intention of altering the Euribor rate in the lead up to a fixing or reset date."
Mr Saini QC suggested that the reference to Mr Moryoussef being at Barclays and later at RBS demonstrates that the trial judge, who was best placed to know the evidence he has heard, had in mind that the conspiracy concerned Mr Bittar dealing with Mr Moryoussef not only when he was at Barclays but also when he had moved to RBS. Mr Quest QC made the legitimate point, however, that what HHJ Gledhill QC had to say here could not be quite right since there is no evidence that Mr Bittar made a request as described to Mr Moryoussef once he had moved to RBS; indeed, it would have been surprising had he done so since RBS was not a panel bank. The likely explanation for this is that the judge was using somewhat loose language, which is, of course, quite understandable in the circumstances. It is clear, when analysing what HHJ Gledhill QC had to say in his sentencing remarks more generally, that his real focus, at least as far as Mr Moryoussef was concerned, was on his time at Barclays. Thus, his sentencing remarks began by referring to the fact that:
"The derivatives world is small and tight [knit]. Bittar moved to Deutsche, Moryoussef to Barclays, whilst Esper remained at Societe Generale. There is no doubt that by 2005, Moryoussef had joined the conspiracy. Exactly when he joined and why he became involved is difficult to determine."
It is notable, indeed, that, although the judge referred a number of times to Mr Moryoussef's communications with Barclays' cash desk and Barclays' submitters, and also his communications with traders at other banks, there is no reference made to Mr Moryoussef being at RBS or to any communications after mid-March 2007. The only reference made by the judge to RBS when sentencing Mr Moryoussef was when he explained that when Barclays refused to pay him a percentage of the profits he made for the bank, "he resigned and went to work for the Royal Bank of Scotland". Moreover, as Mr Quest QC pointed out, the sentencing remarks followed submissions from the prosecution which described Mr Moryoussef's activity as covering "principally – well, it relates to his time at Barclays, which is May 2005-August 2007", Mr Waddington also submitting in relation to Mr Bittar that "The relevant period is March 2005 to the beginning of 2009, in Mr Bittar's case, however the bulk of the activity on which the Crown rely, took place between March 2005-August 2007".
EU Commission Decision
"The EIRD cartel operated between September 2005 and May 2008. The settling parties are Barclays, Deutsche Bank, RBS and Société Générale. The cartel aimed at distorting the normal course of pricing components for these derivatives. Traders of different banks discussed their bank's submissions for the calculation of the EURIBOR as well as their trading and pricing strategies."
The EU Commission Decision itself summarises the infringement found in this way:
"The addressees of this Decision participated in an infringement of Article 101(1) of the Treaty and Article 53(1) of the EEA Agreement. The infringement consisted of agreements and/or concerted practices covering at least the whole EEA that had the object of restricting and/or distorting competition in the sector of the Euro Interest Rate Derivatives linked to the Euro Interbank Offered Rate ('EURIBOR') and/or the Euro Over-Night Index Average ('EONIA') (hereinafter 'EIRD' or 'EIRDs')."
"an acknowledgment in clear and unequivocal terms of its liability for the infringement summarily described as regards its object, the main facts, their legal qualification, including the individual [settlement party]'s role and the duration of its participation in the infringement in accordance with the results of the settlement discussions".
"Having regard to the facts of the case established on the basis of the body of evidence on the file and the settling parties' clear and unequivocal acknowledgement of these facts, the Commission holds the addressees of this Decision liable for the conduct described below."
Recital (32) (under the heading "Description of the conduct") states:
"The [settlement parties] through the conduct of certain of their employees, have participated in arrangements in the EIRD sector which consisted of the following practices between different [settlement parties]:
(a) On occasion, certain traders employed by different [settlement parties] communicated and/or received preferences for an unchanged, low or high fixing of certain EURIBOR tenors. Those preferences depended on their trading positions/exposures.
(b) On occasion, certain traders of different [settlement parties] communicated and/or received from each other detailed not publicly known/available information on the trading positions or on the intentions for future EURIBOR submissions for certain tenors of at least one of their respective banks.
(c) On occasion, certain traders also explored possibilities to align their EIRD trading positions on the basis of such information as described above in (a) or (b).
(d) On occasion, certain traders also explored possibilities of aligning at least one of their banks' future EURIBOR submissions on the basis of such information as described above in (a) or (b).
(e) On occasion, at least one of the traders involved in such discussions approached the respective bank's EURIBOR submitters, or stated that such an approach would be made, to request a submission to the EBF's calculation agent towards a certain direction or at a specific level.
(f) On occasion, at least one of the traders involved in such discussions stated that he would report back, or reported back on the submitter's reply before the point in time when the daily EURIBOR submissions had to be submitted to the calculation agent or, in those instances where that trader had already discussed this with the submitter, passed on such information received from the submitter to the trader of a different [settlement party].
(g) On occasion, at least one trader disclosed to a trader of another [settlement party] other detailed and sensitive information about his bank's trading or pricing strategy regarding EIRDs."
Recital (33), then, continues:
"In addition, on occasion certain traders employed by different [settlement parties] discussed the outcome of the EURIBOR rate setting, including specific banks' submissions, after the EURIBOR rates of a day had been set and published."
This is followed by Recital (34):
"Each [settlement party] participated in at least some of these forms of conduct. This occurred throughout the period of the settling parties' respective involvement in the infringement, although not every settling party participated in all instances of the collusion and the intensity of the collusive contacts varied over the period of the infringement."
Recital (35), then, states:
"The collusive activity occurred through bilateral contacts, mainly through on-line chats, e-mails and on-line messages or over the telephone."
Lastly, Recital (39) is in these terms:
"Between 26 September 2007 and 30 May 2008, RBS engaged in bilateral practices falling under at least some of the practices enumerated in recital (32) with parties."
"Article 101(1) of the Treaty prohibits as incompatible with the internal market all agreements between undertakings, decisions by associations of undertakings or concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which directly or indirectly fix purchase or selling prices or any other trading conditions, limit or control production and markets, or share markets or sources of supply."
Recital (44), then, is in these terms:
"Article 53(1) of the EEA Agreement is modelled on Article 101(1) of the Treaty. However, the reference in Article 101(1) to trade 'between Member States' is replaced by a reference to trade 'between contracting parties' and the reference to competition 'within the internal market' is replaced by a reference to competition 'within the territory covered by the … [EEA] Agreement'."
"For the period of their respective involvement in the infringement, Barclays, Deutsche Bank, Société Générale and RBS accepted that they were aware of the general scope and the essential characteristics of the infringement or were able reasonably to foresee this conduct and prepared to take the risk."
"The facts described in Section 4 show that Barclays, Deutsche Bank, Société Générale and RBS participated in a single and continuous infringement of Article 101(1) of the Treaty and Article 53(1) of the EEA Agreement. The overall conduct consisted of agreements and/or concerted practices that had as their object the distortion of the normal course of pricing components in the EIRD sector."
"What is shocking about the LIBOR and EURIBOR scandals is not only the manipulation of benchmarks, which is being tackled by financial regulators worldwide, but also the collusion between banks who are supposed to be competing with each other. Today's decision sends a clear message that the Commission is determined to fight and sanction these cartels in the financial sector."
Mr Quest QC submitted that this shows that the EU Commission's focus was not on manipulation but only on anti-competitive behaviour. Mr Quest QC accepted that there could be some overlap between conduct which constitutes anti-competitive practices and conduct which constitutes manipulation, but that, as the EU Commission proceedings were directed at a different kind of wrongdoing, the Court should be cautious in placing any significant reliance on the EU Commission's findings.
Other secondary material
"[redacted] the European Commission undertook an unannounced visit ('Dawn Raid') at 135 Bishopsgate on 18 October; similar visits were also made to a number of other banks. The visit lasted four days and papers concerning EURIBOR were taken away. A meeting is scheduled for mid-November in Brussels with the European Commission to discuss progress".
Although these reports obviously demonstrate that RBS had knowledge of the investigations from Autumn 2011, Mr Saini QC did not suggest what conclusion as to the falsity issue should be drawn from this.
"From at least approximately August 2005 through at least approximately May 2008, certain Barclays swaps traders communicated with swaps traders at other Contributor Panel banks and other financial institutions about requesting LIBOR and EURIBOR contributions that would be favorable to the trading positions of the Barclays swaps traders and/or their counterparts at other financial institutions."
The Statement of Facts, then, goes on to say this in the next paragraph:
"Certain Barclays swaps traders made requests of traders at other Contributor Panel banks for favorable LIBOR or EURIBOR submissions from those banks. In addition, certain Barclays swaps traders received requests from traders at other banks for favorable LIBOR or EURIBOR submissions from Barclays rate submitters. When Barclays swaps traders did not have trading positions conflicting with their counterparts' requests, those Barclays swaps traders sometimes would agree to request a LIBOR or EURIBOR submission from the Barclays LIBOR or EURIBOR submitters that would benefit their counterparts' positions. Those interbank communications included ones in which certain Barclays swaps traders communicated with former Barclays swaps traders who had left Barclays and joined other financial institutions. The likelihood that the LIBOR or EURIBOR fix would be affected increased when other Contributor Panel banks also manipulated their submissions as part of a coordinated effort."
Mr Saini QC submitted that the "former Barclays swaps traders" referred to in the second of these passages included Mr Moryoussef. He was clearly right about this. Indeed, it is clear that Mr Moryoussef was "Trader-5" as described in paragraph 28 of the same Statement of Facts:
"From at least approximately August 2005 to at least approximately May 2008, Barclays Euro swaps traders communicated with swaps traders at other financial institutions that were members of the EURIBOR Contributor Panel about requesting favorable EURIBOR submissions from the EURIBOR submitters at their respective banks. At Barclays, this conduct was primarily undertaken by a Barclays Euro swaps trader, Trader-5, who left Barclays and joined another financial institution in approximately May 2007. While Trader-5 worked at Barclays, Trader-5 communicated with traders at several other Contributor Panel banks about obtaining favorable EURIBOR submissions, and requested favorable EURIBOR submissions from the Barclays EURIBOR submitter. After Trader-5 joined another financial institution, Trader-5 continued communicating with traders at Barclays about requesting favorable EURIBOR settings."
Mr Saini QC relied, in particular, on the last sentence of this last passage to show that the conduct continued after Mr Moryoussef joined RBS, given the reference to Trader 5 joining another financial institution which, in the circumstances, was obviously RBS. Nonetheless, this evidence does not really assist in proving the falsity of the EURIBOR Representations in circumstances where the facts recorded in these passages were contained in an appendix to an agreement to which RBS was not a party. Nor, obviously, is the Court bound by any findings in the Barclays Deferred Prosecution Agreement. In my view, therefore, this is not a document which really adds anything to the direct evidence which was before the Court at trial.
"Barclays also breached Principle 5 on numerous occasions between February 2006 and October 2007 by seeking to influence the EURIBOR (and to a much lesser extent the US dollar LIBOR) submissions of other banks contributing to the rate setting process".
Mr Saini QC submitted that this is especially relevant because, certainly by September 2007, Mr Moryoussef had left Barclays and had gone to RBS.
"On numerous occasions between January 2005 and June 2009, Barclays' Derivatives Traders made requests to its Submitters for submissions based on their trading positions. These included requests made on behalf of derivatives traders at other banks. The Derivatives Traders were motivated by profit and sought to benefit Barclays' trading positions. The aim of these requests was to influence the final benchmark LIBOR and EURIBOR rates published by the BBA and EBF."
Mr Saini QC emphasised the second sentence, submitting that this evidences Mr Moryoussef's "modus operandi" after he had moved to RBS (and after his direct channel of influence to the submitters had been closed off). Mr Saini QC asked the Court to infer from this that Mr Moryoussef continued to do what he had been doing with some success whilst at Barclays when he moved to RBS.
"In addition to reviewing the communications of the EURIBOR setters, DNB should be aware that the communications of Euro derivatives traders were reviewed and in particular, those of Philippe Moryoussef. [redacted]."
He also referred to paragraph 41, as follows:
"By way of background, Philippe Moryoussef joined RBSG from [Barclays] in 2007 and then left RBSG to join Morgan Stanley in 2009. During his time at RBSG, he was responsible for running the Euro derivatives trading desk in London and it was for the whole of this period that his written communications were reviewed. In addition, external counsel has also undertaken a review of certain telephone conversations in light of references to such calls in the written communications. In this regard, approximately 450 telephone conversations between Philippe Moryoussef and traders from other banks have been reviewed by external counsel."
This is followed by paragraph 42:
"During this review of written and audio communications, no evidence was found of Philippe Moryoussef being directly involved in manipulation of the EURIBOR setting or that he was in contact with the EURIBOR setters based in Amsterdam. However, external counsel did identify deep and frequent exchanges of information about trades and prices between Philippe Moryoussef and traders at competing banks, including [Entity A] [Entity B], Morgan Stanley, [Entity C] and [Entity D]. Following the review of approximately 280,000 documents, around 1,200 relevant documents were submitted to the Commission [Redacted] [Redacted] [Redacted]. As noted above, none of these documents evidences discussions between Philippe Moryoussef and RBS EURIBOR rate setters."
Mr Saini QC cited also feedback which DNB gave to RBS NV after the report had been prepared in the form of a letter dated 24 April 2013 which states at paragraph 4 that, in respect of the investigation regarding EURIBOR, the DNB had:
"encountered certain difficulties during its review by means of partial observation and document review, because a significant part of the relevant information was not disclosed to the regulator. In particular, DNB could not review interview reports and the investigation documents, because the external parties who conducted the investigation invoked their legal professional privilege. DNB has, nonetheless, gained a fair view of the methods that were used to conduct the investigation".
Although Mr Saini QC was probably right when he suggested that these were references to concerns about Mr Moryoussef, nonetheless these documents do not assist in reaching any meaningful conclusions as to the falsity of the EURIBOR Representations since, ultimately, what the report compilers would have looked at are the documents which were before the Court at trial and it is for the Court to reach its own assessment as to those documents (as has been done).
"admits, accepts and acknowledges that it is responsible under United States law for the acts of its officers, directors, employees and agents as charged in the Information, and as set forth in the Statement of Facts attached hereto as Attachment A and incorporated by reference into this Agreement, and that the allegations described in the Information and the facts described in Attachment A are true and accurate".
It is clear from the Statement of Facts that the conduct predominately related to Yen LIBOR and Swiss Franc LIBOR, in relation to which RBS had been a panel member from at least 2006 to 2010. The agreement was not concerned with allegations of manipulation of EURIBOR at RBS, although Mr Saini QC was able to identify an isolated reference to EURIBOR in a footnote within the Statement of Facts (footnote 23). Significantly, the paragraph to which the footnote relates (paragraph 65) is concerned not with EURIBOR but with Yen LIBOR, albeit that the footnote itself refers to EURIBOR (and Mr Moryoussef by implication) in these terms:
"In addition to the conduct described above, an RBS derivatives trader, on a few occasions from September 2007 to mid-2008, attempted to coordinate with derivatives traders at other banks about submissions related to the Euro Interbank Offered Rate ('EURIBOR'), a reference rate overseen by the European Banking Federation. RBS became a Contributor Panel Bank for EURIBOR in October 2007 by virtue of its acquisition of ABN AMRO Bank. For example, in a series of instant messages on October 4, 2007, the RBS derivatives trader who traded products tied to EURIBOR, communicated with two derivatives traders employed by Barclays Bank, plc regarding favorable EURIBOR settings for their trading positions. The Barclays Bank traders agreed to the RBS trader's request and shared their intended submissions in other tenors, to which the RBS trader signaled approval."
It seems to me that, despite only being in a footnote, this is more significant than the other material cited by Mr Saini QC since it entails RBS admitting that there was misconduct in the period whilst Mr Moryoussef was at RBS. That said, I do not consider that it has any additional probative value given that the direct evidence is before the Court.
"RBS, through a Euro derivatives trader, also colluded with traders at other banks on at least a handful of occasions relating to another benchmark interest rate, Euribor, by asking for beneficial Euribor submissions to be made by the other banks. This conduct occurred from September 2007 through at least mid-2008."
I agree with Mr Quest QC, however, when he submitted that, the Commodity Futures Trading Commission CFTC having seemingly been provided with the same material as the US Department of Justice and the proceedings having been settled without any admission by RBS, this document really adds nothing over and above the direct evidence which was before the Court at trial.
"The tort of deceit involves a false representation made by the defendant, who knows it to be untrue, or who has no belief in its truth, or who is reckless as to its truth. If the defendant intended that the plaintiff should act in reliance on such representation and the plaintiff in fact does so, the defendant will be liable in deceit for the damage caused… ".
There are, accordingly, two elements: first, that the representor intends the representee to rely on the representation and, secondly, that the representor knows the representation to be untrue or has no belief in its truth or is reckless as to its truth.
"… What the cases show is that the tort of deceit contains four ingredients, namely:
i) The defendant makes a false representation to the claimant.
ii) The defendant knows that the representation is false, alternatively he is reckless as to whether it is true or false.
iii) The defendant intends that the claimant should act in reliance on it.
iv) The claimant does act in reliance on the representation and in consequence suffers loss."
As he put it, "Ingredient (i) describes what the defendant does. Ingredients (ii) and (iii) describe the defendant's state of mind. Ingredient (iv) describes what the claimant does". He then went on at  to say this:
"I do not accept that 'intention to deceive' is a separate or free standing element of the tort of deceit. The phrase 'intention to deceive' is merely another way of describing the mental element of the tort. It is a compendious description of ingredients (ii) and (iii) as set out in the preceding paragraph."
It follows that there is no need for Marme in this case to establish that RBS had an intention to deceive. The obligation is, instead, to make good its case as to the four elements identified by Jackson LJ and, in this particular context since the issue of fraud is under consideration, to establish requirements (ii) and (iii).
"Proof of the necessary intent is facilitated by the ordinary inference that the representor intends the natural and probable result of his acts."
Similarly, in Shinhan Bank Ltd v Sea Containers Ltd  2 Lloyd's Rep. 406, it was considered sufficient for intention to rely purposes that the buyer who was signing receipts for undelivered goods knew that the seller would then use them to obtain bank finance and that, absent some unforeseen intervention, the bank would pay against the false receipts. Longmore J (as he then was) explained this at :
"… Mr. Ward accepted in his statement (para 38) that one of the reasons Win wanted the clean receipts was to provide comfort to the bank that Win did have on-going business with SCL. So notwithstanding protestation to the contrary, he did intend that the false clean receipts should be shown to the bank just as much as, in the past, true clean receipts had been shown to the bank. He knew in the past that the bank had paid against clean receipts; in my judgment he intended (in the legal sense of the word) that the bank would pay against clean receipts in the future. I say in the legal sense of the word because my finding is that Mr. Ward appreciated that (barring some unforeseen intervention) the bank would pay against the false clean receipts. This is the formulation now used in the criminal law when a jury is to be directed on the question of intention for the purpose of a murder or other criminal charge, see R -v-Woollin  1 AC 82 approving R -v- Nedrick  1 W.L.R. 82. In my judgment it is equally applicable when one has to assess intention for the purposes of the law of deceit."
"It is obvious that, because it is a fictitious person, a company can only act through one or more natural persons and therefore, as the decisions in El Ajou v Dollar Land Holdings Plc and the Meridian case show, in order to determine whether the company is liable in respect of any particular act or omission it is necessary to identify the natural person who represented the company for that particular purpose and who can therefore can be regarded as embodying for that purpose what is sometimes called its controlling mind and will. When seeking to identify the person who is to count as the company for the purposes of a substantive rule of law it is necessary to consider the nature and policy of that rule. The essence of fraudulent misrepresentation, so far as is relevant for this case, is making a statement that is known to be untrue intending that the person to whom it is made will rely on it. Liability therefore depends on the conjunction of a false statement and a dishonest state of mind. In a case where it is said that a company has made a fraudulent misrepresentation the first step must be to see whether a false statement has been made by someone who is authorised to speak on the company's behalf. Once that has been established the starting point in deciding whether the company acted dishonestly must be to enquire into the state of mind of the person who made the statement. However, if that person was unaware that the statement was false, it may be necessary to enquire into the state of mind of other persons who directed him to make it or who allowed it to be made."
"Deceit: division of ingredients: The tort of deceit, where because of its connection with contract situations agency terminology is frequently used, raises special problems where agents are involved, in so far as it requires a false statement made, with the intention that it should be acted on, 'knowingly, or without belief in its truth, or recklessly, careless whether it be true or false'. Is the principal to be liable to a third party where (for instance) the agent made a representation innocently, believing it to be true, and the principal knew of the untruth of the statement but did not know that it was being made? In such case no individual is guilty of personal fraud: there is an 'innocent division of ingredients'. But are the acts and minds of principal and agent to be regarded as so far one that, by taking the agent's statement and the principal's knowledge together, the principal can be held liable to the third party in deceit? There was some authority that they were: but the law was later clari?ed by the decision of the Court of Appeal in Armstrong v Strain and is best stated in a series of propositions.
(a) The principal is liable if he authorised the agent to make the false representation which he (the principal) knew to be untrue (or did not believe to be true), whether or not the agent knew the truth.
(b) The principal is liable if, while not expressly authorising the agent to make the false representation, he knew it to be untrue and was guilty of some positive wrongful conduct, as by consciously permitting the agent to remain ignorant of the true facts, so as to prevent the disclosure of the truth to the third party, if the third party should ask the agent for information, or in the hope that the agent would make some false representation. The agent's representation when made would of course require to be within the scope of his actual or apparent authority.
(c) The principal is liable if the agent made the false representation fraudulently, it being within the scope of his actual or apparent authority and within the course of his employment, to make such a representation, sometimes even where the representation reached the third party by way of another innocent agent, or by way of the innocent principal himself, because in such a case the innocent second agent or principal may be no more than a conduit pipe for the fraud of the guilty agent.
(d) The principal is not liable if the agent made the false representation innocently, the principal knowing the true facts but not having authorised the agent to make the representation, nor knowing that it would be made, nor being guilty of fraudulent conduct as in (b) above.
(e) Conversely, the principal is not liable if he himself made the false representation innocently, notwithstanding that an agent knew the true facts."
"There is therefore no need to consider whether the judge's conclusion that fraud had not been proved is correct. If we had concluded that the implied representation was false it would be necessary to decide how the normal rule, that, for a finding of fraud, the representor must have intended to make a representation that he knew to be false (see Akerhielm v De Mare  AC 789, 804, per Lord Jenkins, Gross v Lewis Hillman Ltd  Ch 445, per Cross LJ and the Raiffeisen v RBS case  1 Lloyd's Rep 123, paras 338—340, per Christopher Clarke J) can apply to an implied representation when the implication is not present to the representor's mind. It may be the case that an implied representation of this kind can never (or quite rarely) be fraudulent; on the other hand recent decisions about dishonesty, such as Barlow Clowes International Ltd v Eurotrust International Ltd  1 WLR 1476 and Ivey v Genting Casinos UK Ltd (trading as Crockfords Club)  3 WLR 1212, may be relevant. It is unnecessary for us to resolve that question in this case."
It was Mr Quest QC's submission that this is the position in the present case given that the EURIBOR Representations, assuming that they were made, were impliedly made not by Mr Moryoussef but by the RBS personnel who were responsible for RBS entering into the Transaction and whose honesty has not been called into question by Marme.
"So far as Mr Bracy is concerned, a question arises whether his knowledge and intention are for this purpose to be attributed to UBS. UBS submits that (as I have accepted) nobody in UBS apart from Mr Bracy and Mr Maron knew about the 'letter for K' episode; that their knowledge is not to be regarded as the knowledge of UBS; that by the time of the Depfa transaction, Mr Bracy was effectively no longer involved, and played no part in the decision to approach Depfa, in any provision of information to Depfa, or in any discussion or negotiation with Depfa; and that he was therefore not responsible for the making of any representation to Depfa. It is simply a case, according to UBS, of one agent or representative of UBS making a statement believing it to be true, even though another agent or representative not responsible for the representation and not being aware of its being made knows facts making it untrue."
Males J accepted at  that "if this were such a case, there would be no fraudulent state of mind on the part of UBS", referring to a passage in the then edition of Clerk & Lindsell at paragraph 18-28, as follows:
"However, to render the principal liable in an action of deceit in such a case, it must it seems be proved that there was a fraudulent state of mind on his part: that is, that he intended the claimant to be misled or at the very least was indifferent as to whether he might be. Where a false representation has been made innocently by an agent acting within his authority, the mere fact that the principal knows the facts which render the representation false will not make the latter liable if he has not expressly authorised the representation or deliberately concealed facts from the agent with a view to the claimant being misled. So in Armstrong v Strain  1 KB 232 estate agents with general authority to make representations about a house on their books innocently told a purchaser that it was sound when, as the owner knew, it was not. The Court of Appeal upheld a finding that the owner was not liable to the purchaser in deceit."
As Males J went on to explain at , however, that is not always the position:
"The position is different, however, if the relevant knowledge and intention rest with the same individual within the organisation making the representation. The knowledge and intention need not be with the particular individual who makes the representation."
Males J, then, quoted from Bowstead & Reynolds, specifically the then version of the passage to which I have myself referred. Males J observed at  that:
"A footnote explains that the position is the same if the wrongful conduct was that of another agent of the principal acting in the course of his employment, the principal being innocent."
He, then, stated as follows at :
"Chitty on Contracts (31st Edn, 2012) at para 6-052 is to the same effect, citing among other cases The Siboen and The Sibotre  1 Lloyd's Rep 293 at 320–321:
'if one agent makes a statement honestly believing it to be true, but another agent or the principal himself knows that it is not true, knows that the statement will be or has been made, and deliberately abstains from intervening, the principal will be liable. In these circumstances the party with the guilty knowledge can himself be treated as being guilty of fraud.'"
As Males J put it, when dealing with the facts of the case which was before him, at :
"Accordingly there are four matters to be considered. The first is whether Mr Bracy's knowledge of the dishonesty of Value Partners and Mr Heininger is to be regarded as the knowledge of UBS. The second, on the hypothesis that only Mr Bracy had the relevant knowledge, is whether Mr Bracy intended that the representation should be made to Depfa (or a bank in the position of Depfa). The third, on the same hypothesis, is whether his intention is likewise to be regarded as the intention of UBS. The fourth is whether the hypothesis that only Mr Bracy had the relevant knowledge is correct."
"The rule is less easy to apply in respect of implied rather than express statements because the representor may not appreciate what a court later holds to be the implications of what he said. Nevertheless, if he intended what he said to be relied on by the representee in deciding whether to contract he must be taken to have intended that the representee should rely on the objective meaning of what he said."
In that case the position was not on all fours with the present case, however, since the focus was on what the representor should be regarded as intending the representee to do. In the present case, by way of contrast, Mr Moryoussef was not himself making any representation, whether express or implied. As a matter of principle, nonetheless, I consider that Christopher Clarke J's approach is as applicable to implied representations made by other employees or agents as it is to a case where a single person (the representor) is involved.
"In the cases as to spoliation of documents, the point has frequently arisen on the preliminary hearing on documents, and the question has been debated whether or not further proof should be allowed. This point cannot arise under the present procedure, and it may be that in some respects the old doctrine was rather technical. The substance of it, however, remains and is as forcible now as ever, and it is applicable not merely in prize cases, but to almost all kinds of disputes. If anyone by a deliberate act destroys a document which, according to what its contents may have been, would have told strongly either for him or against him, the strongest possible presumption arises that if it had been produced it would have told against him; and even if the document is destroyed by his own act, but under circumstances in which the intention to destroy evidence may fairly be considered rebutted, still he has to suffer. He is in the position that he is without the corroboration which might have been expected in his case.
In the present case there are two separate destructions of documents—one the throwing overboard of documents when the vessel was about to be searched, the other the destruction of the accounts relating to the stock and the consumption of signal lights. As to the first, the Attorney-General admits that the destruction of the code book to prevent it getting into enemy hands is at least excusable. It is, indeed, so obvious that that must at any rate be done that complaint could not be made of it. But Captain Pfeiffer naively admitted that, when throwing overboard documents to avoid their getting into enemy hands, he acted on the principle of throwing overboard too many rather than too few, and adds that the Morse signal book contained absolutely innocent messages, which could be read by any one. That probably was so, but it may also have contained some which were not so innocent; and it is pretty obvious that when he threw it overboard he either knew it did or was not sure that it did not.
The Morse signal book could not have disclosed or given any key to the wireless signal code, so there could be no reason for destroying it, except the consciousness that as something wrong had in fact taken place it might be disclosed by the book. As pointed out, a wireless signal log might have been kept in such a way as not to disclose the code or give any key to it. The destruction of the stock book of signal lights cannot be excused by any fear of disclosing a secret code. It is suggested that it was innocent because the guard on the ship was told it was being done, and that British officers had already examined it. British officers would not in the first instance examine minutely documents of that kind, but would assume that if wanted they could be looked over afterwards. Pfeiffer and the paymaster doubtless knew what the signal lights really were for, and hoped that the British, who up to that time had made no point about it, would not find it out, so they destroyed the book. Nothing that can be called a reason was given for doing so. Even if the books had become waste paper, why destroy them?
Their Lordships are of opinion that Captain Pfeiffer and the other witnesses have by their acts put themselves in such a position that their evidence cannot be relied on; that the evidence discloses facts of which no satisfactory explanations are or can be given; and that although on the Crown affidavit evidence some ambiguities have been pointed out which have not been cleared up by cross-examination or re-examination, yet there are incriminatory matters in those affidavits to which no answer has been given."
"… where a person who is not yet party to litigation destroys documents which are relevant to the prospective litigation, it is not straightforward to hold that he has done something which enables the court to draw inferences against him unless what he has done was with deliberate intent. Where there is no legal duty to retain documents because the litigation has not commenced and no deliberate intent, the court will need to examine the basis for the drawing of inferences. But there should be circumstances, where the court considers the duty to retain documents, even prior to litigation, was suf?ciently obvious that it considers it entitled to draw adverse inferences. Litigation must surely be in reasonable prospect before the principle can apply. An example might be where in pre-action correspondence the lawyers for one party asked the other to retain particular classes of documents, and the documents are subsequently destroyed albeit not deliberately. There seems no reason why the court should not draw adverse inferences where a party has destroyed documents in breach of Practice Direction 31B, treating that as the relevant duty. Once proceedings have started, even if the time for disclosure has not yet arisen, there should be no dif?culty in an appropriate case in drawing adverse inferences."
"(1) In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action.
(2) If a court is willing to draw such inferences, they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness.
(3) There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words there must be a case to answer on that issue.
(4) If the reason for the witness's absence or silence satisfies the court, then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified."
I agree with Mr Quest QC that, applying the formula described by Brooke LJ to the present case, it would not be right to draw an adverse inference since it is unclear to me that any of the witnesses whom Mr Saini QC suggested ought to have given evidence were witnesses "who might be expected to have material evidence to give on an issue" in this action (principle (1)). It is unclear also how this can really be said to be a case in which there is "evidence, however weak, adduced" by Marme "on the matter in question before the court is entitled to draw the desired inference" and so "in other words … a case to answer on that issue" (principle (3)). On the contrary, the case that other RBS personnel (besides Mr Moryoussef) were aware of Mr Moryoussef's misconduct is not supported by any of the evidence before the Court, as illustrated by the material to which I have already referred and my further consideration of the EU Commission Decision in what follows. In the circumstances, I do not consider that any adverse inference should be drawn from RBS's failure to call witnesses concerning the settlement.
"No litigant is obliged to call witnesses to satisfy the curiosity or enthusiasm of his opponent. It was always open to PAG to subpoena any witness it thought would be helpful to the court. The fact that a party who might be expected to produce witnesses does not do so may sometimes speak volumes but it is a matter for the judge to decide whether it does so in a particular case. The critical question in the present case was whether manipulation of GBP LIBOR had taken place. The critical witness for that purpose was Mr Thomasson. If he was believed, there was nothing relevant for senior management to know; if he was not, RBS's case collapsed anyway. The judge did say (para 461) that RBS's decision not to call Mr Cummins (and a Mr Nielsen) in connection with the allegations of lowballing did not reflect well on RBS and repeated this in her decision on whether RBS had been fraudulent (para 485). She was well aware of Mr Lord's case (para 479) but in the end was not prepared to draw an adverse inference. We do not think the judge can be criticised."
In the present case, I recognise that it may have been useful for RBS to have called witnesses to speak to the question of what was known concerning Mr Moryoussef's activities. However, besides the points which I have already made, it is also significant that it was only at trial that Marme made it clear that it was its case that individuals at RBS other than Mr Moryoussef knew of EURIBOR manipulation. As Mr Quest QC pointed out, although Marme had pleaded reliance on Recital (55) of the EU Commission Decision, it never sought to identify particular individuals at RBS. This case is, accordingly, a more striking case even than PAG since in that case specific allegations were made about the knowledge of particular RBS individuals.
"For the periods of their respective involvement in the infringement, Barclays, Deutsche Bank, Société Générale and RBS accepted that they were aware of the general scope and the essential characteristics of the infringement or were able reasonably to foresee this conduct and prepared to take the risk."
Although Mr Saini QC made a number of submissions concerning Recital (55), his core submission was simple: that Recital (55) shows that RBS admitted that, at a corporate level, it was aware of Mr Moryoussef's attempts to manipulate EURIBOR, and so that RBS should be taken as having admitted knowledge internal to RBS which went beyond Mr Moryoussef's own knowledge.
"According to settled case-law, the agreements and concerted practices referred to in Article 101(1) of the Treaty necessarily result from collaboration by several undertakings, who are all co-perpetrators of the infringement but whose participation can take different forms according, in particular, to the characteristics of the market concerned and the position of each undertaking on that market, the aims pursued and the means of implementation chosen or envisaged. It follows, that an infringement of Article 101(1) of the Treaty may result not only from an isolated act but also from a series of acts or from a continuous conduct. That interpretation cannot be challenged on the ground that one or several elements of that series of acts or continuous conduct could also constitute, in themselves and taken in isolation, an infringement of Article 101(1) of the Treaty. When the different actions form part of an overall plan, because their identical object distorts competition within the internal market, the Commission is entitled to impute responsibility for those actions on the basis of participation in the infringement considered as a whole."
This is reinforced by Recitals (50) to (52), Recital (52) in particular stating as follows:
"In order to establish that an undertaking participated in such a … infringement the Commission must show that the undertaking intended to contribute by its own conduct to the common objectives pursued by all the participants and that it was aware of the actual conduct planned or put into effect by other undertakings in pursuit of those same objectives, or that it could reasonably have foreseen it, and that it was prepared to take the risk."
The position is, then, made all the more clear by Recital (53) which deals with the particular case and states:
"The factual circumstances on the file such as the content of the contacts, the methods used and the objective of the various agreements and/or concerted practices in question, show that the bilateral collusive contacts between the [settlement parties] were linked and complementary in nature, since each of these actions was intended to deal with one or more consequences of the pattern of competition and, by interacting, contributed to a scheme having a single objective. Indeed, the [settlement parties] shared a common purpose which was to distort the normal course of pricing components for EIRDs through the forms of conduct described in Section 4. This object of the infringement remained the same throughout the whole infringement period. Each [settlement party] was involved in at least some of these forms of conduct and with varying degrees of intensity. The [settlement parties]' various collusive contacts followed comparable patterns and covered overlapping topics. A stable group of individuals from the [settlement parties] was involved in the anticompetitive activities during the respective period of each [settlement party]'s involvement. The different contacts between different pairs of [settlement parties] often took place in parallel or in close temporal proximity to each other."
Recital (54), then, concludes with this:
"The infringement described in Section 4 therefore qualifies as one single and continuous infringement as regards the respective periods of involvement of Barclays, Deutsche Bank, Société Générale and RBS."
"The mere fact that there is an overall plan linking an infringement in which an undertaking participated and a wider cartel does not suffice to render that undertaking responsible for the whole cartel. It must be shown that the undertaking knew or ought to have known, when it took part in the infringement, of the offending conduct planned or put into effect by other undertakings in pursuit of the same overall plan."
I am, however, unpersuaded by this submission because it overlooks the fact that Recital (55) refers to an "infringement" in which Barclays, Deutsche Bank, Société Générale and RBS were involved and so an acceptance that each of those entities (including RBS) had the awareness described in Recital (55) must entail the acceptance not only of the role played in the "infringement" by the other banks but also by RBS itself.
"An employee performs his duties for and under the direction of the undertaking for which he works and, thus, is considered to be incorporated into the economic unit comprised by that undertaking…".
As a result, the CJEU explained at :
"For the purposes of a finding of infringement of EU competition law any anti-competitive conduct on the part of an employee is thus attributable to the undertaking to which he belongs and that undertaking is, as a matter of principle, held liable for that conduct."
Although this was a case which was concerned with attribution of conduct rather than awareness, nonetheless, as Mr Quest QC pointed out, awareness is a necessary element of liability for an "infringement". It follows that, for competition law purposes, Mr Moryoussef's awareness of his own wrongdoing would be sufficient since he is an employee of RBS and so his knowledge can be attributed to RBS.
"Whichever remedy is sought for misrepresentation, it will be necessary to establish an adequate link between the statement and the consequence from which the representee claims to be relieved. If the claim is for damages, the question is whether the statement caused the loss. If the claim is for rescission of a contract, the inquiry is as to the causal link between the statement and the claimant's entry into the contract. The language used in the different remedies, and the legal tests employed for them, will vary, but generally the issue is similar: it is an issue of the claimant's reliance on the statement, and whether the statement caused the harm in issue. A false statement, even one made fraudulently, will not be actionable as a misrepresentation by the person to whom it was addressed if it had no impact on his actions, nor otherwise caused him loss. This means that the statement must have been present to the claimant's mind at the time when he took the action on which he bases his claim, but the claimant need not prove that he believed that the statement was true: it is sufficient that, as a matter of fact, he was influenced by the misrepresentation. … ."
Mr Howe QC relied also on what is stated in Chitty on Contracts (32nd Ed., 2015) at [7-035], as follows:
"It is essential if the misrepresentation is to have legal effect that it should have operated on the mind of the representee. It follows that if the misrepresentation did not affect the representee's mind, because he was unaware that it had been made, or because he was not influenced by it, or because he knew it was false, he has no remedy."
Similarly, Spencer Bower & Handley: Actionable Misrepresentation (5th Ed, 2014), another textbook cited by Mr Howe QC, has this to say at [6-01]:
"The representee's state of mind (inducement) when changing his position after receiving the representation is relevant in all cases of misrepresentation … He must establish that the misrepresentation operated on his mind and caused him, or helped to cause him, to act as he did."
So, too, O'Sullivan, Zakrzewski & Elliott, The Law of Rescission (2nd Ed., 2014) contains the following passage at [4.101]:
"Where implied representations are pleaded, the claimant must prove that he understood that the representations alleged were in fact made; otherwise there can be no reliance".
"… the claimant must show that he in fact understood the statement in the sense (so far as material) which the court ascribes to it: Arkwright v Newbold (1881) 17 Ch D 301; Smith v Chadwick (1884) 9 App.Cas 187; and that, having that understanding, he relied on it. This may be of particular significance in the case of implied statements."
He went on at  to say this:
"It is not, therefore, necessary for the representee to establish that he would have acted differently if he had known the truth. And it may not be sufficient either. If it were, a claimant who gave no thought to any representation, or did not understand it to have been made, might be entitled to recover."
"As further observed in Raiffeisen, at , the claimant must show that he in fact understood the statement in the sense (so far as material) which the Court ascribes to it; and that having that understanding, he relied on it. Analytically, this is probably not a separate requirement of a misrepresentation but rather is part of what the claimant needs to show in order to prove inducement".
Subsequently, in Foster Hamblen J cited this passage at -:
"… the lack of evidence from Mr Foster that he understood the representations to the effect alleged were being made is highly relevant to the issue of inducement – see the CRSM case at . Unless one understands the representation is being made, it is difficult to see how it can be said to have been relied upon. Mr Foster's evidence was that had he known at the time that the factory had financial issues he would not have signed the contract. However, the case is one of positive representation, not non-disclosure. He gives no evidence that he understood that the Defendants were representing to him or telling him that the factory had no financial issues, still less that they were making the more specific representations set out in the pleading. I am accordingly not satisfied that inducement has been sufficiently proved."
So, too, in an earlier implied representation case, Brown v Innovatorone, Hamblen J stated this at :
"In so far as the Claimants were alleging implied representations it was incumbent on them to prove that such representations were understood to have been made since otherwise there could be no reliance. In relation to most of the alleged implied representations there was no such evidence, or no sufficient evidence, of any such understanding from Lead Claimants or IFAs. Equally, in so far as deceit was being alleged, it was incumbent on the Claimants to prove that the alleged representor understood a representation to the alleged effect to have been made. In relation to most of the alleged implied representations there was no such evidence, or no sufficient evidence, of any such understanding."
"…it is essential for a misrepresentation to have legal effect that it should have operated on the mind of the representee. It follows that if a representation did not affect the representee's mind, because he was unaware that it had been made, or because he was not influenced by it, or because he knew that it was false, the representee has no remedy."
Similarly, more recently, in another implied representation case, Leni Gas & Oil v Malta Oil  EWHC 893 (Comm), Males J explained at  that:
"…a claimant must show that it understood that the representation alleged was being made to it. Without such an understanding, there can be no question of any reliance on the representation."
"In my opinion it would not be right in an action of deceit to give a plaintiff relief on the ground that a particular statement, according to the construction put on it by the Court, is false, when the plaintiff does not venture to swear that he understood the statement in the sense which the Court puts on it."
As Mr Howe QC observed, this passage was cited with approval by Asplin J in another express representation case, Bonham-Carter v SITU  EWHC 3589 (Ch), at , as supporting the proposition that "the representee must establish that he subjectively interpreted the representation in the sense in which the court has found it to be false". It was also, previously, cited by Rix LJ in The Kriti Palm  2 CLC 223 at  and, again, at  when dealing with the absence of evidence from a Mr Whitaker as to what his understanding was in relation to a particular conversation where the representation was said to have been made (see ). It was, indeed, the absence of similar evidence in a claim for misrepresentation where the critical words in a company prospectus ("the present value of the turnover or output of the entire works") were ambiguous which led the House of Lords in Smith v Chadwick (1884) 9 App Cas 187 (Lord Bramwell dissenting on this point on the facts) to decide that the claim could not succeed. In that case, the claimant gave evidence merely that he understood the words to mean "that which the words obviously conveyed" without explaining the meaning he understood them to convey.
"A claimant who seeks to avoid a contract on the ground of either non-disclosure or misrepresentation will typically be claiming that he made a mistake, or entered into the contract on the basis of assumptions as to the relevant surrounding circumstances which he now knows were inaccurate; and now that he knows the truth, he says that he would not have entered the contract had he not made the mistake or made those assumptions. In the case of misrepresentation, he alleges that it was the defendant's misrepresentation that caused him to make the mistake: the defendant's words or conduct communicated information on which the claimant relied in deciding to enter into the contract. But in the case of non-disclosure the defendant has done nothing to cause the mistake or to give rise to the assumptions as to the circumstances surrounding the contract; he failed to give the claimant relevant information which would have corrected the mistake or false assumption."
If Mr Saini QC were right in what he submitted, there is a real danger not only that the distinction between non-disclosure and misrepresentation is impermissibly blurred but also that implied misrepresentation claims would be allowed to succeed in situations where there is not even any 'duty to speak'.
"I agree with Mr Handyside that the evidence of Mr Wyse and Mr Russell in cross- examination does not support the contention that they entered into the Swaps in reliance upon the LIBOR Representations. Mr Russell accepted in evidence that at the relevant time he knew nothing of the BBA Definition or the way in which submissions were made by Panel Banks, whether RBS was a panel bank or how LIBOR was calculated and that it had never occurred to him that it was capable of manipulation. He was able to say however, that he had 'complete trust and faith that RBS were setting correct and qualified rates...' In Mr Wyse's case, he could not recall any of the LIBOR Representations without seeing them and also accepted that it had not crossed his mind that submissions could be manipulated. He added in cross- examination that he knew that LIBOR was an average and that 'the High Street banks' were involved in making submissions. He stated, however, that he had assumed that LIBOR was the true and correct rate."
Asplin J went on in the next paragraph () to say this:
"Equally when asked about the email from Matthew Jones of 6 March 2008, and whether it said anything about LIBOR being a proxy for the cost of funds of LIBOR panel banks, Mr Russell said that he was not sure that he had seen the email at the time and that he did not understand the point. Mr Wyse said that it was something which never occurred to him and that he had no reason to believe that the rates quoted were other than genuine. Mr Russell also agreed that in the email Mr Jones was saying that LIBOR better reflected RBS's cost of funding than base rate and that if PAG's loans were kept on base rate, there would be additional costs for the bank related to its capital requirements and the bank would therefore have to increase the margin charged over base rate to reflect that."
She concluded at  as follows:
"It seems to me therefore, that there was no understanding of what are extremely complex and intricate pleaded representations meant and for the most part, the matters which were pleaded did not cross Mr Russell and Mr Wyse's minds. On that basis, in my judgment, they could not have understood the implied representations to have been made and therefore, did not rely upon them. In the circumstances, it is not necessary to consider whether it is appropriate to ask what they would have done if told the alleged truth as against if nothing had been said. It was accepted the form of the implied representations had been 'borrowed' from the Graiseley case and it seems to me that the pleading was not led by the evidence. At best, it seems to me that both Mr Russell and Mr Wyse assumed that LIBOR, which they understood to be a commercial rate of interest, would be set in a straightforward and proper manner. In my judgment, therefore, they gave no thought to the LIBOR Representations in the form pleaded and did not rely upon them."
Just as Asplin J concluded that, since Mr Russell and Mr Wyse merely made certain assumptions concerning LIBOR without giving any thought to the LIBOR Representations in that case, reliance had not been established, so I find myself in the present case reaching the conclusion that, since Mr Maud merely made certain assumptions concerning EURIBOR without giving any thought to the EURIBOR Representations, reliance has likewise not been established by Marme. Mr Maud did not understand any of the alleged EURIBOR Representations to have been made to him at the time, and so it follows that those representations (or something approximating to them) were not, and cannot, have been "actively present to his mind".
"... Reliance was also placed on the presumption of inducement or 'fair inference of fact' which arises where a false statement is made which is likely to induce a contract and where the representee enters the contract. The inference which arises is that the representee was influenced by the statement: see Zurich Insurance Co. plc v Hayward  AC 142 at paragraph 34 per Lord Clarke of Stone-cum-Ebony. Where the misrepresentation was made fraudulently the inference is 'particularly strong'. The inference or presumption of inducement can be rebutted but that is 'very difficult'; see paragraphs 34-37 per Lord Clarke. In Raiffeisen Christopher Clarke J suggested that Barton v Armstrong may be regarded as establishing that in a case of fraudulent misrepresentation 'the presumption of inducement is not rebutted if all that can be said is that the representee might well have contracted without the [fraudulent misrepresentation]'."
He went on at  to say this:
"However, the representation was made by NIVE for the purpose of persuading Rembrandt to agree the requested price increase and Rembrandt did accept the requested price increase. There is therefore a 'particularly strong' presumption, or a 'fair inference of fact', that the representation induced Mr. Rettig to reach his decision in the sense that but for the representation he would not, or might not, have agreed to the requested price increase. The evidential burden therefore lies on NIVE to rebut that presumption or inference. That is 'very difficult' to do (per Lord Clarke). It is not rebutted (per Christopher Clarke J.) if all that can be said is that the representee might have entered the contract had there been no representation. The presumption will only be rebutted, in a case of fraud, by showing that the representee would have entered the contract had there been no representation."
"Material misrepresentation and a presumption of inducement. Once it is proved that a false statement was made which is 'material' in the sense that it was likely to induce the contract, and that the representee entered the contract, it is a fair inference of fact (though not an inference of law) that he was influenced by the statement, and the inference is particularly strong where the misrepresentation was fraudulent. There is no set list of matters that might rebut the presumption which arises from a fraudulent statement. One is to show that the misrepresentee had already firmly made up his mind, but even then the misrepresentation might have induced him not to change his mind."
"The principal issue between the parties is what must be shown to rebut the presumption. Counsel for the Guarantors submitted that for the representor to rebut the presumption it was necessary for him to show that the representee (i) never knew of the statement until after he had entered into the contract; (ii) discovered before he entered into the contract that the statement was false; (iii) showed by words or clear conduct that the statement did not influence his decision. Counsel for the Bank submitted that the question of inducement was one of fact so that if, as in this case, the representee gives evidence the presumption has no part to play and the judge, like a jury, must determine the issue on all the evidence."
He went on at  to say this:
"In my view the differences between counsel are more apparent than real. First the presumption is one of fact and capable, like any other such presumption, of being rebutted. It would be dangerous in connection with any issue of fact to suggest that it may only be proved in certain specified ways. Similarly it would be wrong to suggest that as a matter of law the presumption can only be rebutted by proof of certain specified matters. But given that the presumption is that the representation did induce the act or omission in question it is hard to imagine facts sufficient to rebut it which do not fall within any of the categories to which counsel for the Guarantors referred. But my inability to imagine them is no ground for limiting the facts sufficient to rebut the presumption. However I do not accept the submission of counsel for the Bank that once the representee gives evidence the presumption no longer has any force. The effect of the presumption is to alter the burden of proof; the alteration remains unless and until the presumption is rebutted whether or not the representee gives evidence. … ."
"In many cases the answer to the two questions will be the same. But not all. It is convenient to take an example. P buys a house from V. He had been considering several houses. He is minded to buy the one which he eventually buys because of its size, shape and character. Shortly before he makes his ?nal decision V's agent tells him that a particular celebrity has the house next door, a circumstance which he regards as advantageous. It is one of the matters he takes into account in deciding to purchase. He had not previously addressed his mind to the characteristics of his potential neighbour. In fact, as it turns out, there is no celebrity next door. Moreover the next door neighbour - Z - whom the agent knows to be the neighbour is one of the few persons, or types of persons, of whom P would never willingly be a neighbour. If he had never been told that there was a celebrity next door, or, having been so told, was then told that there had been a mistake and the celebrity in question did not live there, he would still have bought the house. If he had been told that Z lived there he would not have done so."
He went on at  to say this:
"In determining whether or not P was induced by the representation to purchase, is it relevant to inquire what P would have done if he had been told:
(a) nothing at all;
(b) that there was no celebrity next door;
(c) that Z lived next door.
Question (a) assumes that no representation, and, therefore no misrepresentation, had been made. Question (b) assumes that the representee is told no more than is necessary to ensure that he has not been told an untruth. Question (c) assumes that the representee is given full information as to who actually lives there. In many cases the truth is nothing more than the ?ip side of the misrepresentation, but, as the above facts show this is not always so. The example taken shows that the representee's state of mind may be different according to whether or not he was given answer (b) or (c)."
He explained at  as follows:
"Mr Zacaroli submitted that a claim for misrepresentation requires consideration of what the representee would have done if no representation had been made to him. That is, in my judgment, generally speaking, correct because the claimant must establish the causative impact of the representation on his decision. His essential complaint must be that he entered into the contract on the terms on which he did as a result of what he was told, i.e. that, had he not been told what he was told, he would not have done so. If he would have entered into the relevant contract even if the representation had not been made, he has no valid complaint: McGregor on Damages, 18th Edition, para 41-002; Sir Christopher Staughton in Assicurazioni, para 187 (see para 165 above). That does not mean that a claimant who does not say in terms that, if the relevant statements had not been made, he would not have entered into the contract, necessarily fails: see In re London and Leeds Bank (1887) 56 LJ Ch 321. There the plaintiff had subscribed for shares in what was in fact an insolvent bank on (as he said in his af?davit) 'the faith of' fraudulent statements in the prospectus as to its circumstances and Stirling J rejected a submission that the claim must fail in the absence of evidence in those terms."
Christopher Clarke J recognised, nonetheless, at  that:
"Counsel defending claims for misrepresentation habitually ask claimants what they would have done if they had been told the truth and judges use their answers (or the judge's own conclusion on the question) to decide whether inducement has been established. Thus in Assicurazioni Clarke LJ allowed the appeal on the ground that it was:
'open to the judge to hold that ARIG had not shown that, if it had known that Munich Re was participating only in section A, it would not have entered into the contracts or would have taken some other share.'"
"The plaintiffs have proved what they need to prove by way of the commission of the tort of deceit and causation. They have proved that they were induced to enter into the contract with Mr. Chappell by his fraudulent representations. The judge was wrong to ask how they would have acted if they had been told the truth. They were never told the truth. They were told lies in order to induce them to enter into the contract. The lies were material and successful; they induced the plaintiffs to act to their detriment and contract with Mr. Chappell. The judge should have concluded that the plaintiffs had proved their case on causation and that the only remaining question was what loss the plaintiffs had suffered as a result of entering into the contract with Mr. Chappell to buy his business and shop."
Christopher Clarke J went on at  to say this:
"In my judgment the relevance of the question - what would you have done if you had been told the truth? - depends on the circumstances and on who is asking the question and for what purpose."
He added at :
"A claimant who gives credible evidence that, if he had been told the truth (there is no celebrity next door), he would not have entered into the contract is likely to establish that if the misrepresentation had not been made he would not have contracted and that it was thus an effective cause of his doing so, since such evidence is likely to establish both the importance to him of what he was told and its effect on his mind: see Assicurazioni; Dadourian Group International Inc v Simms  EWHC 2973 (Ch), para 546; and Parabola Investments Ltd v Browallia CAL Ltd  EWHC 901 (Comm), paras 104-107. In the latter case Flaux J observed that Hobhouse LJ's dictum in Downs v Chappell did not mean that if the claimant demonstrated that he would not have acted as he did if he had known the true position (namely that the pro?ts were not as stated), he could not have relied on that as evidence of inducement. In Dadourian Warren J described such a question as 'strictly irrelevant although it may be of some assistance in testing whether there was inducement or not'."
He went on at , as follows:
"Per contra, a claimant who says that even if he had been told the whole truth it would have made no difference to his readiness to enter into the contract will be likely to fail to establish that he was induced to enter into the contract by the misrepresentation in question. There is an inherent contradiction in someone saying that a representation was an inducing cause and accepting that, if the truth had been told, he would have contracted on the same terms anyway."
By way of contrast, he explained at  that:
"If, however, it is clear that, unless the representation had been made to him, the claimant would not have entered into the contract it is irrelevant to ask what would have happened if he had been told the truth. In those circumstances, the court will not speculate on what might have happened in that event: see Spencer Bower, op cit, para 122. In Downs v Chappell  1 WLR 426 the trial judge accepted Mr Downs' evidence that he would not have contracted to buy the business if he had not received veri?cation of certain pro?t ?gures which were fraudulently misrepresented to him. This conclusion was not surprising since an earlier set of ?gures had shown insuf?cient pro?ts to persuade him to buy. So inducement had been established. That being so, it was not then material to consider what he would have done if he had been given the true pro?t ?gures - a situation which had never arisen and to which he would not have given thought (except in the context of the subsequent litigation)."
"There are in fact two separate issues of causation. The first is one of inducement. The second is the cause of the damage. It is easy to conflate the two causal requirements, but they should be kept separate, namely whether the contract or course of conduct was induced by the misrepresentation and whether the contract or course of conduct gave rise to the damage sustained. The distinction between these two questions is highlighted in BHP Billiton Ltd v Dalmine. SpA, where the defendant fraudulently misrepresented the carbon equivalent value of the steel used in pipes supplied to the claimant for the purpose of being incorporated into the construction of a sub-sea gas re-injection pipeline. It was common ground between the parties that the claimant relied on the representation by using the pipes in the pipeline, such that if it had known the truth (or, presumably, if the representation had not been made) the steel pipes would have been rejected. The factual issue before the Court of Appeal was whether the pipeline would have failed even if the steel pipes had not been incorporated into the pipeline. Much of the argument concerned which of the parties bore the burden of proof. The claimant demonstrated that the pipeline failed where the non-compliant steel pipe had been installed. The Court held that the defendant had to prove that a hypothetical pipeline that did not include the non-compliant pipe would have failed in any event. The defendant accepted it could not discharge that onus. The Court noted that 'There was no submission ... that the "but for" test did not apply in its normal way in the tort of deceit'.
Accordingly, as to the first question the misrepresentation induced the use of the steel pipes; as to the second question, the issue was whether or not the steel pipes caused the relevant damage. In the same case, the Court held that the 'but for' test of causation was a starting point designed to eliminate irrelevant causes. There does not have to be a direct link between the misrepresentation and the resultant damage. There is plainly a continuous line (or chain or net or web) of causation between the misrepresentation and the resulting damage; the dislocation lies in the fact that the damage may have been a wholly unforeseen consequence of the misrepresentation (which is no bar to recovery in a claim for damages for deceit). Accordingly, the two questions are whether or not the representee relied on the misrepresentation and whether or not the course of conduct so induced resulted in damage to the claimant."
"… it is irrelevant how the representee would have acted if told the truth. Mr Samek correctly submitted that, once it is found that a misrepresentation was made, was intended to be relied upon and was relied upon by the representee in deciding to enter into the transaction in question, any speculation as to what the representee would or might have done if he had known the truth is immaterial: see Smith v Kay (1859) 7 HL Cas 750 at 759 and Downs v Chappell  1 WLR 426 at 433. On the other hand, as the judge observed at J(1) 549, if it could be affirmatively shown that DGI definitely would have entered into the option agreement even if it had known of Jack and Helga's involvement in Charlton, then it would be very difficult for DGI to argue that it was induced to enter into the option agreement in reliance upon the intermediary representation. But that was not this case. The judge held, and was entitled on the evidence to do so, that if Alex and Haig had known of Jack and Helga's involvement, they would not have allowed DGI to enter into the option agreement."
In other words, where reliance has already been established without having to consider what would have happened had the claimant been told the truth, it is generally not relevant to ask what would have happened had the claimant been told the truth. However, as Arden LJ indicated and as Christopher Clarke J also indicated in Raiffeisen at , that is an inquiry which is relevant if the position is that the claimant would have acted in the same way even had the truth been known since that is evidence which weighs against a conclusion that there was the requisite reliance.
"It is not, therefore, necessary for the representee to establish that he would have acted differently if he had known the truth. And it may not be sufficient either. If it were, a claimant who gave no thought to any representation, or did not understand it to have been made, might be entitled to recover."
This is a conclusion which has been followed in a number of subsequent cases, including in Cassa di Risparmio at  (per Hamblen J) and in Leni Gas where Males J observed at  that:
"The relevant enquiry is whether the claimant would have entered into the contract if the representation had not been made at all, and not whether it would have done so if a different representation (i.e. the truth) had been made to it".
"'But for' causation normally required. It seems to be the normal rule that, where a party has entered a contract after a misrepresentation has been made to him, he will not have a remedy unless he would not have entered the contract (or at least not on the same terms) but for the misrepresentation. Certainly this is the case when the misrepresentee claims damages in tort for negligent misstatement; and it seems also to be required if damages are claimed for fraud. It seems likely that the same rule applies if he seeks to rescind on the ground of an innocent or negligent misrepresentation.
'But for' causation not required for rescission for fraud. In cases of fraud, in contrast, if the representee seeks to rescind, it is no defence for the representor to show that if the misrepresentation had not been made, the misrepresentor would still have made the contract. It is sufficient if there is evidence to show that he was materially influenced by the misrepresentation merely in the sense that it had some impact on his thinking, 'was actively present to his mind'… The rule is intended to deter fraud."
"Mr Zacaroli submitted that, whilst there may be more than one 'but for' cause, in order to establish that any particular representation was a real and substantial cause it is necessary to show that but for such misrepresentation the claimant would not have entered into the contract on the terms on which he did, even though there were other matters but for which he would not have done so either."
He went on at  to say this:
"In the light of decision of the majority in Assicurazioni and the authorities to which I have referred, I accept that submission. The authorities show that inducement is, in essence, a question of causation and that the misrepresentation must be an effective cause of the representee entering into the contract in the 'but for' sense. 'But for' causation means that unless the alleged cause (X) had come about the alleged result (Y) would not have occurred. In the present context that means showing that, unless the representee had had the representation made to him, he would not have contracted (or would not have done so on the same terms). If such causation is necessary in respect of a single misrepresentation, it must also be necessary in relation to an individual representation which is one of several."
Christopher Clarke J was here describing a requirement that the claimant in a misrepresentation case should show that he would not have contracted, not merely that he might not have done so.
"That conclusion is consistent with the decision of the House of Lords in Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd  1 AC 501 in which the majority of the House held: (i) that a 'material circumstance' was one that would have an effect on the mind of the prudent insurer in estimating the risk; but that, for a circumstance to be material, it was not necessary that it should have a decisive in?uence (such that but for the misrepresentation or non-disclosure the insurer would have declined the risk or accepted it only on different terms). But before an underwriter could avoid for non-disclosure he had to show that he had actually been induced by the non-disclosure to enter into the policy on the relevant terms (i.e. that if the full facts had been disclosed he would not have entered into it or would have done so only on different terms). It is apparent from the speeches of the majority that the 'actual inducement test' applies to misrepresentation (page 516E to G); and is an application to marine insurance of the common law as to inducement (pages 549D to E and 569A to C)."
Christopher Clarke J, then, stated as follows at :
"In Assicurazioni Ward LJ referred to the fact that the 'court does not allow an examination into the relative importance of contributory causes', and was concerned that the decision of the majority might lead the courts back to the error that the misrepresentation must be a decisive cause. In the light of the decision of the majority it cannot be the case that the representation does not have to be a cause at all. It need not be the sole effective cause but it must be an effective cause. A misrepresentation is not an effective cause if the representee would have gone ahead even if it had not been made."
"Mr Gruder submitted that it was suf?cient for a claimant to show that but for the misrepresentation he might have acted differently. I do not agree. Assicurazioni shows (see paras 166 and 181 above) that the question is whether had the representation not been made to him, the representee would not have contracted; not whether he might not have done so. I do not accept the submission that the 'would not' formulation applies in insurance cases but that in other cases 'might not' is the appropriate test."
He went on, however, at  to point to a possible distinction between fraud and non-fraud cases:
"Mr Gruder also referred to Barton v County NatWest Ltd  Lloyd's Rep Bank 408 and Australian Steel & Mining Corporation Pty Ltd v Corben  2 NSWLR 202, both of which were fraud cases in which the result of the representation relied on was that the representee persevered in a decision previously made. It does not seem to me that either of those cases establishes that, where the case is not one of fraud, it is suf?cient merely to show that the misrepresentation was actively present to the representee's mind and that but for it the representee might have acted differently. In Barton the presumption of inducement arising from the fraudulent statement was not rebutted. In Australian Steel the statement (as to the identity of a purchaser to whom Mr Corben, who had decided to sell, was to give an option to purchase) was a 'but for' cause of the agreement. Mr Corben would not have persevered with the deal if he had not known the identity of the purchaser."
"As analysed by Christopher Clarke J in Raiffeisen, supra, at –, to establish inducement for the purpose of a claim under s.2(1) of the Misrepresentation Act, it is necessary to show that, but for the representation, the claimant would not have entered into the contract that he did."
He went on at  to say this:
"In that case, Christopher Clarke J concluded that where a fraudulent misrepresentation has been made, the requirement is weaker: it is sufficient to show that the representation was a factor in the claimant's decision and that but for it he might have acted differently …. This conclusion was challenged by Barclays. It submitted that a fraudulent representation must cause a loss to create a cause of action and to do so it must cause the entry into the contract from which the loss is said to arise. It follows that it must induce the representee to enter into the contract and be a cause of him doing so. It is not necessary to resolve this issue but I propose to proceed on the basis that the approach of Christopher Clarke J is correct."
Males J, in Leni Gas at , adopted the same approach as Hamblen J and, more recently still, in NIVE v Rembrandt, although again without deciding the point, Teare J did so also. In that latter case, the defendant contracted to buy dried egg product from the claimant. The defendant subsequently rejected the products supplied and the claimant claimed damages for breach of the contract. The defendant denied liability on the basis that, when the price was renegotiated, the claimant made fraudulent misrepresentations, and that the claimant breached certain warranties given to the defendant. Having accepted that a representation had been made concerning the price, Teare J had this to say concerning the question of inducement at :
"It is first necessary to consider what must be established in this regard. Counsel for NIVE relied upon the judgment of Christopher Clarke J. (as he then was) in Raiffeisen Zentralbank Osterreich v Royal Bank of Scotland  EWHC 1392. In that case it was held that a claimant alleging misrepresentation must show that the representation played a real and substantial part in inducing him to enter into the contract in question, that it was not necessary to show that it was the sole inducement or that it played a decisive part but that it was not sufficient to show that the claimant was supported or encouraged in reaching his decision by the representation in question; see paragraph 153. It was further held that in order to establish that the representation played a real and substantial part in inducing the contract it was necessary to show that but for the misrepresentation the claimant would not have entered into the contract on the terms which he did; see the analysis by the judge of the authorities between paragraphs 153-199 and, in particular, of the judgment of Clarke LJ (as he then was) in Assicurazioni Generali SpA v Arab Insurance Group  1 All E R(Comm) 140."
He went on at  to say this:
"The judgment of Christopher Clarke J in Raiffeisen was the only authority to which I was referred on this topic, notwithstanding that Misrepresentation, Mistake and Non- Disclosure by Cartwright 4th .ed. at paragraph 3-54 refers to 'some disagreement in the authorities'. When I raised the matter with counsel for Rembrandt the submission was made that the 'but for' test did not have to be satisfied because the test was not mentioned in Zurich Insurance Co. plc v Hayward  AC 142 and that 'one should take one's lead from the Supreme Court'. However, the issue in that case was whether it was necessary to establish that the representee had believed the misrepresentation to be true. It was held, in particular by Lord Clarke of Stone-cum-Ebony (as he had become) that, whilst the representee's belief might be relevant to the issue of inducement, it was not necessary to establish such belief. There was no discussion of what had to be established to show inducement and neither Assicurazioni Generali SpA v Arab Insurance Group nor Raiffeisen Zentralbank Osterreich v Royal Bank of Scotland were cited to or by the Supreme Court. In those circumstances I am unable to accept counsel's oral submission that the propositions established by those cases as to the need for the 'but for' test to be satisfied must no longer be regarded as good law. (Indeed, Lord Clarke quoted at paragraph 33 with approval a statement by Lord Hoffman in Standard Chartered Bank v Pakistan Shipping  1 AC 959 at paragraph 15 where the language of the 'but for' test was used in the context of a fraudulent misrepresentation.)."
Teare J, then, at , cited Hamblen J in the Cassa di Risparmio case, before saying this at :
"In Raiffeisen Zentralbank Osterreich v Royal Bank of Scotland Christopher Clarke J. (who was not dealing with a fraudulent misrepresentation) rejected the weaker 'but for the misrepresentation he might have acted differently' test; see para.195. He referred to Barton v Armstrong  AC 104 a Privy Council case on appeal from New South Wales which concerned an agreement entered into as a result of duress. Lord Cross (who gave the majority judgment in the Privy Council) said that the 'but for' test did not need to be satisfied by analogy with agreements entered into on account of fraud. Lord Cross said that if the duress was 'a' reason for entering the contract it did not matter that the claimant might well have entered the contract even if there had been no duress. Christopher Clarke J. distinguished that case on the grounds that the case before him did not involve a fraudulent misrepresentation. That is no doubt why Hamblen J. observed that Christopher Clarke J. had 'concluded' that in such cases there was a weaker "but for the misrepresentation he might have acted differently" test."
He went on at :
"This suggested weaker test in the case of a fraudulent misrepresentation was not the subject of any submissions in the present case. However, in circumstances where both Christopher Clarke J. and Hamblen J. have recognised the weaker test (although in neither case was it the subject of an actual decision) I consider that I should proceed on the basis that the suggested weaker test applies in the case of fraudulent misrepresentation. Misrepresentation, Mistake and Non-Disclosure by Cartwright 4th .ed. at paragraph 3-54 suggests that it is 'generally accepted'."
He concluded at :
"In the light of this evidence it seems clear that the representation was one of three matters which Mr. Rettig considered and took into account before reaching his decision. At the very least the representation was a matter which 'supported or encouraged' him in reaching his decision. But that is not enough, as was held by Christopher Clarke J in Raiffeisen at paragraph 153 following Dadourian v Simms  EWCA Civ 169 at paragraphs 99 and 100, itself a case of fraudulent misrepresentation. The representation must be a matter but for which Mr. Rettig would not have reached the decision he did or, since this is a case of a fraudulent misrepresentation, but for which Mr. Rettig might have acted differently. That is not saying that the representation must be the only reason for his decision; for as Christopher Clarke J. accepted in Raiffeisen there can be more than one 'but for' cause; see paragraphs 170-171."
"The observations of Hobhouse L.J. in Downs v Chappell (quoted earlier) seem to me to be directly in point in the instant case. In the instant case, as in Downs v Chappell, Mrs Williams was never told the truth; she was told lies in order to induce her to execute the UCB charge. The lies were 'material and successful' in that they induced Mrs Williams to act to her detriment in executing the UCB charge."
He went on at  to observe as follows:
"Moreover, Downs v Chappell affords, in my judgment, a useful illustration of the need, in the context of a claim for damages for misrepresentation, to distinguish between two separate questions: (1) whether the claimant was induced by the misrepresentation to act to his detriment; and (2) if so, what loss he suffered in consequence. As Downs v Chappell shows, the fact that the claimant might have acted differently had he not been induced by the misrepresentation is not relevant to question (1), but it is relevant to question (2) (as, indeed, Mr Barker pointed out in the course of his submissions). For present purposes, however, it is the analogy with question (1) which is of importance. Expressed purely in terms of misrepresentation, the issue in the instant case is whether Mrs Williams was induced by the misrepresentation to execute the UCB charge. In that context it matters not, in my judgment, whether, had she not been so induced, she would nevertheless have done so."
Mr Saini QC relied as to this last passage, in particular, on the suggested need for the lies to be "material and successful" in order to have induced Mrs Williams, submitting that this is far removed from a 'but for' test and that it represents a low test for inducement. He highlighted, specifically, the reference in the last sentence to the word "would". Again, however, Mr Saini QC's submission is misplaced. UCB was a fraud case and so is of only limited assistance to Mr Saini QC's submission as to whether might or would is required in non-fraud cases. In addition, however, it is quite clear that Jonathan Parker LJ was not dealing with the question of inducement at all. He was, instead, addressing the separate question of causation in the context of damages since that was what was in issue in that case, the trial judge having found in Mrs Williams' favour that she executed the charge because she had been induced to do so by her husband's undue influence and misrepresentations. That is made clear from Jonathan Parker LJ's summary of the trial judge's findings at  to . In short, as in Downs v Chappell, in UCB the question of inducement had already been determined. It follows, further, that there is no conflict between UCB and ARIG since the two cases were dealing with different issues. That (as opposed to, for example, any oversight on the part of counsel), no doubt, is why UCB was not even cited in ARIG.
"It seems to me that the true position is that the misrepresentation must be an effective cause of the particular insurer or reinsurer entering into the contract but need not of course be the sole cause. If the insurer would have entered into the contract on the same terms in any event, the representation or non-disclosure will not, however material, be an effective cause of the making of the contract and the insurer or reinsurer will not be entitled to avoid the contract. Thus I agree with Sir Christopher Staughton, whose judgment I have seen in draft, that, in this context at least, causation cannot exist when even the 'but for' test is not satisfied…".
Clarke LJ went on at  to say this:
"Those principles seem to me to be consistent with the approach of this court in St Paul Fire & Marine v McConnell: see per Evans LJ (with whom Rose and Nourse LJJ agreed) at pages 827-828, where he discussed the general principles, and at page 831, where he held that, if the three underwriters who gave evidence had been told the truth, on no view would they have underwritten the insurance at the same premium on terms which included subsidence risk. Evans LJ also considered the role played by presumption in this class of case. He did so in the context of a fourth underwriter who was not called to give evidence, no doubt because the trial took place before the decision of the House of Lords in Pan Atlantic."
He referred, in particular, at , to the following passage in Evans LJ's judgment in St Paul Fire at p. 831:
"The existence of such a presumption is recognised in the authorities; see Halsbury's Laws vol 31 par 1067 where the law is stated as follows:
'Inducement cannot be inferred in law from proved materiality, although there may be cases where the materiality is so obvious as to justify an inference of fact that the representee was actually induced, but, even in such exceptional cases, the inference is only a prima facie one and may be rebutted by counter evidence.'
The authorities cited include Smith v Chadwick (1884) 9 App Cas 187 and in my judgment they justify the above statement of the law. This provides a reminder of the need to distinguish 'materiality' from 'inducement', although inevitably the two overlap.
Here, the evidence of the three underwriters who did give evidence and of the expert witnesses was clear. If the underwriters had been told the true state of the ground conditions, as revealed by the 1982 report, and of the conflicting views expressed by the authors of that report and by Worleys, then they would have called for further information and in all probability either refused the risk or accepted it on different terms. In fact, all four underwriters including Mr Earnshaw accepted it without any relevant enquiries. There is no evidence to displace a presumption that Mr Earnshaw like the other three was induced by the non-disclosure or misrepresentation to give cover on the terms on which he did. In my judgment, these insurers also have discharged their burden of proof."
Clarke LJ commented as to this:
"It appears to me that a presumption of this kind really amounts to no more than this. It simply operates where the evidence before the court is enough to lead to the inference that the insurer or reinsurer was, as a matter of fact, induced to enter into the contract."
Clarke LJ, then, summarised the relevant principles of inducement, in this context, in this way at :
"(i) In order to be entitled to avoid a contract of insurance or reinsurance, an insurer or reinsurer must prove on the balance of probabilities that he was induced to enter into the contract by a material non-disclosure or by a material misrepresentation.
(ii) There is no presumption of law that an insurer or reinsurer is induced to enter in the contract by a material non-disclosure or misrepresentation.
(iii) The facts may, however, be such that it is to be inferred that the particular insurer or reinsurer was so induced even in the absence from evidence from him.
(iv) In order to prove inducement the insurer or reinsurer must show that the non-disclosure or misrepresentation was an effective cause of his entering into the contract on the terms on which he did. He must therefore show at least that, but for the relevant non-disclosure or misrepresentation, he would not have entered into the contract on those terms. On the other hand, he does not have to show that it was the sole effective cause of his doing so."
Sir Christopher Staughton (in the majority, like Clarke LJ) echoed these observations, saying this at :
"In reaching that conclusion I have had regard to the classic speech of Lord Mustill in Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd  1 AC 501 at p. 549, and I hope that I have followed it. A misrepresentation or non-disclosure which did not make any difference, in the sense that the underwriter would have agreed to the same contract on the same terms if it had never been made, cannot be an inducement. Benjamin Franklin once wrote that for want of a nail a shoe was lost; for want of a shoe the horse was lost; and for want of a horse the rider was lost (Poor Richard's Almanac). But in my view, causation cannot in law exist when even the 'but for' test is not satisfied."
"I take the law to be this: if it is established that the representee did not allow the representation to affect his judgment in any way then he could not make it a ground for relief. If on the other hand the representee relied on the misrepresentation, then the representor cannot defeat his claim to relief by showing that there were other more weighty causes which contributed to his decision to enter into the contract. In this field the court does not allow an examination into the relative importance of contributory causes. In other words, it is sufficient if the representation is a cause even if it is not the cause operating on the mind of the representee when he enters into the contract."
Ward LJ emphasised the words "a" and "the" in the last sentence in the same way as I did earlier, before going on at  to refer to Edgington v Fitzmaurice, as follows:
"In my judgment that has been well established since Edgington v Fitzmaurice …. Cotton L.J. expressed the principle at p. 481 as follows:
'It is not necessary to show that the misstatement was the sole cause of his acting as he did. If he acted on that misstatement, though he was also influenced by an erroneous supposition, the defendants will still be liable.'
Bowen L.J. said at p. 483:
'The real question is, what was the state of the plaintiff's mind, and if his mind was disturbed by the misstatement of the defendants, and such disturbance was in part the cause of what he did, the mere fact of his also making a mistake himself could make no difference. It resolves itself into a mere question of fact.'
He referred also, at , to Fry LJ having stated at p. 485:
"But in my opinion if the false statement of fact actually influenced the plaintiff, the defendants are liable, even though the plaintiff may have been also influenced by other motives."
"That that still represents the law was affirmed in St Paul Fire & Marine Insurance Co (UK) Ltd v McConnell Dowell Constructors Ltd  CLC 818, 827-828 per Evans LJ."
Ward LJ, then, had this to say at :
"I am happy to express my agreement with the analysis of the law conducted by Clarke L.J. subject to this reservation. I am not entirely sure that it is necessary to require the misrepresentation to be an effective cause of a party's entering into the contract on the terms on which he did. If by that qualification my Lord means no more than that it did actually play upon his mind and influence his decision then I have no argument. In other words I readily accept it must have some causative effect. I would be concerned if the insistence on an effective cause were to lead to an evaluation of the weight placed by the representee upon the various matters which in combination lead to the agreement. We must be careful not to be led back into the error that the cause has to be a decisive cause."
"I agree with Ward LJ that in determining whether the insurer or reinsurer was induced to enter into the contract the court does not embark upon the exercise of finding the decisive cause or the main reason. However, I remain of the view that the non-disclosure must be an effective (or as Arnould puts it in the passage quoted in paragraph 58 above) a real and substantial cause of the decision to enter into the contract. That conclusion seems to me to be supported by the passages from the judgments in Edgington v Fitzmaurice quoted by Ward LJ."
Importantly, Clarke LJ went on at  to use the language of would, suggesting in pretty unambiguous terms that, as far as Clarke LJ was concerned, it was not in relation to would (or might) that he and Sir Christopher Staughton differed with Ward LJ:
"Having reconsidered the evidence I also remain of the view that it was open to the judge to conclude that what was said (or written) about the participation of Munich Re played no part in ARIG's decision to participate. In short, it was open to the judge to hold that ARIG had not shown that, if it had known that Munich Re was participating only in section A, it would not have entered into the contracts or would have taken some other share and I can see no basis upon which this court could properly interfere with that conclusion."
In short, therefore, the issue in ARIG was as to the relative importance of contributory causes in circumstances where each of those causes meets the would criterion, not the would/might issue.
"The representor must have decided to make the misrepresentation because he or she judged that the truth or silence would not, or might not, serve their purposes or serve them so well. In doing so they fashioned an evidentiary weapon against themselves, and the court should not subject the victim to 'what if' inquiries which the representor was not prepared to risk at the time."
It was Mr Saini QC's submission that Lord Clarke must have been aware that the article was critical of ARIG. As such, he submitted, Lord Clarke should be taken as having changed his mind and so as now being in favour of the appropriate test involving might as opposed to would.
"Subject to one point, the ingredients of a claim for deceit based upon an alleged fraudulent misrepresentation are not in dispute. It must be shown that the defendant made a materially false representation which was intended to, and did, induce the representee to act to its detriment. To my mind it is not necessary, as a matter of law, to prove that the representee believed that the representation was true. In my opinion there is no clear authority to the contrary. However, that is not to say that the representee's state of mind may not be relevant to the issue of inducement. Indeed, it may be very relevant. For example, if the representee does not believe that the representation is true, he may have serious difficulty in establishing that he was induced to enter into the contract or that he has suffered loss as a result. The judge makes this point clearly and accurately in the third sentence of para 2.5 of his admirable judgment."
He went on at  to say this:
"I am not persuaded that the authorities lead to any other conclusion. As stated above, the ingredients of the tort of deceit are not in dispute subject to one question, which is whether a claimant alleging deceit must show that he believed the misrepresentation. In my opinion the answer is no."
He continued at :
"There are many formulations of the relevant principles in the authorities. I take two examples. In Briess v Woolley  AC 333, 353 Lord Tucker said:
'The tort of fraudulent misrepresentation is not complete when the representation is made. It becomes complete when the misrepresentation - not having been corrected in the meantime - is acted upon by the representee. Damage giving rise to a claim for damages may not follow or may not result until a later date, but once the misrepresentation is acted upon by the representee the tortious act is complete provided that the representation is false at that date.'
To like effect, Lord Mustill said in Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd (No 2)  1 AC 501, 542:
'In the general law it is beyond doubt that even a fraudulent misrepresentation must be shown to have induced the contract before the promisor has a right to avoid, although the task of proof may be made more easy by a presumption of inducement.'"
He then set out, at , Zurich's argument in support of the position that belief in the truth of the representation is not required, considering each limb of this argument at  to . One such limb involved reliance upon the presumption of inducement which applies, in particular, where there is an intention to induce by means of fraud. Zurich submitted that, if the defrauded representee first had to show that he believed the misrepresentation, there would be little (or no) utility in having the presumption (see [28(iii)]). It was this submission, relating to the presumption of inducement and no other aspect, which Lord Clarke was considering when he cited the Handley article. In short, Lord Clarke's judgment in Zurich has no bearing on the might/would issue.
"The case was one in deceit but this test for inducement applies in all deliberate misrepresentation cases. The important point is Bowen L.J.'s reference to the misstatement being 'actively present to his mind'. This excludes only those misrepresentations where the truth is known and those which have been forgotten or ignored as irrelevant or immaterial. The question was considered in Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd where Lord Goff of Chieveley said that inducement was established if the misrepresentation had 'an effect on the mind' of the insurer or an 'influence on [his] judgment', which I suggest propounded a single test. Lord Mustill said that inducement was not established where the misrepresentation 'did not influence the judgment', 'did not influence the mind', or 'had no effect on the decision'. Here again I suggest he was propounding a single test. Lord Lloyd of Berwick asked whether the misrepresentation 'might well have influenced the underwriter'.
There, then, follows citation of other cases, including In Re London & Leeds Bank Ltd (1887) 56 LJ Ch 321, in which Handley takes Stirling J to have decided that 'but for' causation does not need to be proved, and JEB Fasteners Ltd v Marks Bloom & Co  1 All ER 583, as to which Handley says this:
"Properly understood the decision of the Court of Appeal in JEB Fasteners Ltd v Marks Bloom & Co may be consistent with these authorities, and it is only some dicta applied later to deliberate misrepresentations that are clearly out of line. In any event it was an action for negligent misrepresentation and distinguishable in the present context. The trial judge found that: 'the plaintiffs would not have acted differently if they had known the true position as to the accounts'. Sir Sebag Shaw, who gave the principal judgment, said that what the trial judge really meant was that 'while the content of the accounts was observed and considered it did not in any material degree affect [the plaintiffs'] judgment'. This would be orthodox if 'any material degree' was intended to mean 'any' degree, but not if a greater contribution was required. Donaldson L.J. agreed but added that inducement was not established where the misrepresentation related to 'subsidiary factors which support or encourage the taking of the decision'. If these were false the validity of the decision would not be affected because 'if the truth had been known or suspected the same decision would still have been made'. Stephenson L.J., who agreed with Sir Sebag Shaw, but not Donaldson L.J., added that:
'as long as a misrepresentation plays a real and substantial part, although not by itself a decisive part, in inducing a plaintiff to act it is a cause of his loss'."
He goes on:
"Although Sir Sebag Shaw's judgment contains the ratio, the dicta of the other judges proved to be influential.
The decision was rescued from obscurity by Rix J. who in Avon Insurance Plc v Swire Fraser Ltd, a deliberate misrepresentation case, said that it decided:
'[that there is a] distinction between a factor which is observed or considered by a plaintiff or even supports or encourages his decision, and a factor which is … a real and substantial part of what induced him to enter into the transaction'.
In his view only the latter would be causative. Then in Assicurazioni Generali Spa v Arab Insurance Group 44 Clarke L.J., in the majority, over the dissent of Ward L.J., said:
'If the insurer would have entered into the contract … in any event the representation … will not … be an effective cause of the making of the contract … [I]n this context … causation cannot exist when even the 'but for' test is not satisfied … He must … show at least that, but for the … misrepresentation, he would not have entered into the contract …'.
A requirement that the misrepresentation be a necessary cause is unsupported by authority and is contrary to the Cranworth test. The dictum of Rix J. was applied in Dadourian Group International Inc v Simms where the Court of Appeal said:
'… the presumption of inducement is rebutted by the representor showing that the misrepresentation did not play a real and substantial part in the representee's decision to enter into the transaction, the representor does not have to go so far as to show that the misrepresentation played no part at all'.
These decisions were followed by Christopher Clarke J. in Raiffeisen Zentralbank Osterreich AG v Royal Bank of Scotland Plc. The recent and novel 'but for', 'a real and substantial cause', and 'only support and encourage' tests require contributory causes to be weighed and should be rejected'."
It is this last passage, in particular, which Mr Saini QC submitted entails Handley favouring might over would. It is quite apparent, however, that the focus here is on something quite different: the relative weight (or decisiveness) to be attributed to particular causes, rather than on the might/would question which nowhere is even mentioned in the article.
"The representee is not required to show that he would not have entered into the contract had the representation not been made. The evidence may, however, show that he would or might well still have entered into the contract, even if the misrepresentation had not been made. In such a case one might argue that the representation did not cause him to enter the contract, because 'but for' the misrepresentation he would still have entered into the same contract, or suffered the same loss. On the other hand, it is still true to say that the misrepresentation, if present to his mind and acting as one of the factors he took into account in making his decision, did in fact cause the representee to enter the contract, and that he should still be permitted to base his claim to rescind upon the representation. At least in relation to fraudulent representations the courts have indicated that they will not deny the representee the right to rescind on this ground."
Again, however, the question which Cartwright is here considering is not the might/would question but whether one of multiple causes can be an effective cause. That, indeed, is made clear by the reference in the third line of this passage to "would or might well" without drawing any qualitative distinction between would or might.
"If the purpose of this measure of damages assumes that the loss associated with the contract or other conduct would not have taken place but for the misrepresentation, there is no reason why a test of inducement should be any different. That is, it is a test that presupposes a strong sense of causation. If it were otherwise, the claimant might well receive a windfall …
It is suggested that the Court should adopt a strong test of inducement for all misrepresentations, even in cases of deceit. Whilst no one likes a fraudster successfully to have deceived an innocent, it is difficult to see why the Court should allow a cause of action to exist, the mark of which is the suffering of damage, where in truth no damage has been sustained by reason of the misrepresentation. How can it seriously be suggested that a representee has suffered damage when that representee would have concluded the contract or pursued the line of conduct alleged to have been induced in any event (and consequently suffered the same loss) even if no misrepresentation had been made? It is understandable that the Courts, explicitly fuelled by moral considerations, might be prone to punish fraud even if no damage resulted from the wrong. Unlike the making of fraudulent claims in the context of insurance contracts, where no inducement need be proved; damage resulting from the wrong remains an essential requirement of the cause of action in deceit. If, for policy reasons such as apply with particular force to insurance contracts, the law wished to remove the element of damage (i.e. iniuria) from the cause of action, the Courts should say so."
Mr Saini QC criticised this, suggesting that the passage conflates the issue of causation of loss with the question of reliance, but I do not agree since the point which MacDonald Eggers is making is that, since the iniuria requirement is an ingredient of the cause of action, the fact that a claimant might not have contracted on the same terms had there been no misrepresentation is obviously highly material. I need not, however, base my approach to this case on MacDonald Eggers being right and, accordingly, do not do that, instead adopting the approach which is consistent with that adopted in Raiffeisen, Cassa di Risparmio, Leni Gas and NIVE v Rembrandt.
"The next feature of the doctrine of election in these cases which in my opinion is important is that when the person entitled to make the choice does so one way or the other, and this has been communicated to the other party to the contract, then the choice becomes irrevocable even though, if and when the first person seeks to change his mind, the second cannot show that he has altered his position in any way.
This being so, I do not think that a party to a contract can realistically or sensibly be held to have made this irrevocable choice between rescission and affirmation unless he has actual knowledge not only of the facts of the serious breach of the contract by the other party which is the pre-condition of his right to choose, but also of the fact that in the circumstances which exist he does have that right to make that choice which the law gives him. To hold otherwise, subject to the considerations to which I shall refer in a moment, would in my opinion not only be unjust, it would be contrary to the principles of law which one can extract from the decided cases."
The position is summarised, also, in Virgo, Principles of the Law of Restitution (3rd Ed., 2015) at pp. 27-28:
"The claimant cannot rescind a transaction which he or she has affirmed. Two conditions must be satisfied before the transaction can be considered to have been affirmed. First, the claimant must know of the circumstances which enable him or her to rescind the transaction, as will be the case where the claimant discovers that he or she was induced to enter into the contract by virtue of the defendant's misrepresentation. But rescission will not be barred if the claimant merely had the means of discovering that there was a ground for rescinding the transaction, even if this could have been discovered with due diligence.
Secondly, the claimant must unequivocally show by words or conduct that he or she has decided not to rescind the contract. It is not necessary for the claimant to communicate this affirmation to the defendant."
As to the second element, the conduct must be "inconsistent with an intention to rescind the contract": see Chitty at paragraphs 7-132 and 7-133.
"If A wishes to allege that B, having had a right of rescission, has elected to affirm a contract, he should in his pleadings, so it seems to me, expressly allege B's knowledge of the relevant right to rescind, since such knowledge will be an essential fact upon which he relies."
As to this, RBS pleaded in its Re-Re-Amended Defence that Marme:
"has affirmed the Swap by continuing with the Swap without seeking at the earliest opportunity to rescind it and by making payments under it with knowledge of the matters of which it now complains".
The plea went on to refer to Marme having:
"made a payment under the Swap on 20 February 2014, two-and-a-half months after the press release upon which its claim is based".
Similarly, the Non-RBS Banks pleaded in their Re-Amended Defence and Counterclaim that:
"Marme has affirmed the Swaps by making payments under them in February 2014, after the alleged falsity of the (denied) EURIBOR Representations was known to it, following the 4 December 2013 press release …".
It can be seen, therefore, that Mr Saini QC was, strictly speaking, right that that none of the Banks expressly pleaded that Marme had knowledge of its right to rescind. In circumstances, however, where there has been no suggestion on Marme's part that it has been, in any sense, prejudiced by this pleading deficiency, and given that it must have been obvious, at all times, that the Banks were meaning to allege knowledge of a right to rescind given that affirmation has been alleged, however imperfectly, it would be inappropriate to decide the case on this technical basis. The more so, since, as I shall now explain, in substance, the affirmation case is unanswerable.
"Q. Now, at some point after the default in September 2013 you became aware, didn't you, of the fact that the European Commission had fined RBS for participation in the cartel?
A. Sometime in early 2014 I did, yes.
Q. Well, the fine against RBS was quite big news at the time, wasn't it?
A. Well, I read about it, obviously, because I became aware of it.
Q. Yes. And you told us before that you would keep up, as it were, with news reports about RBS particularly?
A. Well, I wouldn't say I kept up with; I didn't have it on my computer as a watch or something like that. But whenever I saw an article in the press about RBS, I tended to read it, yes.
Q. I'm going to suggest to you, just so it's clear, that it's likely you would have found out about the European Commission fine at the time it was made because it was reported extensively in the newspapers.
A. Well, if you show me where it was reported extensively, I'll let you know whether I saw it. But I don't believe I saw it in late 2013, I believe I saw it in the beginning of 2014, and it was a result of becoming aware of it that I first discussed the matter with lawyers."
Albeit a little grudgingly, it can be seen, therefore, that Mr Maud accepted that by the start of 2014 he had become aware of the EU Commission Press Release. Mr Maud need not have been so grudging, however, because he had at an earlier stage of the proceedings, in his second statement, stated as follows:
"RBS's involvement in Euribor manipulation had become a matter of public knowledge on 4 December 2013, when the European Commission announced by a press release that it had fined eight international institutions a total of €1,712,468,000 for participating in illegal cartels in markets for financial derivatives covering the European Economic Area. RBS was fined €131 million for its participation in the cartel of banks that had colluded to manipulate Euribor, which also included Deutsche Bank, Société Générale and Barclays. I believe that I became aware of this development in early 2014."
"Q. So when you read about RBS's involvement in the cartel in the press, you formed the view that RBS had concealed a corruptly established rate from you?
Q. Right. My question is this: if you had – as you say you did – interpreted the European press release as showing that RBS had been guilty of concealing corruption from you, wouldn't the natural response have been for you to complain to RBS?
A. We were – the reason I put the company into insolvency, protective insolvency, was to protect from what I believed was the imminent enforcement by RBS of its security against the company to the detriment of the company, and acting in the best interests of the company, I put it into protective insolvency to protect it from RBS, amongst others. And therefore our dialogue, I've got to say, at that point was limited.
Q. Well, you say it was 'limited'. Just to get the chronology, in December 2013 the European Commission press release is published. You read it at some point, or you read the report of it either then or some point later. You form the view that RBS has concealed corruption from you. But you don't make any complaint to RBS?
A. Well, my lawyers wrote a letter before action to them.
Q. Well, your lawyers wrote a letter before action in August 2014, didn't they?
A. Whenever it was, they wrote a letter before action to them.
Q. Well, we'll come to that in a moment. But so far as you are concerned, at no stage in December, January, February, all the way up to August, did you contact anyone at RBS and say –
A. Well –
Q. – 'What's happened here?'
A. No, I didn't, but I think it's fair to say that RBS were not engaging with me at that point. On the contrary, they were seeking to enforce against the asset which I was director of, a company I was director of and which I was one of the beneficial owners of, in detriment to the company and in detriment to myself, and we didn't have a dialogue. And I thought -- you know, even if I thought of writing to RBS, I think they would have treated it in the normal disdain that they treated at that time any communication from me.
Q. So even though you say you'd formed the view that EURIBOR was corrupt and RBS had concealed it from you, you didn't think there was any point in writing to them?
A. Well, no, I didn't, for the reasons I've just told you."
I interject to acknowledge that, whilst these latter exchanges embraced time periods which went beyond February 2014, Mr Quest QC was, then, careful to steer Mr Maud back to the relevant time period in these further exchanges:
"Q. Now, in February 2014 the next quarterly payment fell due under the swap, didn't it?
A. It did.
Q. Yes, And that was another €5 million net –
Q. -- that Marme had to pay under the swap to RBS?
Q. If you had formed the view that EURIBOR was a corruptly established rate and RBS had concealed that from you, why did you allow that payment to be made?
A. I thought about it long and hard, and the reason I did was that I didn't want to give any -- any reason to RBS or justification for RBS to terminate the swap.
Q. Right. But you didn't even write to RBS to make any kind of reservation of rights or any complaint at all?
A. We had conversations, but at that time I didn't --I didn't -- you know, we were not in a dialogue where we were discussing this sort of thing. Generally communication was through lawyers or professional advisers. And I did think very long and hard about making the payment and -- but we decided -- I decided fundamentally to make the payment because I didn't want to give RBS and the other banks the excuse of terminating the swap at that point.
Q. So you made the payment without making any complaint, even though you say you were aware by then that RBS had contributed to the corruption of EURIBOR?
A. Well, we were considering bringing these proceedings at that time and -- and I didn't think it was appropriate to warn them of those proceedings at that time.
Q. You didn't even think it was appropriate to complain to them about what you thought you discovered?
A. Well, you're presupposing a situation where there is a convivial relationship between two parties. There wasn't."
Mr Quest QC was here, very clearly, putting to Mr Maud that the payments which Marme made in February 2014 were made at a time when Marme could have chosen not to pay. If there were any doubt about what was being put, however, that doubt is dispelled by what followed:
"Q. Mr Maud, you were formerly a practising lawyer, weren't you?
A. Oh, a long time ago.
Q. But you probably remember, don't you, from your legal practice the principle that if you are misled into entering a contract, that you're able to set it aside or rescind it?
A. Pardon me?
Q. You probably remember, don't you, the principle that if you are --
A. Yes, but --
Q. -- misled into entering into a contract, that you may be able to set it aside?
A. Yes. I also remember that to do that, you need to bring legal proceedings."
"It is a trite law that, if a contract is to be rescinded, the representee must rescind the whole contract or none of it. He cannot elect to rescind only the part affected by the misrepresentation, whilst retaining the advantages of the remainder of the contract. Similarly, if the representee is unable to make restitution of parts of the benefits obtained under the contract, he cannot rescind as regards the remaining part."
Mr Quest QC and Mr Howe QC submitted that this applies also to situations where a number of interdependent contracts are entered into and form part of an indivisible wider bargain where rescission of a single contract would amount to a rewriting of the parties' (overall) bargain. On this basis, Mr Quest QC and Mr Howe QC submitted, rescission of the Swaps alone ought not to be ordered in this case, given that they form part of the (overall) Transaction along with the Senior Loan (which was entered into not just between Marme and the Banks but also with Postbank and RZB, non-parties to the present proceedings), the Junior Loan and certain equity funding (which concerned Ramblas and Mr Maud and Mr Quinlan personally). To permit the Swaps alone to be rescinded, Mr Quest QC and Mr Howe QC submitted, would entail the rewriting of the bargain into which not only Marme and the Banks entered but also other parties which are not before the Court.
"The principle that rescission of part of a contract is not an available remedy has been applied in cases where there is as a matter of form more than one contract comprised in a wider transaction. Thus in A H McDonald & Co Pty Ltd v Wells (1931) 45 CLR 507 the High Court of Australia held that where a contract had been entered into and then replaced some months later by a second contract - both having been induced by innocent misrepresentation - the remedy of rescission could be available only if the entire transaction, including the earlier contract, were rescinded and the question whether restitutio in integrum could be substantially achieved had to be tested by reference to restoration of the position before the earlier contract had been made. That was not possible because it would have involved treating the representor as if he had had the benefit of exploiting the patents in question for a period of three years during which the representee was entitled to that benefit. No relief could be moulded 'which will accomplish an approximate restoration that will be just' … ."
He continued in the next two paragraphs by considering the claimants' submission that English law was insufficiently certain on this issue, explaining at [6.7] as follows:
"I conclude that on this issue the present state of English law is not in any doubt at all and nothing in Vadasz renders it doubtful, whatever may be the position in Australia. By reference to the state of English law as so far developed at House of Lords level that case was wrongly decided. Unless and until the House of Lords overrules the analysis by Lord Browne- Wilkinson in Barclays Bank v O'Brien and its particular application in TSB Bank v Camfield the principles binding on this court are well-settled. The scope of the equitable discretion in a rescission claim is confined to adjustments to achieve substantial restitution to accommodate events that have occurred after the contract has come into force and does not extend to the general reconstruction of the bargain to achieve an objectively overall fair result."
He concluded at [6.9]:
"The crucial issue in the present application is, however, one of mixed fact and law and it is how one identifies the criteria for determining whether a number of separate contracts are part of a single overall transaction for the purposes of the rule against rescission of part of a transaction. On this point there is little or no help in the authorities, but application of general principles strongly suggests the necessary criteria. If a representee is induced to enter into separate contracts A & B by the same misrepresentation, it may be that performance of contract B depends on the prior performance of contract A. In that case one cannot rescind contract A without also rescinding contract B. To permit the survival of contract B would be inconsistent with the principles of restitutio in integrum. But there may be cases where although both contracts were induced by the same misrepresentation either can be performed without performance of the other. In that case the representee may rescind unless the contract not sought to be rescinded would never have been entered into by the parties without also entering into the other. Thus, for example, in a case where the transaction is divided into different contracts simultaneously negotiated, it may be that the consideration for the whole bargain is written into one contract, leaving only nominal consideration in the other contract. In that event it would not be open to the representee to leave open the contract that gave him the main consideration while rescinding the other under which his primary performance obligation lay. Again, to do otherwise would not effect restitutio in integrum. Or there may be cases where it is clear from the terms of the contracts and the matrix evidence that the subject matter of the contracts is so interrelated that, although it would be theoretically possible to perform each separately, one would never have been entered into without that contract sought to be rescinded. However, in the absence of structural interdependence between separate contracts, the most usual determinant of inseparability is likely to be the distribution of consideration for the whole bargain between the separate contracts."
On that basis, Colman J explained, at [7.1], that the three share distribution agreements were interdependent and so one could not be rescinded without rescinding the other two, whereas the equivalent issue as regards the share buyback agreement and its relationship with the share distribution agreements could not be conclusively determined and the issue should go to trial (see [7.12]).
"The rule against partial rescission applies to bargains rather than individual contracts. Rescission will accordingly be refused where the contract in question is part of a wider transaction, the components of which are commercially interdependent in the sense that they were contracted each in consideration or contemplation of the others and were intended to be performed together. For example, in Maguire v Makaronis the High Court of Australia reversed the decision of the court below, which had been to rescind a mortgage while leaving the underlying contractual covenants intact. The effect of that had been to leave the borrower in possession of the loan money while depriving the lender of his security. The High Court considered this to involve an impermissible reformation of a single bargain comprised of two instruments."
In the next paragraph this is stated:
"By contrast, where a contract or wider transaction is severable according to conventional principles, there is usually no difficulty with rescinding one severable part and leaving the remainder on foot. In effect the court must find that the obligations in respect of which rescission is claimed form a self-contained bargain. There may be cases, however, in which a defendant would suffer unjustified prejudice if one agreement were set aside in circumstances where a second independent agreement remained on foot, such that substantial restitutio in integrum is not possible."
"The rule against partial rescission applies, it is said, to bargains rather than merely to individual contracts. Rescission will be refused where a contract in question is part of a wider transaction, the components of which are commercially inter-dependent, in the sense that they were contracted each in consideration or contemplation of the others and were intended to be performed together."
"The obligation to make restitution must flow from the ineffectiveness of the transaction under which the money was paid and not from a mistake or misrepresentation which induced it."
That case, however, involved a claim in restitution for money 'had and received'. It is not, as such, altogether clear how it assists in considering the rationale for the rule against partial rescission. An authority more directly on point is, however, Halpern v Halpern  QB 195, in which, at , Carnwath LJ (as he then was) endorsed Professor Treitel's view that:
"the essential point is that the representee should not be unjustly enriched at the representor's expense; that the representor should not be prejudiced is a secondary consideration."
That said, it is clear that what Carnwath LJ was really addressing here was the question of which parties needed to be "restore[d] … to their previous positions". Halpern is, accordingly, not entirely on point.
"The rule against partial rescission has two bases. The most general and fundamental is that the court should not involve itself in the rewriting of bargains along lines it may consider to be fair. Where the court cannot say which part of the consideration the claimant received related to which of his obligations – in other words, where the contract is not severable – the court cannot properly erase only some of the obligations. A fortiori a claimant cannot avoid his obligations while insisting that the defendant's obligations should remain on foot or, what is in effect the same thing, while refusing to make restitutio in integrum. The rule against partial rescission and the rule requiring restitutio in integrum are for this reason closely related."
Mr Saini QC submitted that the last sentence of this passage, taken together with Colman J's observation in De Molestina at [6.2] that "the principle that there cannot be partial rescission is part of the wider requirement that there cannot be rescission unless there can be restitutio in integrum", demonstrates that the rule against partial rescission and restitutio in integrum are concerned with preventing the unjust enrichment of a representee at the representor's expense. Mr Saini QC submitted, accordingly, that the partial rescission rule is, as he put it, directed at "preventing unjust enrichment, and not some abstract concern about rewriting bargains". It is for this reason, he suggested, that, if there is no unjust enrichment, the rule against partial rescission has no application. It follows, he went on to submit, that the partial rescission rule does not apply in the present case, Marme having agreed to repay the Senior Loan in return for rescission being ordered.
"These authorities do, in my judgment, make it very clear that the principle that there cannot be partial rescission is part of the wider requirement that there cannot be rescission unless there can be restitutio in integrum. Further, that requirement is the conceptual consequence of the basic nature of the remedy of rescission which is to discharge all the parties from the bargain into which the misrepresentor has induced them to enter. It is not and never has had the function of providing compensation for the misrepresentation or some hybrid solution to reflect what would be fair between the parties having regard to the nature of the representation and the extent to which one party has been misled by another. Consistently with that, the court has no power to create a new bargain for the parties. What has been induced is the original bargain and it is the purpose of the remedy to return the parties to their position before that particular bargain was made. There is therefore no room for any form of equitable engineering directed to re-constructing the fabric of the original contract."
I agree with what is stated in this passage since it seems to me that it encapsulates the underlying principle in helpful terms. What it makes clear is that, where contracts are inseparable, it is not appropriate to attempt to unravel some of those contracts but not others since doing that brings with it the risk (or more) that a "new bargain" will be created for the parties based on notions of what is or is not fair which are necessarily born out of impermissible hindsight. That is why the partial rescission rule operates, essentially, on an 'all or nothing' basis.
"It would be obviously unjust that a person who has been in possession of property under the contract which he seeks to repudiate should be allowed to throw that back on the other party's hands without accounting for any benefit he may have derived from the use of the property, or if the property, though not destroyed, has been in the interval deteriorated, without making compensation for that deterioration. But as a Court of Law has no machinery at its command for taking an account of such matters, the defrauded party, if he sought his remedy at law, must in such cases keep the property and sue in an action for deceit …
But a Court of Equity could not give damages, and, unless it can rescind the contract, can give no relief. And, on the other hand, it can take accounts of profits, and make allowance for deterioration. And I think the practice has always been for a Court of Equity to give this relief whenever, by the exercise of its powers, it can do what is practically just, though it cannot restore the parties precisely to the state they were in before the contract."
Erlanger was considered by Lord Wright in Spence v Crawford  3 All ER 271 at pp. 288-289, where Lord Wright cited Erlanger and stated as follows:
"In that case, Lord Blackburn is careful not to seek to tie the hands of the court by attempting to form any rigid rules. The court must fix its eyes on the goal of doing 'what is practically just'. How that goal may be reached must depend on the circumstances of the case. But the Court will be more drastic in exercising its discretionary powers in a case of fraud than in a case of innocent misrepresentation. This is clearly recognised by Lindley, L.J., in the Lagunas case. There is no doubt good reason for the distinction. A case of innocent misrepresentation may be regarded rather as one of misfortune than as one of moral obliquity. There is no deceit or intention to defraud. The Court will be less ready to pull a transaction to pieces where the defendant is innocent, whereas in the case of fraud the Court will exercise its jurisdiction to the full in order, if possible, to prevent the defendant from enjoying the benefit of his fraud at the expense of the innocent plaintiff. Restoration, however, is essential to the idea of restitution. To take the simplest case, if a plaintiff who has been defrauded seeks to have the contract annulled and his money or property restored to him, it would be inequitable if he did not also restore what he had got under the contract from the defendant. Though the defendant has been fraudulent, he must not be robbed, nor must the plaintiff be enriched, as he would be if he both got back what he had parted with and kept what he had received in return. The purpose of the relief is not punishment, but compensation. The rule is stated as requiring the restoration of both parties to the status quo ante, but it is generally the defendant who complains that restitution is impossible. The plaintiff who seeks to set aside the contract will generally be reasonable in the standard of restitution which he requires."
"In closing submissions Mr Rees QC on behalf of Sheikh Tahnoon argued that Mr Kent cannot on any view rescind the promissory note alone. Mr Rees cited Molestina v Ponton  CLC 1412 for the proposition that a contract which forms an inseparable part of a larger transaction cannot be separately rescinded. In the face of this authority, Mr Kent abandoned his claim to rescind the promissory note. I think it was plain that he was right to do so. The promissory note was not a freestanding agreement but was an inseparable part of the overall transaction by which the interests of Mr Kent and Sheikh Tahnoon in the Aquis and YouTravel companies were demerged pursuant to the Framework Agreement. Its ancillary nature is demonstrated by the fact that clause 5.2 of the Framework Agreement provided for the issue of the promissory note. It seems to me impossible to separate the benefits which Mr Kent received in return for entering into the promissory note from the totality of the benefits that he received under the Framework Agreement, which included the transfer to him of the shares held by Sheikh Tahnoon in Aquis UK and Stelow. Mr Kent could not restore those benefits without rescinding the Framework Agreement. In any event, even if it were possible to rescind the promissory note without rescinding the Framework Agreement, doing so would not free Mr Kent from liability, as it would leave clause 5.2 of the Framework Agreement in effect and would simply place Mr Kent in breach of that clause, giving rise to a liability in damages equivalent to the value of the promissory note."
It is, of course, the last sentence which Mr Howe QC highlighted in support of his submission. It was Mr Saini QC's submission, nonetheless, that Al Nehayan can be distinguished on the basis that, whereas there was no qualification to Mr Kent's obligation to provide the promissory note, Clause 8.3 of the Senior Loan would only be breached by Marme if it failed to maintain such hedging arrangements as the Banks might require acting in good faith and in accordance with the purpose of Clause 8.3 and not arbitrarily, capriciously or unreasonably. As a result, he submitted, Clause 8.3 does not require Marme to agree to whatever hedging arrangements the Banks might demand, and so it does not follow that there would necessarily be a Clause 8.3 breach as Mr Howe QC suggested. I decline, in the circumstances, to reach any definitive conclusion on this issue since my earlier conclusion makes it unnecessary that I do so.
Applicable legal principles
"None of the witnesses gave direct evidence as to what the position of [the plaintiffs] would have been if the fraudulent misrepresentation had not been made. But I feel able to judge it on balance of probabilities. I have no doubt that Mr Gwyer wanted his company ... to become the exclusive distributor of [Sovereign's] products in France. I have no doubt that he wanted to buy those products at prices which meant that [Sovereign's] customers in the UK could not buy its products in the UK and take them to France to undersell [the plaintiffs] ... In my judgment it is distinctly more probable than not that, if Mr Dent had not made the false misrepresentations which he did, the ... discussion about [Sovereign's] prices would have revealed the existence of prices to large customers, as in the bulk price lists, and probably the bulk price lists themselves. In my judgment Mr Gwyer would have wished to negotiate a discount from the prices in the bulk price list ... There was no reason why Mr Dent should not have agreed such a discount. The bulk price list ... provided for an agreed salesman's commission of 10% payable on the prices in the list. What [Sovereign] sold to [the plaintiffs] would not carry salesman's commission ... Moreover, [Sovereign] were selling to some customers at prices well below those on the bulk price list, although salesman's commission was generally much less on such sales. Although some such sales appear to have been at prices as much as 25% below bulk price list, no doubt due to particular market pressures, I do not believe that Mr Gwyer would have negotiated a commission or discount as great as that as part of a long term, exclusive distribution agreement. I judge that he would have achieved a discount on bulk price lists prices of somewhere between the May 1978 salesman's commission of 10% and the discount of 25% ... which he achieved on the minimum standard rate price list prices. I can do no better than take the mid-way point of 17-5% as the discount which Mr Gwyer would probably have achieved on the bulk price list prices and agreed as the pricing mechanism in the 1979 agreements which would have followed, if the false and fraudulent misrepresentations, the deceit, had not taken place ... The agreements would have had a price clause with the same provisos as clause 5(1) of the actual agreements, relating to price increases only, but related to prices appearing in [Sovereign's] bulk price lists."
Mr Quest QC and Mr Howe QC highlighted the fact that Bell J referred in this passage to it being "distinctly more probable than not that, if Mr Dent had not made the false misrepresentations which he did, the … discussion about [Sovereign's] prices would have revealed the existence of prices to large customers, as in the bulk price lists, and probably the bulk price lists themselves". This, they submitted, makes it clear that Bell J had in mind that, had the misrepresentation in question not been made, the truth would have been revealed. They drew attention also to Bell J's reference to Mr Gwyer (on behalf of the claimant) wishing to negotiate a discount from the prices in the bulk price list and to there being "no reason why Mr Dent should not have agreed such a discount". This, they suggested, again shows that Bell J was considering what the position would have been had the truth been revealed, rather than simply proceeding on the basis that the claimant did not need to establish that the truth would, indeed, have been revealed.
"I confess to have been worrying whether there is any meaningful difference between, on the one hand, being put in the position one would have been in had one not been told a lie and, on the other hand, being put in the position one would have been in had one been told the truth. I think the answer is to follow Lord Steyn's approach to its logical conclusion because if one is truly to compare the position of the plaintiff as it was before the fraudulent statement was made to him with his position as it became as a result of his reliance on the fraudulent statement, then just before the fraudulent statement was made the plaintiff was battling in what he believed to be honest negotiations to ascertain the defendant's bottom line and he was denied finding it because of the lies that were told to him. … ."
Mr Tomson suggested that Ward LJ was here focusing on the position had the truth been known. On analysis, however, it seems to me that what Ward LJ was really doing was highlighting the very distinction identified in the submissions which were made by Mr Quest QC and Mr Howe QC whilst, nonetheless, making the point that in the case before him the plaintiff would have ascertained the truth had the misrepresentations not been made given that the plaintiff had been "battling … to ascertain the defendant's bottom line" (and so was actually investigating that bottom line) "and he was denied finding it because of the lies that were told to him". Plainly, in Ward LJ's view, but for the lies, the plaintiff's investigations would have revealed the truth. On that basis, it was appropriate to assess damages by reference to the true state of affairs.
"If Petex or Rafirom had known the true position they would probably have rejected the claim cargoes and purchased the relevant brand elsewhere. They would not have paid the price of Iranian Heavy or GOSM for a bespoke blend or purchased such a blend without being provided with yield information and negotiating a discount."
Christopher Clarke LJ went on at  to refer to an example concerning horses which Flaux J had considered, namely:
"… the example of the horse with a latent defect dishonestly concealed which turns out to win all its races."
Christopher Clarke LJ observed that Flaux J had not found the example to be of assistance to Glencore, explaining that he agreed for this reason:
"The upshot of the argument based upon it is that the seller, although fraudulent, is not, on the valuation approach, liable in damages at all. The judge rejected the argument on the basis that it ignored the fact that as a consequence of the fraud the buyer will still have paid more for the crude oil (or the horse) than he would have done if he had known the truth and that it was the difference between the price paid and the actual value which represented the loss."
He went on at  to say this:
"Mr Southern submits that it was wrong in principle to ask what the buyer would have done if he had been told the truth, relying on what Lord Steyn said in Smith New Court  CLC 1958 at 1979;  AC 254 at 283F-G:
'... it is not necessary in an action for deceit for the judge, after he had ascertained the loss directly flowing from the victim having entered into the transaction, to embark on a hypothetical reconstruction of what the parties would have agreed had the deceit not occurred.'"
He continued at  in this way:
"I do not regard this criticism as well founded. Lord Steyn's observations were designed to confirm that the deceived buyer was entitled to recover all his loss as a result of entering into the transaction and not merely such of his loss as was attributable to the falsity of the representation. In the present case the buyer's loss is the difference between the price it paid and the market value. I accept Mr Matthews' submission that this is a 'generic' exercise which does not require consideration of what alternative transaction the claimant would have entered into if not deceived or a hypothetical negotiation between the actual parties."
It was Mr Tomson's submission that OMV is authority, as he put it orally, "that the court shouldn't construct a detailed, complex counterfactual matrix guessing in what circumstances this knowledge came out, who knew, what was said, assuming investigations had taken place …" since that "would be to take into account everything known now and to rely on hindsight". I cannot agree with him about this, however, since OMV is a very different case and, more importantly still, what Christopher Clarke LJ was saying in the passages cited by Mr Tomson does not address the issue now under discussion, namely whether there is a prior question which needs to be answered before damages are assessed by reference to the truth. That prior question was not under consideration in OMV since the issue in that case was as to the appropriate measure of the loss suffered. Furthermore, I do not accept that Mr Tomson was right when he sought to characterise Mr Quest QC and Mr Howe QC's prior question as involving the type of hypothetical inquiry frowned upon by the Court of Appeal in OMV. On the contrary, in my view, all that is required is that it be asked whether, but for the EURIBOR Representations, Marme would have become aware of the truth.
"It seems to me that he should have begun by considering the kind of profit which the second plaintiff might have made if the representation which induced her to buy the business at Exeter Road had not been made, and that involved considering the kind of profits which she might have expected to make in another hairdressing business bought for a similar sum. Mr. Nicholson has argued that on the evidence of Mr. Knowles, an experienced accountant, the judge could have arrived at the same or an equivalent figure on that basis. I do not agree. The judge left out of account the fact that the second plaintiff was moving into an entirely different area and one in which she was, comparatively speaking, a stranger. Secondly, that she was going to deal with a different clientele. Thirdly, that there were almost certainly in that area of Bournemouth other smart hairdressing salons which represented competition and which, in any event, if the first defendant had, as he had represented, gone to open a salon on the Continent, could have attracted the custom of his former clients."
He continued at pp. 467H-468A, as follows:
"The judge, as Mr. Nicholson has pointed out, had two clear starting points. First, that any person investing £20,000 in a business would expect a greater return than if the sum was left safely in the bank or in a building society earning interest, and a reasonable figure for that at the rates then prevailing would have been at least £6,000. Secondly, that the salary of a hairdresser's assistant in the usual kind of establishment was at this time £40 per week and that the assistant could expect tips in addition. That would produce a figure of over £7,000, but the proprietor of a salon would clearly expect to earn more, having risked his money in the business. It seems to me that those are valid points from which to start to consider what would be a reasonable sum to award for loss of profits of a business of this kind. As was pointed out by Winn L.J., in Doyle v. Olby (Ironmongers) Ltd.  2 QB 158, 169, this is not a question which can be considered on a mathematical basis. It has to be considered essentially, in the round, making what he described as a 'jury assessment'."
Mr Tomson submitted that the same, as he put it, "fairly rough and ready" approach should be adopted in the present case when considering the question of loss. I am unconvinced, however, that East v Maurer provides too much assistance when considering the somewhat more complex counterfactuals put forward by Marme in this case. Marme's case is very specific. It would be quite wrong, in the circumstances, to adopt the type of approach advocated by Mr Tomson. The more so, given that Mr Maud accepted in cross-examination that he would not have walked away from completing the Transaction under any circumstances. Nor, indeed, is it any part of Marme's case that it would have withdrawn from the Senior Loan since, if it had done that, then, it could not have completed the acquisition of the Ciudad Financiera and so would have forfeited its €75 million deposit (the funds for which were provided by Mr Maud and Mr Quinlan) and given up the opportunity of making a very large profit. The claim is, in that sense and for that reason, as Mr Quest QC put it in closing, an "all or nothing claim": either the counterfactuals advanced by Marme are viable or they are not; there is no halfway house.
"RBS participation in Project Brick was part of a wider agreement with Santander to take some stressed assets off our hands where we've sliced other transactions to provide junior debt pieces. Propinvest are a well known client to RBS and real Estate Finance (purchased 25 Canada Square – Citi tower – from us last year)".
This followed another internal RBS email on 9 September 2008 in which Mr Bates told Mr Goodwin that RBS is "agent/coordinator at request of Santander and we know what the background is there", so hinting that there was Santander involvement in RBS becoming involved as clearly there was. Thus, in an earlier internal RBS email on 8 August 2008 from Mr Eighteen to Mr Bates it was recorded that Mr Bates "met with Jose Antonio Soler (Banco Santander) yesterday to discuss the Santander HQ sale and the reciprocal trade with RBS". The email went on to report that:
"Jose Antonio stressed that Santander would assist in the selldown of the RBS debt position on their HQ building, would consider other trades with RBS if need be and would look at the existing REF Propinvest facility on Blade 'if they had to'".
The same point is made clear by a circular email sent by Mr Eighteen after the Transaction closed on 12 September 2008, telling the recipients that:
"This was a key transaction for Santander as it released approx. €600m of tier 1 capital on the sale and consequently REF were able to negotiate on favourable terms a separate €500m asset sale agreement with Santander in return for providing this support".
"CB emphasised the relationship element of the deal: Santander's CFO and Johnny Cameron have been in negotiation in relation to RBS providing liquidity to this deal and it was important to note that JANC was supportive of the transaction.
CB summarised that there are 2 key selling points for the deal – the 5% fee and Santander taking a REF position in return for us helping them in the sale of their HQ."
Subsequently under the heading "Fees and Pricing", Mr Tiesi was recorded as saying the following:
"… that this deal stacks up on the basis of the rewards (5% fee)/risk therein and any reciprocal trade with Santander is a bonus."
Under the heading "Conclusion", Mr Tiesi was, then, reported to have:
"… expressed his view that the deal is at market terms, he is comfortable with the yield and the tenant/counterparty. Additionally, he feels that the offloading of Blade debt is a bonus and is overall very supportive of the transaction."
It was Mr Quest QC's submission that there is nothing in these minutes to show that RBS was desperate to do the deal. I agree with Mr Quest QC about this. I consider also, more generally, that Mr Maud's insistence in evidence that RBS (in the shape of Mr Cameron, in particular) would have intervened in Marme's favour amounts, in truth, to little more than conjecture.
"What I want to hear from you is: faced with a negotiation with Mr Goodwin, for example, what is it you would have said to him which you think would have persuaded him to change his mind?"
Mr Maud's answer was this:
"Yes, right. So what I would have said was -- what I tried to explain was the context in which I would have said this. I would have had no -- in this hypothetical world we're talking about, I would have said to him, 'Look, you know, we can't trust the rates that you're setting for EURIBOR as -- which obviously feed into the swap rate, and therefore, you know' -- and I don't know if it's, as I say, 1 bp or 100 bps, where the swap in terms of mark to market, in terms of the embedded loan, day one embedded loan, was enormously sensitive to any movement in spread, any movement. I mean, 1 bp made -- you know, I think as you can see from the evidence on the last day, one movement, small movement, actually made a difference between the embedded loan being €100 million, €107 million, then €117 million. So small movements were -- had a dramatic effect. And if actually the rate that we were being offered was not true and honest, I really, really don't want to enter into this swap.
But I do appreciate that the senior loan would be predicated on EURIBOR, but for me that was a quid pro quo that I was prepared to take, because I can terminate the loan without break costs at any time."
The exchanges, then, continued in this way:
"Q. Right. I understand what you're saying your reasons would be. But if Mr Goodwin had said, 'Well, sorry' –
A. You just asked me what my reasons would be; I just told you.
Q. Right. But if Mr Goodwin had then said to you, 'Well, I'm sorry, but I'm not prepared to move from my position' –
Q. -- what would you have done with the information then?
A. Well, I would -- I would have sought to implore him and his seniors that -- you know, I'm assuming that this would be public information, that's the way I would have found out about it -- that in these circumstances the bank should understand that on a major transaction like this, with what was then, you know, one of their biggest clients, one of their best, biggest real estate clients, they should assist me and, you know, in all honesty and truthfulness, look at this alternative structure which I proposed to them.
Q. So you would implore them to do that. But if RBS said, 'Look, this manipulation business may be serious and we've reported it to the regulators' –
A. Well, I -- yeah, sorry.
Q. – 'and maybe there will be an investigation and maybe there has to be a prosecution, but we can't give you a preferential rate because of that', what would you have done then?
A. Well, I would have continued to argue. I would have gone to Santander. I would have -- I would have sought in all circumstances not to fix into a swap which I believe was predicated on rates which might be costing my company and the interests of my company an enormous amount of money."
Mr Quest QC, then, pressed Mr Maud further:
"Q. Because the truth is if this information had come out earlier, no doubt there would have been an investigation, as there was, perhaps by the Commission, perhaps by the regulator, by whoever, but why should that make any difference to the terms of your deal?
A. Because the situation was that at this stage I believe -- and obviously this is a matter for your client to argue in this case -- I believe that EURIBOR, from what I've read and what I understand, that EURIBOR was being manipulated at this moment and affected the rates that my company was transacting at.
Q. The reality, Mr Maud, though, is if, after listening to your arguments, RBS had said, 'Well, I'm sorry, but we're not going to allow this to affect the commercial terms of our deal with you' –
A. I would have had to reflect on it.
Q. Well, there was nothing you could have done about it?
A. Well, you say there's nothing I could have done about it. I don't know. I would -- I would have done everything I can, in those circumstances, not to fix into rates which were based -- and remember, it's not only on – it's not only on commencement; obviously manipulation of rates has an effect on termination. And in circumstances where I was looking to terminate this swap sooner rather than later, that's equally pertinent. On the basis that I believe that RBS were manipulating rates at this period, then I would have done everything, and I would have taken it to whatever level I needed to, to persuade RBS that they needed to deal with me, as a major -- major real estate client on the largest -- as you said, the largest real estate transaction in Europe, in a proper way. And I knew I would have leverage both through my own relationships, but in particular through the relationship of Santander at the very highest level. And I believe that with that concerted effort, we would have got what we -- what I propose here and what I would have sought."
Mr Quest QC, then, put the point a final time:
"Q. The truth is, if RBS didn't accept your entreaties, you had no option but to go ahead anyway with the swap?
A. Well, as I said before, my intention always was to complete this transaction. I put a lot of effort into it, I had personal funds committed in it, et cetera, et cetera, et cetera. But -- but I would have -- you know, as you can see from the thing -- from the evidence, I can be a very stubborn man, I can be a very hard negotiator, and I wouldn't have let it drop, I wouldn't, and they would have had a very serious time doing anything else but this transaction. As I can say, you know: look, I persuaded RBS to fund me 100% on a £1 billion sterling asset, right? Not everybody can do that. I did it."
"Q. Now, I'm not accepting what you say about leverage as against RBS for these purposes is correct. Mr Quest QC has asked you questions and I'm not going to go back over that. But I want to ask you about the position of my clients, the second to fifth defendants. Do you understand?
Q. Now, you don't suggest that on this hypothesis the fact of RBS's EURIBOR misconduct becoming public would somehow have given Propinvest any leverage over the second to fifth defendants, do you?
A. No, I don't.
Q. Right. Because you accepted that my clients had no involvement in any such misconduct?
A. No, I believe my leverage would have been over Royal Bank of Scotland, not your clients."
Mr Howe QC, then, explored, in the exchanges set out below, with Mr Maud what he was, in the circumstances, expecting that the Non-RBS Banks would have done:
"Q. So leaving RBS to the side for a moment, in this counterfactual world really the position isn't any different as against my clients, in the situation where you assume you've become aware of EURIBOR misconduct, from the real world, in which things happened as they actually did, is it?
A. Well, I would have expected, as I said in my evidence yesterday when I was cross-examined by Mr Quest, I would have expected Royal Bank of Scotland to sort out the situation …
Q. So what you were suggesting was that RBS might subsidise the other banks?
A. Well, I'm sorry, Mr Howe QC, what I said, if you read the -- all of the answer there, is: '... I don't know how they would have done it. It's not my business ... it's up to them. I would have made [a] proposal to them in the circumstances we're talking about ... it's a hypothetical world: I'm hypothesising what the banks could have done. And one ... thing they could have done is ...'
Q. Today, in the context of our discussion about credit spread, you said … that you didn't believe that RBS would have subsidised the other banks in any circumstances.
A. I said in relation to the swap.
Q. In relation to the credit spread.
A. Yeah. But I'm not saying, in a situation where they'd been found to have been criminally and fraudulently manipulating EURIBOR, that I would not have had some leverage with the 4% additional fee, which, as you say, was probably not known to the other banks, in order to do something -- do something to compensate the banks for taking -- the other banks, your clients -- for taking the swap out of the transaction and dealing with my alternative structure. As I said, from the part of the answer which you didn't speak but which I just repeated, that's just one suggestion. I've got no idea how they would have --
Q. Well, I asked you to read the whole of the answer and then I particularly drew your attention to two sentences in it.
A. Yes, but what I'm saying, to finish, is I had no idea how they would have done it, but I would have expected them to do it.
Q. Well, the bottom line is there you really have no idea whether, as you said in the final sentence of your answer --
A. I just gave one hypothetical way in which they could have possibly done it. I'm not saying that they would have done it; I'm not saying they would have considered doing that. I'm just saying that's a hypothetical thing they could have done, in the hypothetical world we were discussing.
Q. At any event, in this hypothetical world that you're postulating, you wouldn't expect my clients, the second to fifth defendants, who are totally innocent of any alleged EURIBOR manipulation, to be taking a financial hit as a result of the new hypothetical structure?
A. I think I -- I think I said that almost implicitly in that statement by saying that in the hypothetical world we were discussing, that they would, I suspect, have needed to be compensated. And that's why I, as you say, postulated that one of the ways that could be achieved would be by taking their 4% additional fee and distributing that to the banks in lieu of the profit they would make from the swap."
"The Transaction was not a once-in-a-lifetime deal that was not to be missed, as illustrated by the difficulty that Bayern LB had from the outset finding willing participants."
Mr Feenstra cited Bayern, in particular, in recognition of the fact that Bayern was unable to close the deal before RBS's intervention. In fact, a number of the banks (including Bayern and ING) struggled to get credit approval for the sums originally sought. Mr Greenland's evidence was that the absence of hedging would have made securing credit approval "extremely unlikely" and that the Swaps were "essential" to ensure that interest rate risks were fully hedged. He confirmed in cross-examination that the PIK structure would not have solved the issue of interest rate risk to the lender, and he also gave evidence that in 2008 it would not have been usual for Bayern to have lent money without interest rate hedging because it was part of Bayern's "basic business plan" to insist on full hedging. He described the possibility of interest rate rises as "a huge risk to the lenders" and, when asked what his reaction would have been if he had been asked to underwrite this particular transaction without interest rate hedging he stated that "It wouldn't have been entertained".
Counterfactual 1 – PIK Loan Structure
"At the time, I had – - I had a series of dates which I had to meet in terms of completion and my concern was to get the transaction over the line, and I understood that the majority of the banks or most of the banks in the syndicate required a swap. So it was pointless trying to defeat the object of raising the debt by putting barriers in the way of achieving that. And so, … I reluctantly accepted that we had to proceed ...
But I realised and I was persuaded by my team that there was no point shouting and jumping up and down about it; that we had to proceed with this transaction, in order to get these banks over the line, on the basis of a swap. And that's what we did".
Later on, Mr Maud confirmed this:
"I wanted – I wanted to get this transaction over the line, and the way I realised in rapidly deteriorating capital markets was – that I had any chance of getting over the line was to agree to a swap".
Then, asked whether he thought that interest rate hedging was desirable, Mr Maud's answer was this:
"… My view was: I would have preferred there not to be a swap, for the reasons I've just explained. But I understood that in the very difficult economic climate we were in at that time, back in 2008, that I needed to enter into a swap, otherwise I would not be able to finance this transaction. And that's – that's my evidence".
"… it was part of our basic business plan. We were -- our business plan was modelled upon commercial property investments with secure income streams, with fixed rates of interest, on a non-recourse basis to shareholders. And so in that respect we always insisted upon full hedging, so that we could fix the cash flow and model an accurate cash flow, so that we could see where we were throughout the loan and at the expiry of the loan."
Asked, then, what his reaction would have been if he had been asked to underwrite the Transaction without interest rate hedging, his answer was that "It wouldn't have been entertained".
"For us it was key that there was interest rate hedging in the form of a swap".
So, too, was Mr Grey, who made it clear in his first witness statement that "If the Transaction had not included any interest rate hedging, HSH would simply not have participated in it at all, never mind been willing or able to extend a credit line of over €300 million", something which he confirmed when being cross-examined because he described the interest rate hedging as being "a very, very important part of the commerciality of the this deal" which was "instrumental to the whole transaction" and "a condition precedent to drawing the facility".
"…the increase of income from Marme over time was not so much of an issue, but what would happen with the three-month rollover interest rates, that was the issue. So the income side was not an issue; it was the expenses that this single purpose vehicle was supposed to make, directly linked to three months interest developments on the market."
This exchange, then, followed:
"Q. Okay, let's split it up then. So we're dealing first of all with rental payment shortfalls, which in principle could be covered by a PIK loan. And your point is separately from that: how are you going to deal with your exposure to EURIBOR? And I think your point is, if I've understood correctly, you need a swap to deal with the exposure to EURIBOR; is that right?
A. You need a swap to fix – to hedge against interest rate rises, for of course there quite a few ways to hedge against interest rate risk. But in this case, because it was so tight that even on day one they could not afford paying interest, interest rate swap is the one and only solution."
There is no suggestion here that the Banks would have adopted a relaxed approach. On the contrary, Mr Feenstra's explanation, which is consistent with evidence given by others (including Mr Goodwin), displays a rather more rigorous approach than that apparently envisaged by Mr Maud.
"Well, let's face it, the PIK loan, the PIK loan in question, or the hypothetical situation in question here is a situation that's just ... it's being modelled on the basis of hindsight. And what the PIK loan doesn't include, and nor does any of the suggested structuring involving the senior and the PIK, it doesn't involve interest rate swaps or hedging. So there's a huge structural gap there, there's a huge risk to the lenders. And so in that respect, if the interest rates were moving up and had moved up, then that's not a satisfactory solution. You can only come to that conclusion with hindsight."
Mr Greenland put this very well. I agree with him. Marme's first counterfactual case involves acceptance of a scenario which I am quite clear would not, in reality, have been capable of being achieved.
Counterfactual 2 – Swap Discount Structure
"I could have argued that the uncertainty over whether Euribor was accurate should be resolved decisively in favour of Marme by a reduction in the fixed rate payable by Marme under the Swaps. I could have argued that each fixed payment rate under the Swaps should be reduced by, for example, 0.5% to compensate Marme for the risk of being exposed to overpayments through the upward manipulation of Euribor … I could also have argued that there should be a reduction in the 15 basis point credit/execution spread imposed by RBS on behalf of the banks: a profit element for the banks which should be reduced in the circumstances. My view of the reasonable market rate for spreads on swaps of this nature was in the range of 5 to 8 basis points, and that is what I would have tried to obtain for Marme. A reduction in the credit/execution spread would have been part of the overall 0.5% reduction in the fixed rate, and not an additional reduction."
"Accordingly, what I had intended to convey … concerning this second alternative, and what I had thought at the time I signed it was actually being conveyed, was not that there would be a 0.5% reduction in the interest rate payable by Marme on the fixed interest element created by the EURIBOR Swaps, but rather that a reduction of, for example, 0.5% should apply to the overall fixed interest rate payable by Marme from the combination of the Senior Loan interest margin (160 bps) and the fixing of EURIBOR created by the Swaps."
He explained that Marme's lawyers, in pleading the alternative claim based on his original evidence, had got the "wrong impression". Whatever the rights and wrongs of that explanation, what matters for present purposes is that the case as ultimately put forward at trial, after Mr Saini QC had in opening clarified the position, was not based on a contention that a 50 bps reduction in the overall interest rate across the Senior Loan and the Swaps would have been realistically achieved through negotiations with the Banks but that a 10 bps reduction (from 15 bps to 5 bps) in the Swap rates would have been achieved (the other 40 bps reduction being in respect of the Senior Loan margin). Marme's case (at least at trial and despite not being entirely consistent with what Mr Maud had to say even in his most recent witness statement) was, therefore, in effect, that, whereas a 50 bps reduction in respect of the Swaps would have been unrealistic as it would have meant that the Swaps were loss-making at the outset, a 10 bps reduction would merely have reduced the profit taken by the Banks on the credit spread (and a 40 bps reduction in the Senior Loan would merely have reduced Marme's payment of interest but not required the Banks to make payments to Marme).
Liability of the Non-RBS Banks: Agency
Apparent authority – the law
"(1) Agency is the fiduciary relationship which exists between two persons, one of whom expressly or impliedly manifests assent that the other should act on his behalf so as to affect his relations with third parties, and the other of whom similarly manifests assent so to act or so acts pursuant to the manifestation. The one on whose behalf the act or acts are to be done is called the principal. The one who is to act is called the agent. Any person other than the principal and the agent may be referred to as a third party.
(2) In respect of the acts to which the principal so assents, the agent is said to have authority to act; and this authority constitutes a power to affect the principal's legal relations with third parties.
(3) Where the agent's authority results from a manifestation of assent that he should represent or act for the principal expressly or impliedly made by the principal to the agent himself, the authority is called actual authority, express or implied. But the agent may also have authority resulting from such a manifestation made by the principal to a third party; such authority is called apparent authority.
(4) A person may have the same fiduciary relationship with a principal where he acts on behalf of that principal but has no authority to affect the principal's relations with third parties. Because of the fiduciary relationship such a person may also be called an agent."
Clearly of particular relevance in the present case are (3) and (4). There was, however, controversy concerning the reference in (4) to "fiduciary relationship" since it was Mr Saini QC's contention that fiduciary duties are not a sine qua non of an agency relationship whereas it was Mr Howe QC's submission that the existence of fiduciary obligations is a strong pointer to the existence of an agency relationship.
"Fiduciary relationship between agent and principal. Since the paradigm agent has conferred on him special powers which enable him to change the legal position of another, the law also imposes on him special duties of a ?duciary nature towards that other."
He went on to refer to paragraph 6-035:
"Agent as ?duciary. An agent in the strict sense of the word holds a power to affect the legal relations of his principal. This power is conferred by the law in the implementation of the supposed intentions of the parties; but it is not surprising that the law also imposes controls on the way in which the holder of such a strong power may behave towards the person who conferred it. This is not a situation like the more usual one regulated by the law in which the parties are in an adverse commercial relationship, for example a simple hire of services. Agency services are services of a special kind. Even when no such power to affect legal relations was conferred, as in the 'incomplete agency' case of the canvassing agent, the relationship of the parties still imports an undertaking by one to act in the interests of the other rather than his own, and this likewise, though to a lesser extent, justi?es the law's intervention."
Also of note, he suggested, is paragraph 6-037:
"Are all agents always ?duciaries? Turning ?rst to the question of how the incidence of the duties should be explained, it will be noted that the formulations in Article 1 and in the present Article treat the relationship of principal and agent as by de?nition a ?duciary one, and therefore in effect say that every agent is a ?duciary and hence owes ?duciary duties. This can be criticised on the basis that not every person who can be described by the word 'agent' is subject to ?duciary duties; and that a person who certainly is so to be described may owe such duties in some respects and not in others. Hence it is said that there may be a 'non-?duciary agent', and that in some functions an acknowledged agent may not act as ?duciary at all. Rather than talk of a 'non-?duciary agent' it seems better to say that where an agent does not act in a ?duciary capacity (e.g. because he simply carries out speci?c instructions), this is a re?ection of the scope of his duties and the boundaries of the equitable rules.
It is certainly true that ?duciary relationships arise in situations other than those of agency. Nevertheless, it is submitted that the fact that an agent in the strictest sense of the word has a power to alter his principal's legal position makes it appropriate and salutary to regard the ?duciary duty as a typical feature of the paradigm agency relationship. To do so will not mislead so long as two things are borne in mind.
The ?rst is that the word 'agent' can be used in varying senses, and not all persons to whom the word is applied are agents in the full (or sometimes, any) legal sense. A canvassing, or introducing agent, for instance, may do no more than bring two parties together and thus may in many situations do little involving the incidence of ?duciary responsibilities at all; though equally he can, as has been stated above, in some circumstances become liable for breach of such duties, as when he conceals from his principal the existence of further offers. Further, even canvassing agents usually have authority to make and receive communications on behalf of their principals, and can be expected to act loyally in exercising those powers. A distributor or franchisee, though sometimes called an agent, is in most respects in a position commercially adverse, rather than ?duciary, to the person whose goods he distributes: he buys and resells. But again it is conceivable that circumstances might give him knowledge of and power over his principal's affairs which could justify the imposition of some ?duciary duties; and this is quite apart from the possibility that he may also in some circumstances exercise true agency functions, for example as regards complaints concerning the goods, and be subject to ?duciary duties in that respect.
The second matter which should be borne in mind is that the extent of an agent's equitable duties (a phrase that embraces more than the strictly ?duciary duties to avoid con?icts of interest and not to pro?t) and also common law duties may vary from situation to situation."
"Incomplete agency: internal relationship only – the 'canvassing' or 'introducing' agent. Article 1(4) seeks to achieve completeness by taking in a well-established type of intermediary who makes no contracts and disposes of no property, but is simply hired, whether as an employee or independent contractor, to introduce parties desirous of contracting and leaves them to contract between themselves. In effecting such introductions he is remunerated by commission, which he may sometimes take from both parties. Such a person is a common figure in most western legal systems and may well be referred to as an agent. The most obvious example of such an intermediary in the English cases is the estate agent, who introduces purchasers to vendors and tenants to lessors of houses, and vice versa. Such persons are sometimes also referred to as brokers, and indeed in some English-speaking countries the estate agent is referred to as a 'real estate broker': but this may be misleading since the current practice, at any rate in England, is to use the term 'broker' for persons who go beyond introductions and certainly do make contracts for their principals, e.g. commodity brokers, insurance brokers and stockbrokers. Canvassing agents are on the fringe of the central agency principles used by the common law, since their powers to alter their principals' legal relations are at best extremely limited. They often, however, have authority to receive and communicate information on their principals' behalf, and in so doing have the capacity to alter their principals' legal position. They also usually act in a capacity which may involve the repose of trust and confidence, and hence may be subject in some respects to the fiduciary duties of agents towards their principals. They are also subject of typical rules, largely developed in estate agent cases, as to entitlement to commission, which are normally regarded as part of agency law and are relied on also by agents who have greater powers to bind their principals. They may sometimes hold money (e.g. deposits) for their principals. The rules applicable to the internal relationship between principal and agent will therefore apply as appropriate, and for this reason such persons should certainly be treated in a work on agency even though they lack the external powers of the agent. It is an advantage of the formulation of basic agency principle in Article 1, which selects the internal relationship between principal and agent as a distinguishing feature of agency, that it can be taken to cover such persons. Canvassing agents are persons to whom the internal parts of agency law may apply, but who, because of the limited nature of their external powers to affect their principals' legal positions, are not agents in the full sense of the word. They may therefore be said to provide an example of 'incomplete agency'."
What is here being described, therefore, is not the type of agent identified in Article 1(1) but, instead, the type of 'incomplete agent' described in Article 1(4), namely a person who is a fiduciary of his principal but who has no authority to affect the principal's legal relations. The 'incomplete agent' may be called an agent but is not an agent "in the full sense of the word". It was this distinction which was at the heart of UBS's case, Lord Falconer on behalf of UBS submitting that the corrupt payment made by Value Partners "exhibited none of the settled characteristics of agency", including the authority to affect the legal relations of the principal and the existence of a fiduciary duty, and Mr Tim Lord QC arguing for KWL that these were not essential prerequisites of agency: see  and .
"(i) The court should not impose an agency analysis upon a relationship which may better be analysed in other terms, in particular where the intermediary (in that case the car dealer) has its own interest in the transaction as a principal;
(ii) There may be identified within a general relationship which is not one of agency, specific tasks for which one party assumes an ad hoc agency responsibility for the other, such as the delivery of the hired car to its new owner."
Lord Briggs and Hamblen LJ, then, went on at  to refer to Plevin v Paragon Personal Finance Limited  1 WLR 4222, describing the Supreme Court in that case, at , as reinforcing "the warning to be found in the Branwhite case against forcing into an agency analysis a relationship better explained in some other way", before citing, at , Tonto Home Loans Australia PTY Limited v Tavares & Others  NSWCA 389, a New South Wales Court of Appeal decision in which this was stated, at , concerning Article 1 of Bowstead & Reynolds:
"These expressions of the central characteristics of the relationship reveal the closeness of identity that is required for the relationship to exist. Not every independent contractor performing a task for, or for the benefit of, a party will be an agent, and so identified as it, or as representing it, and its interests. Agency is a consensual relationship, generally (if not always) bearing a fiduciary character, in which by its terms A acts on behalf of (and in the interests of) P and with a necessary degree of control requisite for the purpose of the role. … In McKenzie v McDonald  VLR 134 at 144 Dixon AJ, in saying that not every agent stands as a fiduciary, was recognising that the word 'agent' is used in many senses and is apt to mislead, citing Kennedy v De Trafford at 188. That is, however, no more than to say that the word 'agent' has a potentially wide and varying meaning in life and business and that, on some occasions, the business description will be given to someone who is not a fiduciary. … It is sufficient to recognise that the essential characteristic is that one party (A) acts on the other's (P's) behalf, and that this will generally be in circumstances of a requirement or duty not to act otherwise than in the interests of P in the performance of the consensual arrangement. Bowstead and Reynolds on Agency, the Restatement and Seavey op cit at 863 include in the conception of agency the characteristic of fiduciary duty. The duty will, of course, conform with the extent and scope of the agency and thus be of potentially varied content, recognising that context (in particular, perhaps, a market or commercial context) may attenuate the rigour or content of the fiduciary duty … . The necessary good faith implicit in a fiduciary character in the relationship reflects the character of identity or representation that the relationship essentially carries."
Lord Briggs and Hamblen LJ went on at  to address Lord Falconer's submission:
"Lord Falconer sought to derive from the Tonto case a principle that a relationship could never be identified as one of agency if none of the main characteristics, namely authority to affect the principal's relationships with third parties, fiduciary duty or control by the principal, was present. We would not be minded to go quite that far, but the absence of any of these main characteristics must nonetheless be a significant pointer away from the characterisation of a particular relationship as one of agency, even though there may be rare exceptions."
They continued at  in what may, strictly speaking, amount to obiter dicta (as Longmore LJ considered in Medsted Associates Limited v Canaccord Genuity Wealth (International) Limited  EWCA Civ 83 at -):
"Mr Lord took us to Halton International Inc v Guernroy Limited  EWHC 1968 (Ch) per Patten J at -, and to Tigris International NV v China Southern Airlines Company Limited  EWCA Civ 1649, per Clarke LJ at , in support of his submission that the existence of a fiduciary duty was by no means an essential characteristic of agency. We agree. There are no doubt many forms of non-fiduciary agency, just as there are forms of fiduciary agency in which the agent has no authority to affect the principal's relations with third parties."
"We see no reason to force that corrupt arrangement into an agency analysis for any purpose, let alone the purpose of deciding whether UBS is legally responsible for the bribe paid by Value Partners to Mr Heininger."
There were four reasons why they took this view, as set out at  to . The first two reasons were these:
"95 First, Value Partners was, and was known by UBS to be, the fiduciary agent of its captive clients before the corrupt arrangement with UBS was made. It is therefore a case, like the Plevin case, where a pre-existing agency relationship with another party is hostile to, albeit not necessarily irreconcilable with, an agency relationship with another party seeking to transact with the intermediary's pre-existing principal.
96. Secondly, the substance of the corrupt arrangement was that UBS would secretly assist Value Partners in abusing its pre-existing fiduciary relationship with its captive clients, including KWL. This could not be achieved either by UBS holding out Value Partners as its agent, or by Value Partners asserting an agency for UBS in dealings with KWL. On the contrary, the arrangement would only achieve its intended results if, from start to finish, Value Partners purported in its dealings with its captive clients to act loyally on their behalf."
The third and fourth reasons were, however, particularly pertinent:
"97. Thirdly, the arrangement did not involve, or authorise, Value Partners to affect legal relations between UBS and any third party, even by the making of representations, or the receipt of information, as sometimes occurs within the context of a canvassing agency or an estate agency.
98. Fourthly, the judge did not find, and in our view the facts which he did find do not admit, the existence of a fiduciary duty by Value Partners to UBS. Each of the participants in the corrupt arrangement was pursuing its own interests, for its financial benefit. Neither was paying or otherwise remunerating the other."
In other words, the fact that Value Partners did not owe UBS a fiduciary duty was in that case regarded as significant. So, too, was the fact that the arrangement did not involve or authorise Value Partners affecting legal relations between UBS and any third party.
"Thus, fiduciary duties typically arise where one person undertakes and is entrusted with authority to manage the property or affairs of another and to make discretionary decisions on behalf of that person. (Such duties may also arise where the responsibility undertaken does not directly involve making decisions but involves the giving of advice in a context, for example that of solicitor and client, where the adviser has a substantial degree of power over the other party's decision-making: see Lionel Smith, 'Fiduciary relationships: ensuring the loyal exercise of judgement on behalf of another' (2014) 130 LQR 608.) The essential idea is that a person in such a position is not permitted to use their position for their own private advantage but is required to act unselfishly in what they perceive to be the best interests of their principal. This is the core of the obligation of loyalty which Millett LJ in the Mothew case  Ch 1 at 18, described as the 'distinguishing obligation of a fiduciary'. Loyalty in this context means being guided solely by the interests of the principal and not by any consideration of the fiduciary's own interests. To promote such decision-making, fiduciaries are required to act openly and honestly and must not (without the informed consent of their principal) place themselves in a position where their own interests or their duty to another party may conflict with their duty to pursue the interests of their principal. They are also liable to account for any profit obtained for themselves as a result of their position."
Secondly, it was Mr Saini QC's submission that the fact that a person is not an agent and fiduciary at all times and for all purposes does not mean that he is not an agent at some points and for some purposes. That is clearly right and was not, indeed, disputed by Mr Howe QC. If authority were necessary, however, Lord Wilberforce's observation in New Zealand Netherlands Society 'Oranje' Incorporated v Kuys  2 All ER 1126 at p. 1130 is apposite:
"A person in his position may be in a fiduciary position quoad a part of his activities and not quoad other parts: each transaction, or group of transactions, must be looked at."
So, too, is Brandeis (Brokers) Ltd v Black  2 All E.R. (Comm) 980, in which Toulson J explained at  that:
"The Law Commission was right to emphasise that the extent of a person's fiduciary duties may vary according to what the parties have agreed or may reasonably be taken to expect. Fiduciaries are not all required, like the victims of Procrustes, to lie on a bed of the same length."
"… the law may treat a third party dealing with a person who appears to have authority from a principal as entitled, by virtue of the principal's manifestations to him by words or conduct, to assume that the person in question has such authority, regardless of whether anything has occurred from which the law would draw that conclusion if the matter were in issue only between the supposed agent and the supposed principal. This reasoning takes effect in the doctrine of apparent authority. This applies both where the supposed agent is not authorised to act at all, and also where he appears to have a greater authority than was actually conferred on him. It is said in the English cases that this reasoning depends on estoppel. But it is suggested below that this is a very weak form of estoppel, and to be distinguished from other agency-related situations where the principles of estoppel as normally stated more obviously apply. The doctrine operates regardless of whether the agent himself believed that he was authorised, provided that he reasonably appeared to the third party to be authorised. But the basis of the doctrine makes it essential that he has purported to act on the principal's behalf."
"An 'apparent' or 'ostensible' authority … is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the 'apparent' authority, so as to render the principal liable to perform any obligations imposed upon him by such contract. To the relationship so created the agent is a stranger. He need not be (although he generally is) aware of the existence of the representation but he must not purport to make the agreement as principal himself. The representation, when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract. It is irrelevant whether the agent had actual authority to enter into the contract."
Diplock LJ went on at p. 505 to explain as follows:
"… where the agent upon whose 'apparent' authority the contractor relies has no 'actual' authority from the corporation to enter into a particular kind of contract with the contractor on behalf of the corporation, the contractor cannot rely upon the agent's own representation as to his actual authority. He can rely only upon a representation by a person or persons who have actual authority to manage or conduct that part of the business of the corporation to which the contract relates. The commonest form of representation by a principal creating an 'apparent' authority of an agent is by conduct, namely, by permitting the agent to act in the management or conduct of the principal's business. Thus, if in the case of a company the board of directors who have 'actual' authority under the memorandum and articles of association to manage the company's business permit the agent to act in the management or conduct of the company's business, they thereby represent to all persons dealing with such agent that he has authority to enter on behalf of the corporation into contracts of a kind which an agent authorised to do acts of the kind which he is in fact permitted to do usually enters into in the ordinary course of such business."
"…a representation by an agent within his ostensible authority may give rise to an estoppel against his principal. However, where, as here, it is suggested that it was within the agent's ostensible authority to communicate to the third party the principal's approval of the agent entering into a transaction which would otherwise not be within the agent's authority, the only representation of the principal which can give rise to such ostensible authority is a representation to the effect that the third party can rely upon the agent's communication of the principal's approval. It is possible to construct a theoretical case in which such a representation is expressly made by a principal, where he states to the third party that he should look to the agent for the necessary approval, and that he can rely upon the agent's statement whether such approval has been given. But I can see no basis for concluding, on the facts of the present case, that the defendants ever made any such representation regarding Mr. Magelssen. No doubt, by appointing Mr. Magelssen to his position and allowing him to act as such, they did represent that he had authority to bind his principals to those contracts which an agent in his position ordinarily has authority to make; and no doubt that ostensible authority would embrace the making of such representations concerning the subject matter of any such contract as might reasonably be understood to fall within such usual authority. But that does not, in my judgment, embrace authority by Mr. Magelssen to communicate approval by his superiors to his making contracts which, to the knowledge of the third party, he had no authority to enter into without such approval, with the effect that the defendants would be bound by such communication."
Subsequently, in the House of Lords, at p. 779D-G Lord Keith agreed with Robert Goff LJ about this, specifically with this observation:
"… the effect of the judge's conclusion was that, although Mr. Magelssen did not have ostensible authority to enter into the contract, he did have ostensible authority to tell Mr. Jensen and Mr. Dannesbøe that he had obtained actual authority to do so. This is, on its face, a most surprising conclusion. It results in an extraordinary distinction between (1) a case where an agent, having no ostensible authority to enter into the relevant contract, wrongly asserts that he is invested with actual authority to do so, in which event the principal is not bound; and (2) a case where an agent, having no ostensible authority, wrongly asserts after negotiations that he has gone back to his principal and obtained actual authority, in which event the principal is bound. As a matter of common sense, this is most unlikely to be the law."
Lord Keith, then, added:
"It must be a most unusual and peculiar case where an agent who is known to have no general authority to enter into transactions of a certain type can by reason of circumstances created by the principal reasonably be believed to have specific authority to enter into a particular transaction of that type. … ."
Lord Keith had earlier summarised the relevant principles concerning apparent authority at p. 777A-E in this way:
"Ostensible authority comes about where the principal, by words or conduct, has represented that the agent has the requisite actual authority, and the party dealing with the agent has entered into a contract with him in reliance on that representation. The principal in these circumstances is estopped from denying that actual authority existed. In the commonly encountered case, the ostensible authority is general in character, arising when the principal has placed the agent in a position which in the outside world is generally regarded as carrying authority to enter into transactions of the kind in question. Ostensible general authority may also arise where the agent has had a course of dealing with a particular contractor and the principal has acquiesced in this course of dealing and honoured transactions arising out of it. Ostensible general authority can, however, never arise where the contractor knows that the agent's authority is limited so as to exclude entering into transactions of the type in question, and so cannot have relied on any contrary representation by the principal … .
It is possible to envisage circumstances which might give rise to a case of ostensible specific authority to enter into a particular transaction, but such cases must be very rare and unusual. Ex hypothesi the contractor knows that the agent has no general authority to enter into the transaction, as was the position here. The principal might conceivably inform the contractor that, in relation to a transaction which to the contractor's knowledge required the specific approval of the principal, he could rely on the agent to enter into the transaction only if such approval had been given. In such a situation, if the agent entered into the transaction without approval, the principal might be estopped from denying that it had been given. But it is very difficult to envisage circumstances in which the estoppel could arise from conduct only in relation to a one-off transaction such as this one was."
"It seems to me that, although there was evidence fit to be left to the jury that the defendants held out Dennis as their agent to receive orders, which they might or might not thereafter execute as they pleased, there was no evidence that he was held out by the defendants as their agent either to make contracts on their behalf, or to bind them to accept orders when brought by Dennis to them … ."
"In each of the relevant cases the representation relied upon as creating the 'apparent' authority of the agent was by conduct in permitting the agent to act in the management and conduct of part of the business of the company. Except in Mahony v. East Holyford Mining Co. Ltd.; it was the conduct of the board of directors in so permitting the agent to act that was relied upon. As they had, in each case, by the articles of association of the company full 'actual' authority to manage its business, they had 'actual' authority to make representations in connection with the management of its business, including representations as to who were agents authorised to enter into contracts on the company's behalf."
Mr Saini QC highlighted the reference here to the making of representations.
"Ultimately, these are of no direct relevance, because the plaintiffs' representatives were then also unaware of them, except in general terms and in relation to this particular transaction, and possibly one earlier transaction with Mr Druker."
It is apparent also from the fact that he went on to observe as follows:
"Nevertheless, if the plaintiffs had known these facts and had relied upon them as part of the matters which caused them to believe that Mr. Booth was equally authorized to assist Mr. Druker by signing the letter of July 26 on his own, there could be no doubt that they would have provided evidence of Mr. Booth's actual authority from which his apparent authority to sign the letter could have been inferred, however unusual such activities might have been in relation to persons employed as documentary credit managers in either banks. On the relevant evidence in this case, the facts known to the plaintiffs lie between these two extremes, although they are closer to the latter. Was this evidence, taken as a whole, sufficient to entitle the Judge to conclude that Mr Booth had been held out by Refson as having apparent authority to sign the letter on his own?"
Quite clearly, Kerr LJ was here considering the representee's awareness, not merely what somebody in the representee's position should reasonably be regarded as having known. This is the first part of the dual requirement described earlier by Browne-Wilkinson LJ. The same approach is set out in Bowstead & Reynolds at paragraph 8-023:
"No estoppel through simple negligence. It is plain that if the third party does not know of the existence of any principal, there cannot be apparent authority, as when the agent purports to deal as principal. A representation that does not come to the notice of the third party is no representation. The mere fact that the principal enables the agent to commit fraud by putting him in a position where he can do so is not, without more, decisive. The common law has avoided, so far at least, a concept of estoppel by negligence. The mere possession of another's goods or documents (including those of title) creates no representation of entitlement to deal with them, since there can be any number of reasons why a bailment of them subsists. The doctrine does not apply even if the principal represents that the agent is the owner of goods or of a business where the third party was unaware of the representation, though in many such cases the related doctrine of apparent ownership may apply, or there may be evidence that permits an inference of a grant of actual authority by the undisclosed principal."
"Where a principal, whether disclosed or undisclosed, sues the other party to a contract made by the principal through an agent, the other party has all the defences which he would have had against the principal if the principal had himself made the contract in the same circumstances."
It is clear, however, that this is a principle which applies only where a contract has been entered into "through an agent". In the present case, by contrast, Marme has disavowed any case that the Non-RBS Banks contracted with Marme through RBS acting as agent. Furthermore, despite the unqualified terms in which the principle is expressed, it is apparent from the commentary in paragraph 8-097 that the position is not quite so clear-cut. That commentary reads as follows:
"It is not yet clear whether the third party's defence under Rule (1), where based on an agent's misrepresentation, requires that the misrepresentation have been made within the agent's actual or apparent authority, so long as the agent had some authorised role in the transaction. If the relevant contract was entirely negotiated by the agent, the principal may ?nd it dif?cult to deny the agent's apparent authority to make the statements that induced it if he wishes to enforce the contract. In such circumstances, it is unlikely to matter that at the time the misrepresentation was made the agent had not yet been appointed, so long as the representation can be regarded as continuing after the appointment. Obviously, the third party will be in a weaker position where the misrepresenting agent had a lesser role to play in the process."
The commentary, then, continues by referring to certain authorities relied upon by Mr Saini QC (including The New Brunswick and Canada Railway and Land Company v Conybeare (1862) 9 HLC), as follows:
"However, it has been suggested that there is a general principle that 'no person can take advantage of the fraud of his agent', which precludes the principal from enforcing a contract induced by deceit whether or not the agent had express or apparent authority to have made the statement. In New Brunswick Railway v Conybeare, both Lord Westbury and Lord Chelmsford adverted to the possibility of a contract procured by the fraud of an agent being rescindable even though no action for damages would lie against the principal (actual or apparent authority normally being required before tortious liability for an agent's misstatements arises) There are other dicta, although it is dif?cult to ?nd a case which has in fact turned on this point. The principle being advocated appears to be an example of the idea that a principal should not be permitted to approbate and reprobate. Although the cases relied upon involve fraud, it is not clear why the principle, if it exists, should be con?ned to fraud. On the other hand, where the agent had no actual or apparent authority to make the statement, and neither the principal nor any agent whose approval was needed for the making of the contract knew of the misrepresentation, it seems likely that rescission would be permitted only where the principal could adequately be put back in his pre-contractual position."
"… fiduciary duties typically arise where one person undertakes and is entrusted with authority to manage the property or affairs of another and to make discretionary decisions on behalf of that person. … The essential idea is that a person in such a position is not permitted to use their position for their own private advantage but is required to act unselfishly in what they perceive to be the best interests of their principal."
It is unrealistic to suggest that in the present case RBS managed the property or affairs of the Non-RBS Banks. That is simply not what happened at all. The suggestion, in particular, that RBS's role in relation to execution on 12 September 2008 entailed RBS acting in a fiduciary capacity (indeed, that this is "plainly" the case) is not sustainable for reasons which I shall come on to explain later.
The Senior Loan
"…the arranger's position is commonly not documented in detail: it is not usually stated who the arranger is acting for, the arranger is closely involved in structuring and organising the loan and the arranger receives a signi?cant fee for its services. In the normal case it is considered that the arranger is in the position of an independent contractor and is not an agent or ?duciary of either the borrower or the banks. The arranger is selling a service in the same way that a seller may sell a washing-machine or car. It is suggested that clear words or conduct would be required to put the arranger in the position of an agent or ?duciary of either the banks or the borrower."
Professor Wood continues at paragraph 7-08 as follows:
"If the arranger were an agent then this may attract the usual range of draconian ?duciary duties, including a duty of due diligence, a duty of full disclosure, and duties not to put itself in con?ict of interest and not to bene?t personally from the agency, e.g. by taking unauthorised pro?ts. Although the letter from the borrower to the arranger authorising the arranger to organise the loan is expressed to be a mandate, thereby suggesting agency, this should not itself characterise the arranger as agent of the borrower. In negotiating the term sheet and then negotiating the documentation, the arranger would seem to be performing functions for the bene?t of the banks and this might therefore suggest that the arranger is somehow the agent ?rst of the borrower and then of the banks. The solution to this oddity of the shifting boss is that the arranger is the agent of nobody. Nevertheless, the precise relationship depends on the facts, including the language used in the mandate letter, the language used by the arranger in soliciting participants and any clear assumption of responsibilities as agent by the arranger. Statements such as 'we will organise this on your behalf', 'we will look after this for you', and 'you can rely on us to look after your interests', etc. would have to be construed in the above light, but the assumption of agency duties should be unambiguous in order to attract responsibilities not matching the usual expectations in market practice."
"A simple explanation of the common procedures for syndicating a loan is that one bank, the mandated lead arranger or simply 'the arranger', obtains a mandate from the borrower to arrange a syndicated loan. The mandate or permission may be a result of competitive bidding or successful discussions with the borrower. With the borrower's mandate, the arranger starts assembling the syndicate. This consists of promoting the loan and obtaining commitments from other banks to advance money to the borrower. The initial step is to solicit other banks for indications of interest in the loan. There is no standard procedure for doing this, although it is easiest to send facsimile or e-mail messages to potential participants. The more prudent method, however, is to target those likely to be interested and send them facsimiles or e-mails that are essentially 'term sheets'. These contain brief but important information about the proposed credit facility, the borrower, and the relevant fees. The banks which express an interest later receive an information memorandum, sometimes also called a placement memorandum. This document discloses wide-ranging information pertinent to the proposed credit, including the borrower's financial condition as well as other economic and political factors that are relevant to the ability to repay the loan. It thus expands on the information previously circulated in the initial facsimile or e-mail. At the same time as the arranger assembles the syndicate, it is also discussing the documents, and in particular negotiates the terms of the loan agreement with the borrower with the intention that there should be a draft agreement for consideration by the participants as soon as they are identified. When the syndicate members have been identified and the agreement is drafted to all parties' satisfaction, the deal is completed-which means that the borrower and the lenders execute the loan agreement. At this point in time, the duties of the arranger end. Further coordination between the lenders and the borrower is done by an agent bank that is specifically chosen for that purpose. It is common practice for the lead arranger to be nominated as the agent bank as well."
"While it is outside the scope of this chapter to deal with the mechanics of syndication in any great detail, it is important to understand the basic processes at work and the roles which are played in order to understand the various relationships which arise or which are alleged to arise. Moreover, syndication tends to lead to a plethora of names and titles for various lenders, often denoting different levels of involvement in the transaction and different levels of fees. In addition to the Arranging Bank there can be 'co-underwriters', 'co-arrangers' or 'managers'. Often these participants do no more than any ordinary participant in the syndicated loan. Accordingly, labelling in itself may lead to confusion but can, and often does, play a part in the legal analysis of the obligations and duties taken on by participants in a syndicated loan to each other and to outside parties … ."
They go on to say this in the next paragraph:
"The Arranging Bank is the principal point of contact with the borrower and acts, at the very least, as a conduit for information between the borrower and the other banks involved in the loan. While it has the borrower's mandate it is effectively marketing the loan to other banks. It will also be looking after its own credit risk and negotiating the terms of the loan facility and security with the borrower. It takes a small amount of consideration of this (in some ways, dual) role to appreciate that it is fraught with risk for the bank which takes it on although it is a risk which is compensated by increased fees. … ."
"The arranger is in a different position from the agent bank appointed under the loan agreement although often the arranger (or main arranger) is appointed as the agent bank once the credit agreement is signed.
The powers and duties of the agent bank are defined in detail in the credit agreement, the agent is agent of the banks, the agent bank is awarded a lowish fee and the agent bank's role is largely administrative with few powers to alter the legal position of the banks. Effectively the agent bank is a mechanical conduit. By contrast the arranger's position is commonly not documented in detail, the arranger is closely involved in structuring and organising the loan and the arranger receives a significant fee for its services.
It is not easy to define precisely the role and consequential responsibilities of the arranger. This is one of the great dilemmas of syndicated transactions. In one sense, as the arranger is acting upon a mandate granted to it by the borrower, it is fulfilling a function as the borrower's agent or representative in terms of soliciting interest from the banks and generally in arranging the transaction. On the other hand, in negotiating the terms of the overall transaction and the documentation that will encapsulate it, the arranger has in mind the interests of the banks (which almost inevitably will include itself as a member of the syndicate), but the arranger will also have made clear to the banks that it does not purport to accept any responsibility towards them in relation to making any credit assessment, the truth or accuracy of any information that has been provided or for the scope or effectiveness of the documentation. One way of analysing the situation would be to say that the arranger was really no-one's agent and so was acting more in the capacity of an independent go-between. Another approach might be to say that the arranger acts in a limited way as the borrower's agent but that this fades away once the documentation stage has been reached in the progress of the transaction, after which it is not acting on anyone's behalf."
"In addition to the role of MLA, there are certain other roles on a deal such as the Transaction that will earn a bank a fee. For completeness, and based on my experience of working on large deals such as the Transaction, such roles include the following:
(a) In circumstances where a number of banks will be underwriting the deal, the 'Bookrunner' is required to co-ordinate the syndication process and run the books for the deal, which includes maintaining a record of interest and participation in the deal as it develops. On the Transaction, Bayern LB originally took on the role of Bookrunner, but this role was later assumed and performed by RBS.
(b) The 'Document Agent' (which is not to be confused with the 'Facility Agent' (see subparagraph (d) below)) is responsible for dealing with the transaction documentation leading up to the deal closing. This is a coordinating role; the Document Agent has no mandate whatsoever to negotiate or agree the substance of legal documents on behalf of any financing bank and rather collates and documents the information that is passed to it. For deals on which I have worked, it has been typical for the bank playing the MLA role to also take on the role of Document Agent in the later stages of the deal (whether or not officially given the title).
(c) On some deals, one of the banks will act as a 'Hedge Coordinator'. The role of Hedge Coordinator is an operational role to hedge the market risk and pass on to the other swap counterparties their share of that hedge. The Hedge Coordinator is not acting as an agent of any other lender nor has it instructions or authority to represent any other lender or to make decisions for them. The role of Hedge Coordinator is usually fulfilled by one of the MLAs. The pricing (costs and fees) and documents for the swap are reviewed, discussed and agreed to by each swap counterparty at its sole discretion.
(d) In addition to these roles, there are a number of other roles which kick in after a deal has closed, for example the 'Facility Agent' (which acts as agent for a syndicate of lenders in administering the facility with the borrower) and the 'Security Agent' (which holds the collateral on behalf of the lenders as security for performance of the borrower's obligations under a loan agreement). The party that takes on each of these roles will act as the agent of the lending banks in relation to matters pursuant to the relevant loan agreement, for the duration of that agreement from completion onwards (but not before)."
"To assist you with working through the docs/diligence we can confirm RBS is the Agent and doing the KYC. Should you have any specific requirements please let us know and we can send through the relevant documents."
Asked about this in cross-examination, Mr Greenland suggested that this was a reference to the 'Facility Agent' under the Senior Loan, making the point that somebody who would perform such a role would typically carry out certain administrative functions such as 'Know Your Customer' even before being appointed. Mr Greenland was probably right about that. It is not easy to see, however, how this assists Marme since the activities described in the email are limited. Nor does it follow that whatever administrative functions Mr Greenland had in mind would be performed, ahead of time, as it were, by RBS on the Non-RBS Banks' behalf since the position under Clause 8.3 ("Hedging") is unambiguous: the 'Facility Agent' is a species which only has any role under the Senior Loan after completion. Mr Saini QC did not, indeed, argue the contrary. Thus, Clause 8.3 provides as follows:
"(a) From and including the Utilisation Date the Company must maintain Hedging Arrangements satisfactory to the Majority Lenders in accordance with this Subclause.
(b) (i) The Interest Hedging Arrangements must:
(A) be with a Counterparty; and
(B) have a notional principal amount not less than the aggregate amount of the Loan.
(ii) All Hedging Arrangements must be:
(A) in form and substance satisfactory to the Facility Agent; and
(B) the subject of security under a Hedging and Account Security Agreement … ."
Since the need to maintain Hedging Arrangements from and including the Utilisation Date only arises post-completion and those arrangements must be in form and substance satisfactory to the 'Facility Agent' (as well as to the 'Majority Lenders'), it necessarily follows that it is only at the post-completion stage that the 'Facility Agent' is called upon to do anything. Mr Durkop's 11 August 2008 emails were not, in any event, documents which Marme (and Mr Maud) would have seen at the time and, as such, are of no relevance for present purposes. Indeed, nor is there any evidence that Mr Maud or anybody else at Marme took any notice of Clause 8.3, still less that they placed any reliance on what it has to say.
"Allister – do we (you!) want to be agent. Given that we are now book runner/ leading bank its not a great leap to make us agent but I'm sure that Bayern would still take it if they could. It is €100k a year and we'd have direct access to the borrower etc."
Mr Saini QC put to Mr Bates in cross-examination that the reference to "agent" was to RBS acting as agent in co-ordinating the closing of the Transaction. Mr Bates did not agree, explaining that his recollection was that this referred to an agency "that came into play after the deal had closed". He was plainly right about that since the reference to an annual remuneration of €100,000 tallies with the fact that this was the remuneration which it was envisaged would be payable to the Facility Agent once the Transaction had completed, Clause 24.1 of the Senior Loan stating as follows:
"The Company must pay to each Facility Agent for its own account an agency fee in the amount and manner agreed in the Fee Letter between the Facility Agent and the Company."
Furthermore, as Mr Howe QC pointed out, the Agency Fee Letter dated 12 September 2008 stipulates that:
"The agency fee payable under the Agreement is: (i) for the first payment, €100,000 per annum … ."
"RBS as Agent Bank
- At GCC, it was requested that the role of Agent be transferred from RBS to one of the other 'arranging' banks to avoid potential conflicts of interest given that we are now providing a Junior loan of €200m for the transaction.
- The role of Agent was offered to HSH and Bayern but both declined. Therefore approval was sought for RBS to act as Agent to facilitate closing of the deal. This has been approved by Philip Carraro (see attached email) subject to RBS trying to move the agency role to another bank post completion."
Although Mr Saini QC suggested to Mr Bates in cross-examination that the words "to facilitate closing of the deal" reflect the fact that it was RBS's role as "Agent" to facilitate the closing of the Transaction, that plainly cannot be right since the role of "Agent" referred to in this passage was the role which had been "offered to HSH and Bayern" and "declined", and these can only be references to the role of 'Facility Agent' under the Senior Loan (a post-contractual role). Indeed, if Mr Saini QC were right, it would make no sense for the last sentence to refer to "RBS trying to move the agency role to another bank post completion" since there would by that stage no longer be any role which could "move". Furthermore, again if Mr Saini QC were right, then, it would have made no sense for Mr McDonald to have sent an internal email to Mr Shome and Mr Atkins on 1 September 2008 asking them to "check with HSH if they want to take on the [Agency] role" and referring in that email to the "Agreed agency fee" being "€100k p.a.". Nor would it have made sense for Mr Bates to write to Mr Greenland and Mr Worley at Bayern on 8 September 2008 saying "If Bayern wish to undertake the Agency role then please let me know". It is tolerably clear, in the circumstances, that, far from pointing to RBS acting as an agent of the Non-RBS Banks in closing the Transaction, the document's reference to "facilitating closing" was merely reflecting the rather obvious fact that the Transaction could not close until there had been agreement as to who should act as the 'Facility Agent' - and nothing more than that.
"RBS imposed a spread of 15 basis points for each of the hedging banks … It appears that the arrangement RBS had agreed with the banks was for RBS to charge a credit spread of 15 basis points on behalf of each of the hedging banks for their respective swaps, 2 basis points of which would go to RBS as its fee for execution of the Swaps, the remaining 13 basis points to the banks as a credit spread."
The credit spread negotiations
"Need to tie down the credit spread each bank needs. Ideally we'd get these all to the same level so your swap is all at the same rate(s). How do you want to do this – do you want me to co-ordinate & feed back to you then look to negotiate to the same spread or do you want me to ask each bank to go back to you direct then you can manage it?".
Mr Littlewood replied at 10.51 am, saying "we will call you soon to discuss". Mr Goodwin, then, emailed again at 2.56 pm, saying:
"credit spreads are something we need to discuss and confirm ahead of Friday. Please let me know how you want to play it."
These exchanges followed an earlier email from Mr Goodwin to Mr Maud, Mr Frohnsdorff and Mr Littlewood sent on 26 August 2008 at 9.11 am, in which he set out a number of things which needed to be determined or agreed in advance of execution. Mr Goodwin stated, in particular, as follows:
"You need to get spreads agreed in advance. Some of the banks involved won't fully understand the embedded loan risks and costs etc. Whereas this could work for you, it's more likely to hurt you as the tendency will be to price conservatively, especially in this environment. I can speak to the banks about this in conjunction with Bayern & HSH. I've not been to credit yet as we don't have a final swap structure but could make some initial calcs. This will also allow you to trade at the same swap rate."
That afternoon, Mr Littlewood and Mr Goodwin spoke, Mr Littlewood asking ("almost begging" as Mr Goodwin put it when passing on the request within RBS in an email sent at 2.27 pm) that there be "some form of swap spread rebate agreement". Mr Eighteen's response to that request was unequivocal ("Absolutely No … particularly in this case") and Mr Goodwin conveyed that refusal to Mr Littlewood.
"They really played on the super senior ranking. They asked what my spread would be if not a stepped swap – I said 5 or 6 on top of execution. I said I'd get numbers run again but unlikely to come lower. They're talking about speaking to my lending guys if that's the case to ask them to view the credit on the structure in a more favourable manner with the aim of requiring less credit spread on the swap. My bankers won't entertain this. You guys should prepare to be asked the same thing. I'll leave you to your own decision/response but I'll be going back to say we won't be reducing our spread and in fact we should be charging more. As it stands we won't be changing our position on that."
"The last time was them calling to say the model was done, but that Group Risk adjusted the volatilities recently so I should expect a larger number. I told them not to run it and that I'd ask credit if they can honour the original numbers as we're so close to trading. Means I need to get that approved asap. It also means that at best, we'll be at the current spread."
Mr Littlewood forwarded this email to Mr Maud and Mr Frohnsdorff, prompting Mr Maud to ask "What is the 'current spread'?" and Mr Frohnsdorff, on being told by Mr Littlewood that Mr Goodwin "has always talked about 13 bps credit + 2 execution", to describe what Mr Goodwin had had to say as being "Classic, last minute bullshit".
"do you want me to get everyone's credit spread and let you know what it is or do you want to contact directly? He hasn't said so far er, where you guys reckon you're going to be?".
Mr van der Nagel's response to Mr Goodwin's question was "16 to 18", to which Mr Goodwin replied:
"Alright, fine. I think you should keep going with that … you might, you probably get chipped down a little bit but you won't be. You won't get made any worse than 13. Err, but go in certainly – I think you're right, I think we should have been a little bit higher so err, if I was you I would stand your ground on that."
"Mr Goodwin: Mate I have heard, I have heard, two people that they are at a spread between 16 and 18 instead of 13.
Mr Littlewood: Fucking hell. We can't have that.
Mr Goodwin: So I don't know how you want to play it mate. Do you want me to do it? Or do you want to make individual calls?
Mr Littlewood: Well can you tell me, well do you want to confirm, and then come back to us?
Mr Goodwin: I'll come back and get everyone's spread.
Mr Littlewood: Yeah, because if they're over yours they're not getting it.
Mr Goodwin: Well mate.
Mr Littlewood: Mate, we'll make those calls.
Mr Goodwin: No mate that's not the way to play it. The way to play it is, you have to get ... you have to try and get them back down to mine, because there's no space to pass it at the moment. You're going to end up not being able to hedge this.
Mr Littlewood: Right, well okay, well do you just want to find out what the story is, and tell them that they'll get a call from Glen to you know whomever, Andrew Sutherland or Mike Worley straight away.
Mr Goodwin: Alright, well I'll get the spreads. I suggest then when we get them, if they're over, then I go back and I say look, 'I've spoken to Glen etc, my spreads here, guys you need to get there.' Do you want me to do it that way?
Mr Littlewood: Yeah, do it that way.
Mr Goodwin: That'll save Glen a lot of time, and save, because mate if you raise it …
Mr Littlewood: Mate he'd go through the roof if he heard that. I'm not fucking joking.
Mr Goodwin: Yeah I know but mate, if you raise it too much at banks, especially here, and I'm guessing other banks are the same, you're gonna come across somebody in a wanky mood, well say fuck it, here's the real number, and you either do it there, or you're not doing it, and everyone's fucked mate.
Mr Littlewood: Well I'm not joking Sean, Glen will take that, I'm not saying I would, but Glen will, but yeah, he will fucking go ballistic!
Mr Goodwin: Let me see where they are, I'll come back. I guarantee some will be over, because there are people already saying to me that they're at 18, some of them.
Mr Littlewood: Right, honestly.
Mr Goodwin: I'll try and get them right down."
"Yeah okay no problem I'll feed that back. I think the other guys are, on top of the two execution, are anywhere between fourteen and sixteen on top of that."
"I think once we've got all the credit spreads the client might come back and say I'm 13 and you're 13, well 15 from mid, I think the client might come back and say "can everyone do 15". And then everyone will be the same agreed spread."
The reference to "the client" was clearly a reference not to any of the Non-RBS Banks but, instead, a reference to Propinvest.
"I'm thirteen. [Caixa] thirteen. Tony and Edwin are wider I think than all of us …. You won't get the call I mean, it's the likes of Mike [Worley] that will get the call from Glen."
This, then, was a reference to Mr Littlewood's view that, if necessary, Mr Maud would take what might be described as direct action.
"Well they said I'll go back and if, with telling them where everyone's spread has agreed that and I said once you get that we can decide what to do but I suggest that what you do is, instead of getting Glen phoning everyone that's busy trying to get this deal closed, you come back to me and say, try and get them down to the cheapest if I can."
After Mr Piggott asked whether Mr Goodwin required something in an email and was told that that was unnecessary, there was, then, this exchange:
"Mr Piggott: Say 15 for credit and 2 for execution and then … if they want you to negotiate it then make it change yeah?
Mr Goodwin: Yeah, yeah exactly.
Mr Piggott: But … I don't want to all come in at the same do we?
Mr Goodwin: Nah, we can't. Caixa come in at 13, we were 13. Just spoke to Russell he said 14.
Mr Goodwin: I'll see what ING say. I think they might be a bit higher … if it's looking too samey I might up you a little bit.
Mr Piggott: Yeah, I'm …
Mr Goodwin: I'll take it back to Phil but in the likelihood we'll all get cut to 13.
Mr Piggott: Yeah.
Mr Goodwin: Which is obviously still good but I think that's the way we need to play this one. I'll speak to ING now and then I'll go back to Phil, and I'll give you a shout, mate."
"I've spoken to all the other banks, erm, I've spoken to Phil, and I said how do you want me to do it, do you want to go and do it, or do you want me to ask them where they are … Erm, and I've got the numbers, some, a couple are wide."
These exchanges, then, followed:
"Mr Maud: Yeah well just tell him to fuck off. I mean look, you know, I mean, look. We're quite happy to go with what we've been working on, between eleven and two, but more than that, I'm telling you it could be a deal breaker because we can't do this.
Mr Goodwin: Fifteen all in it's always been.
Mr Maud: No, no, no. Its eleven and two.
Mr Goodwin: It isn't Glen. It's always been thirteen and two and always been fifteen from mid. And that's the tightest out of everyone. We're the tightest. Everyone's wider than us. Some … one is nineteen …
Mr Goodwin: Yeah, I know, but we're fifteen all in and I'm gonna struggle to get that any tighter, and someone is nineteen Glen. I think if you get fifteen, you've got a result to be honest."
It was Mr Howe QC's submission that there was nothing said in this call which suggested that RBS was representing the Non-RBS Banks. I agree. As can be seen from the passages quoted above, all that Mr Goodwin did, aside from resisting Mr Maud's insistence that the credit spread previously envisaged was "eleven and two", was to tell him what the various banks' credit spreads were. As such, Mr Goodwin was performing a reporting function.
"Mr Maud: Yeah ... Sean, look I'll tell you what, look, we've been working for one or another reason on thirteen [bps] for this. Tell you what can we split it down the middle and then we're done and I can get these fucking notices served, because I've got enough things going on.
Mr Goodwin: I, I need to get approval on that mate which I'm willing to ask for, I need to get the other banks, because the other banks, us and [Caixa] are both at fifteen, everyone else is wider. One's at nineteen.
Mr Maud: I need, and I'm not joking and I'm not putting on pressure here but I've got to like serve these in the next five minutes.
Mr Goodwin: Err mate, I can't, let me speak to the other banks and my guys and I think, 1 mate, if you get fifteen you've done well, honestly, because one's at nineteen, one's at seventeen ...
Mr Maud: Well, are you saying to me that if I say fifteen, we are done and I can serve these notices?
Mr Goodwin: Err, I think so, I think you will be but let me quickly phone the two guys that are very wide and see if they will do that.
Mr Maud: Well, what I'm saying is, is that I want fourteen if you're going to phone the bastards. If you're saying to me fifteen, I need to serve this thing now.
Mr Goodwin: Ah, fucking hell mate, honestly don't then, I'm going to have to pay them.
Mr Maud: Yeah, you'll be alright, your making a bit of money out of it. You're going to make it back in fucking three months I'm telling you.
Mr Goodwin: Ah, fucking hell mate, I ...
Mr Maud: Course you can, fucking hell! You're a big man come on Sean do it!
Mr Goodwin: [Laughs] Fucking hell!
Mr Maud: Get it done!
Mr Goodwin: Mate!
Mr Maud: Come on! Let's get it done!
Mr Goodwin: You fucking ...
Mr Maud: I've got to serve these notices.
Mr Goodwin: How long have you got?
Mr Maud: I've literally, honestly, that's why I phoned you and that, that's why I sent you that email, lit, I, have ten minutes, you know.
Mr Goodwin: Yeah, but fucking hell mate you just said five minutes. [Laughs]
Mr Maud: Well I'm being metaphorical aren't I? You know, come on.
Mr Goodwin: Give me two minutes I'll phone you back on your mobile.
Mr Maud: Are you going to give me fourteen?
Mr Goodwin: Err no. Fifteen I'm going to ask the guys for. And then ...
Mr Maud: Well, I'm telling you, I'm telling you we're not going to serve it unless it's fifteen because that is like ...
Mr Goodwin: Right, right ...
Mr Maud: Two bids more I'm working on.
Mr Goodwin: Fine. Alright mate. Two minutes and I'll get them all to fifteen and I'll phone you back.
Mr Maud: Alright.
Mr Goodwin: Alright, see you mate."
"Well, he – actually he was able to do it. He said he wasn't; he was using that as an excuse because I was trying to get the rates down. And he was saying – as always with Sean, he was like, 'Oh it's going to cost me money, I've got to speak to somebody, it's not my decision' et cetera, et cetera, et cetera. This is just normal –this is what happens when you're dealing with a trader; there's always a reason why they can't. And actually at the end of the day he could, and it's proven by this call."
On this basis, it was suggested, Mr Maud should be treated as having been under the impression that Mr Goodwin already had the requisite authority to agree 15 bps. The difficulty with this, however, is that, if Mr Maud really did think at the time that Mr Goodwin was bluffing and, in fact, already had such authority, then, it is most curious that Mr Maud did not say this to Mr Goodwin. It would have been a simple thing for Mr Maud to have told Mr Goodwin that, as far as he was concerned, he already had authority from the Non-RBS Banks to agree the credit spread. The fact that he did not do this significantly undermines Marme's case. The more so, given that Mr Maud had every opportunity to challenge Mr Goodwin given that Mr Goodwin told him on no fewer than three occasions that he needed to obtain approval. Why, if Mr Maud really did think that Mr Goodwin was making this up, he did not say so is hard to understand.
"Q. You'd left it with him at the end of the previous call that he would try and speak to the other banks and get their agreements to 15?
A. That's what – I didn't – I didn't – I didn't agree to that. What – all he said is that's what he's going to do. I was interested that he was going to come back and confirm the 15 bps.
Q. Suggesting that, if necessary, he could pay any difference out of RBS's own pocket in order to get them to that number?
A. I don't know. I don't know.
Q. That's what you were suggesting?
A. Frankly I don't care. It's not my concern. All I was concerned at that moment was that at least the purpose of my calling Sean Goodwin had been achieved, which was to make sure he did not, on behalf of himself and on behalf of the other banks, move the margin higher than 15 bps. At that point I'd achieved what I set out to do.
Q. Whatever you say you understood was agreed on this call, it was not agreed on behalf of the second to fifth defendants, my clients.
A. I don't know. I've no idea.
Q. You didn't understand that?
A. All I know – all I know is what happened –
Q. Because –
A. – what I know has happened. There was no – as far I'm concerned, unless you can show me an evidence to the contrary, there was no further discussion on the margin. It was 15 bps, which had been in the model, and that's what we executed on.
Q. So your position is that you thought at this call that if any of the second to fifth defendants had said, 'No, I'm sorry, I don't agree to 15', when Mr Goodwin had managed to contact them, you could say, 'Sorry, you've been bound by Mr Goodwin'?
A. Didn't happen. I don't know.
Q. Is that what you understood at the time?
A. I've no – I – look, you're putting me in a hypothetical situation. I'm trying to – trying to answer questions based on what happened and my direct knowledge, because I was involved directly. As opposed to previous matters. I was dealing directly with this. All I know is that on this call I insisted, 'I've got to know. I've got to know, 15?' and he said, 'Mate it's 15', it's agreed. And I said, 'Send me a quick email [confirming 15]", and he did that, as I understand."
"Mr Goodwin: Er, and that how it's gonna be, I, erm, I've just spoken to the last bank so we've done it at 15. Well we've done it at 15 anyway!
Mr Maud: Well we're done now anyway; we're done and confirmed Sean!
Mr Goodwin: I know, well I wasn't. I fucking; well I am now, so I've just spoken to the last one, so that's sorted anyway."
Mr Goodwin was here confirming to Mr Maud that he had finally heard from the last bank and they had all agreed. Although it is not entirely clear what Mr Maud's response should be taken as meaning since, whereas the first part might suggest that until this call there was something still outstanding, the second part might suggest the opposite, what is undoubtedly clear is that, as far as Mr Goodwin was concerned, until he had obtained all of the other banks' approvals, he was not "done" but, on the contrary, was taking the risk that he/RBS might have to "pay" the Non-RBS Banks.
RBS's sole execution role
"Q. Now, I know that you were not involved in this particular swap transaction, but would you find it surprising that representatives of ING were not involved in the execution call between Marme and RBS at which the pricing for all of the swaps was agreed? Is that not rather surprising?
A. No, for this call was actually -- what I say as a property financier -- a 'push the button' call. So all conditions, talks, pricings, issues, were all on an individual basis agreed, and somebody had to push the button and it had to be in one go, for else, otherwise, you disrupt the market. If there are more banks than one go and find for asking swaps, that's no good for the trade."
"… RBS taking charge of the execution process ultimately meant that RBS took all the necessary steps required in the market to finalise the Swaps, which was a three-stage process. First, RBS would go out into the market place and execute a swap or swaps to the required value (€1.575 billion) with as many market counterparties as required. That would effectively fix the price of the Swaps. RBS would then execute a swap with the other hedging banks, in effect parcelling out their portion of the swaps. Finally, Marme would execute its Swap with each of the hedging banks."
Mr Maud did not seek here to suggest that the sole execution role performed by RBS was regarded by him as having any particular (still less relevant) significance.
"If RBS could persuade the banks, we were quite happy with that and, as I say, we had no objection; indeed, we probably thought it was preferable to have single execution. But it wasn't something that we were fixated about."
It follows that sole execution required the specific approval and agreement of the Non-RBS Banks. It further follows that, as Mr Howe QC put it, far from supporting some general holding out of RBS by the Non-RBS Banks as able to act on their behalf, RBS needed to obtain specific authorisation from the Non-RBS Banks to perform the sole execution role. This makes it very difficult to see how it can be suggested on Marme's behalf that by allowing RBS to do what it did in relation to execution the Non-RBS Banks should be treated as holding RBS out to make the EURIBOR Representations.
"Q. Are you aware, Mr Feenstra, that the price at which the swap was going to be executed was fixed on the execution call? Were you aware of that?
A. On the execution call, the pricing -- so the 15 basis points spread, et cetera, that is what I call pricing, the rate at which the swap goes on the market, that depends on market rates at that time, and that normally I hear we take mid-market pricings. So that is a kind of objective rate that you cannot disagree with, for that's on the screen."
"They've got 15 basis points on top of a hedge, so they are indifferent. They've got an equal and opposite swap."
It is also why, when it was put to Mr Feenstra by Mr Saini QC in cross-examination that "ING were happy to trust RBS to make sure that they got an accurate mid-market price on the execution call", Mr Feenstra's response was that:
"It's not a matter of trust, so – and I don't have any idea whether or not ING would have liked to be on the call. But what I consider is that mid-market is not: you get a mid-market price and the person next to you gets a different mid-market price. It is the mid-market price, and it only depends on the moment you are doing the call and do the execution."
Mr Saini QC, then, asked:
"But it's a matter which is capable of being the subject of disagreement isn't it? Because it may depend on which screen you're looking at."
Mr Feenstra replied:
"I haven't heard of any disagreement on that. But again, I'm in property lending, and I only heard about financial markets and the swaps they did from them in their experience, so … but I have never heard that you can disagree on mid-market rates."
It is clear, therefore, that the 'mid-market' price was not something about which the Non-RBS Banks needed to be concerned.
"Well, I have no idea. I mean, what you're saying is something that in actuality didn't happen. None of the banks came back to us on the swaps; they all allowed RBS to negotiate the swaps with us. That is what happened. There's no point talking about a hypothetical in this instance because we know what happened. The bank –and frankly, I would imagine that if one of the banks had come back to me, the first port of call would have been back to Sean."
Mr Howe QC, then, asked Mr Maud this:
"So if the bank had come back to you, there's a flow of information from Sean to the banks and they respond, if the banks had said to you, 'You do understand Mr Goodwin is not representing anything on our behalf; we're just passing our answers back to you', your first port of call would have been to have gone to Mr Goodwin?"
Mr Maud answered:
"Yeah, and said, 'Can you go back and find out what's going on?' Because, you know, as far as we were concerned, in terms of the swap, we were dealing with Sean Goodwin on behalf of Royal Bank of Scotland, who was acting -- who was an employee of Royal Bank of Scotland, who was, as far as we were concerned, negotiating and discussing and agreeing the terms of the swap with us on behalf of the other banks. So I would have been surprised to have received a call from one of the other banks, and as you know, it didn't actually happen; and I would have probably -- I mean, you know, we're looking at a hypothetical world because obviously it didn't happen -- I would have probably gone back to Sean and said, 'Sorry, you know, are -- Bayern, HSH, are they now part of these discussions, do we join them in?' But that didn't happen."
"Q. So when you said -- and I'm sorry, I do need to press you on this, because we do need to be clear exactly what your evidence is as to your understanding at the time. When you said, 'When we agreed anything, we agreed it with RBS' –
A. That's right.
Q. -- you mean to say that at the time, as far as you were concerned, agreeing something with RBS would be agreeing that matter with the non-RBS banks as well, so as to bind them, without having to agree with them directly?
A. No, I'm not suggesting that. I'm not suggesting that we said something to RBS and they said, 'Yes, that's agreed', right? I'm not suggesting that. I'm suggesting that the final agreement was -- we were only talking effectively to RBS. So if we were trying to agree something with them, whether it was a document, whether it was a margin, whatever it was, we agreed it with RBS. I don't know what happened behind the scenes; that's something for this court to investigate, right? I don't know. All I'm saying to you is: from my position, apparently RBS had full authority from the banks to negotiate and they did negotiate. What happened when we finally reached agreement on any point we were discussing was that we agreed it with RBS. But what happened prior to that, behind the scenes, I don't know because I wasn't involved in it.
Q. I'm sorry, Mr Maud, but that is a very unclear answer.
A. Well, I'm sorry, I think that's perfectly clear."
Mr Saini QC suggested in closing that this exchange demonstrates that, as far as Mr Maud was concerned, RBS was representing the Non-RBS Banks in negotiations, particularly in relation to the Swaps. Mr Saini QC may well be right about this but, if reliance is going to be made out, that does not go far enough since what Marme would need to show is that Mr Maud (and Marme) would not have carried on negotiations with RBS (and ultimately concluded the Swaps with RBS and the Non-RBS Banks) had it been known that RBS lacked authority to negotiate on the Non-RBS Banks' behalf. Unless that can be established, there cannot have been the requisite reliance. That is why the exchange the following day between Mr Maud and Mr Howe QC is rather more on point. So, too, is a subsequent exchange during Mr Howe QC's cross-examination, in fact at the very end of that cross-examination, when Mr Maud was asked to consider a scenario which involved the Non-RBS Banks telling him at the "signing meeting" on 12 September 2008 that they wanted to "make it clear that whatever RBS may have said or done, you're not entitled to rely on any of that as against us because RBS isn't acting on our behalf". Mr Howe QC asked Mr Maud whether he would "have done anything differently in those circumstances, other than complete the deal", to which Mr Maud replied:
"At that – at the point of completion, probably not."
Mr Howe QC, then, asked:
"A day before completion?"
Mr Maud's answer was:
"A day before completion, probably not. Other times, maybe I'd have gone – if it had been earlier than that, maybe I would have gone back to resolve any issues that we needed resolving vis-à-vis RBS and the other banks. But that's not actually what happened, Mr Howe."
These exchanges underline the fact that Mr Maud (and Marme) would not have acted any differently had it been known that RBS lacked the authority to negotiate (and so to make the EURIBOR Representations) which it is now suggested that it appeared to Mr Maud (and Marme) that RBS had.
The Defendants' claims for declaratory relief
€5,318,495 due to RBS under the RBS Swap;
€4,710,971.56 due to HSH under the HSH Swap;
€3,026,959.10 due to Bayern under the Bayern Swap;
€2,131,661.34 due to Caixa under the Caixa Swap;
€1,598.746.00 due to ING under the ING Swap.
Each of the Non-RBS Banks sent letters notifying Marme of non-payment and reserving their rights on or about 21 May 2014 (and in the case of ING, again on 10 June 2014) and again on 12 August 2014. RBS sent a notice on 12 August 2014 requesting payment and reserving its rights. The Banks submit that Marme did not remedy its failure to pay by the sixtieth business day following 21 May 2014 or 12 August 2014 (as the case may be) with the result that, pursuant to Clause 5(a)(i) of the ISDA Master Agreements (as varied by Clause 5(b)(iii) of the Schedule to the ISDA Master Agreements), an Event of Default has occurred. Specifically, Clause 5(a)(i) of the ISDA Master Agreement provides that an Event of Default will include:
"(i) Failure to Pay or Deliver. Failure by the party to make, when due, any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) required to be made by it if such failure is not remedied on or before the third Local Business Day after notice of such failure is given to the party;"
Clause 5(b)(iii) of the Schedule provides that:
"(iii) With respect to Party B only, Section 5(a)(i) (Failure to Pay or Deliver) will be amended by deleting the reference to "third" in the final sentence and replacing it with "sixtieth"."
"Right to Terminate Following Event of Default. If at any time an Event of Default with respect to a party (the "Defaulting Party") has occurred and is then continuing, the other party (the "Non-defaulting Party") may, by not more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all outstanding Transactions…"
(i) Statement. On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the calculations on its part, if any, contemplated by Section 6(e) and will provide to the other party a statement (1) showing, in reasonable detail, such calculations (including all relevant quotations and specifying any amount payable under Section 6(e)) and (2) giving details of the relevant account to which any amount payable to it is to be paid. In the absence of written confirmation from the source of a quotation obtained in determining a Market Quotation, the records of the party obtaining such quotation will be conclusive evidence of the existence and accuracy of such quotation.
(ii) Payment Date. An amount calculated as being due in respect of any Early Termination Date under Section 6(e) will be payable on the day that the notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of an Event of Default) and on the day which is two Local Business Days after the day on which notice of the amount payable is effective (in the case of an Early Termination Date which is designated as a result of a Termination Event). Such amount will be paid together with (to the extent permitted under applicable law) interest thereon (before as well as after judgment) in the Termination Currency, from (and including) the relevant Early Termination Date to (but excluding) the date such amount is paid, at the Applicable Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed."
Those notices were served as follows: by RBS on 17 November 2014, specifying the sum due as being €223,721,576; by HSH on 20 November 2014, specifying the sum due as being €199,249,545.25; by ING on 26 November 2014, specifying the sum due as being €67,294,554.15; by Bayern on 1 December 2014, specifying the sum due as being €129,049,794.94; and by Caixa on 3 December 2014, specifying the sum due as being €91,375,814.79. The notices also stated that the Banks claimed an indemnity for their reasonable out-of-pocket expenses, including legal fees incurred by reason of the enforcement and protection of their rights and/or by reason of the early termination of the Swaps.
"(1) The HSH Swap was validly terminated on 13 November 2014 in accordance with its terms by the Termination Notice dated 11 November 2014.
(2) The sum due to HSH upon termination of the HSH Swap is €199,249,545.25 plus interest in the terms set out above at paragraph 82, along with an indemnity as regards its costs.
(3) The ING Swap was validly terminated on 20 November 2014 in accordance with its terms by the Termination Notice dated 19 November 2014.
(4) The sum due to ING upon termination of the ING Swap is €67,294,554.15 plus interest in the terms set out above at paragraph 82, along with an indemnity as regards its costs.
(5) The BayernLB Swap was validly terminated on 26 November 2014 in accordance with its terms by the Termination Notice dated 25 November 2014.
(6) The sum due to BayernLB upon termination of the BayernLB Swap is €129,049,794.94 plus interest in the terms set out above at paragraph 82, along with an indemnity as regards its costs.
(7) The La Caixa Swap was validly terminated on 27 November 2014 in accordance with its terms by the Termination Notice dated 25 November 2014.
(8) The sum due to La Caixa upon termination of the La Caixa Swap is €91,375,814.79 plus interest in the terms set out above at paragraph 82, along with an indemnity as regards its costs."
"…It could be dangerous to reformulate the principles, but I would add six comments on the summary given by Lord Simon in the BP Refinery case 180 CLR 266, 283 as extended by Bingham MR in the Philips case  EMLR 472 and exemplified in The APJ Priti  2 Lloyd's Rep 37.
First, in Equitable Life Assurance Society v Hyman  1 AC 408, 459, Lord Steyn rightly observed that the implication of a term was 'not critically dependent on proof of an actual intention of the parties' when negotiating the contract. If one approaches the question by reference to what the parties would have agreed, one is not strictly concerned with the hypothetical answer of the actual parties, but with that of notional reasonable people in the position of the parties at the time at which they were contracting.
Secondly, a term should not be implied into a detailed commercial contract merely because it appears fair or merely because one considers that the parties would have agreed it if it had been suggested to them. Those are necessary but not sufficient grounds for including a term.
However, and thirdly, it is questionable whether Lord Simon's first requirement, reasonableness and equitableness, will usually, if ever, add anything: if a term satisfies the other requirements, it is hard to think that it would not be reasonable and equitable.
Fourthly, as Lord Hoffmann I think suggested in Attorney General of Belize v Belize Telecom Ltd  1 WLR 1988, para 27, although Lord Simon's requirements are otherwise cumulative, I would accept that business necessity and obviousness, his second and third requirements, can be alternatives in the sense that only one of them needs to be satisfied, although I suspect that in practice it would be a rare case where only one of those two requirements would be satisfied.
Fifthly, if one approaches the issue by reference to the officious bystander, it is 'vital to formulate the question to be posed by [him] with the utmost care', to quote from Lewison, The Interpretation of Contracts 5th ed (2011), p 300, para 6.09.
Sixthly, necessity for business efficacy involves a value judgment. It is rightly common ground on this appeal that the test is not one of 'absolute necessity', not least because the necessity is judged by reference to business efficacy. It may well be that a more helpful way of putting Lord Simon's second requirement is, as suggested by Lord Sumption JSC in argument, that a term can only be implied if, without the term, the contract would lack commercial or practical coherence."
Whereas Mr Saini QC emphasised in his written closing submissions (he did not address the implied terms issue in his oral submissions) the first part of the sixth of these observations (that the test is not one of absolute necessity), Miss John emphasised the second observation (that a term will not be implied merely because it appears fair or would have been agreed) and the last part of the sixth observation (that a term will be implied only if, without it, the contract would lack commercial or practical coherence). Miss John also submitted that a term should not be implied if it is "not capable of clear expression", relying upon Hamblen J's comment to that effect in Cassa di Risparmio at .
"RBS would not make false or misleading LIBOR submissions to the BBA and/or engage in any practice of attempting to manipulate LIBOR such that it deviated from the rate as defined by the BBA (viz a rate measured at least in part by reference to choices made by panel banks as to the rate that would best suit them in their dealings with third parties)".
In that case, Mr Handyside QC, counsel for RBS, having criticised this as being too vague, Asplin J stated this at :
"I agree that it is very widely framed and that it is vague and therefore, fails the test for implication. Had it been formulated in the way suggested by Mr Handyside I would have taken a different view".
Mr Handyside QC's formulation mirrored that accepted by RBS in the present case.
"In the context of the 1992 ISDA Master Agreement, it is submitted that the provisions setting out the circumstances in which termination is permitted, and the consequences of such a termination are intended to be comprehensive, especially as regards matters falling within the scope of the termination provisions. The contrary view would mean that … the methodology prescribed for calculating the termination payment due on a contractual close-out would be inapplicable and the parties' choice of the 'Second Method' for this purpose (so that a payment is due to the Defaulting Party if the termination results in the Non-defaulting Party making a gain) would be fruitless. It is difficult to believe that this would be the parties' intention, as the Second Method is designed to impose an obligation on the Non-defaulting Party to account for such a gain. This is an obligation that it would not have following a common law termination. If it were able to choose between a contractual and a common law termination, this obligation could easily be circumvented and the objective of the close-out provisions defeated …
… it would seem illogical to conclude that, while the contractual methodology must be used where a party fails to perform its obligations, if that party merely states that it will not perform, the other party's common law remedies are preserved.
The better view, therefore, is that the statement that the rights, powers, remedies and privileges set out in the Agreement are not exclusive of those provided by law [in clause 9(d)] is intended to preserve rights of set-off, remedies such as specific performance and similar matters rather than conferring an additional right to terminate on grounds falling outside the express terms of the Agreement. Rights of termination should therefore be regarded as falling within the words "except as provided in this Agreement" so that they are implicitly excluded by the fact that the Agreement contains a detailed code governing the circumstances in which termination is permissible, as well as its consequences."
Cooke J continued at  by referring to the facts of the case before him:
"It is SHI's case that it was DBAG's breaches of contract which led to the close out and the termination of the Agreements, including the FX ISDA which was only terminated recently. It is also SHI's case that DBAG's terminations were wrongful. Breaches were alleged of the FXPBA , which refers to the FX ISDA, of the FX ISDA itself, of the Equities PBA and the Equities ISDA (as well as the oral agreements and the Listed F&O Agreement ). It is hard to see how SHI could claim damages at large in respect of the Prime Broker Agreements and the FX ISDA and Equities ISDA, without reference to the provisions in them and the Master Netting Agreement . There are express terms in the Master ISDA Agreements about calculation of loss on the occurrence of Events of Default, Early Termination, designation of a Termination Date or Master Termination Date. The ISDA Agreements each provided for payment on early termination under Clause 6(e) on the basis of 'Loss' and the 'Second Method'."
He, then, made this observation at :
"Where close out occurs in the context of an agreement, as opposed to forced close out as the result of an Event of Default or Early Termination, it is difficult to see how a party's position can be improved as against the position where the other party is in breach."
This was followed by  in which he set out the relevant ISDA provisions:
"Moreover, each of the FX ISDA, the Equities ISDA, the Equities PBA and the Listed F&O Agreement contained provisions which exclude DBAG's liability in circumstances which obtain for many of the claims. The FX ISDA and Equities ISDA contain provisions as set out in Annex 1 . The Equities PBA has an exclusion Clause in paragraph 13.4 in respect of 'special, indirect and consequential damages arising as a result of any breach by the Prime Broker of any provision of this Agreement'. The Listed F&O Agreement in Clause 16.1 again excludes 'direct or indirect losses, damages, costs or expenses … unless arising directly from … gross negligence, wilful default or fraud' as well as excluding liability for 'consequential or special damage or for loss of profits'."
Cooke J was clear that, in the circumstances, those provisions should operate, saying this at :
"There is no reason why these Clauses should not be given their full effect."
"What remains unclear, however, is whether a common law right to terminate for an anticipatory breach of contract exists alongside the express contractual provisions and, if it does, what remedies follow from the exercise of such a right. Under the 1992 ISDA Master Agreement, none of the Events of Default cover anticipatory breach. It is therefore arguable that the innocent party's common law remedies in this respect are preserved, especially in view of the fact that, in construing a contract 'one starts with the presumption that neither party intends to abandon any remedies for its breach arising by operation of law, and clear express words must be used in order to rebut this presumption'.
On that basis, if a party disables itself from performing, or makes it clear that it intends not to perform, the Agreement in a fundamental respect, the other party would have an immediate right to terminate. At least on a strict reading of the Agreement, the methodology prescribed for calculating the amount due on a contractual termination would then be inapplicable, as it is triggered by the designation or occurrence of an 'Early Termination Date', which depends on the existence of an Event Default or a Termination Event. This would mean that, even if the parties had selected the 'Second Method' (so that a payment would normally be due to the Defending Party where the Non-defaulting Party makes a gain from a termination), the innocent party would not have to account for any gain it makes, as there is no obligation to do so at common law.
It cannot, however, be right to say that, while contractual methodology must be used where a party fails to perform its obligations, if that party merely states that is will not perform, a completely different set of remedies applies. It would also be curious if the making of such statement gave rise to an immediate right to terminate while an actual failure to perform requires notice to be given and a grace period to elapse before such a right arises. The better view, therefore, is that a right to terminate for anticipatory breach is not available. Although the Agreement states that, 'except as and not exclusive of those provided by law, this is probably intended to preserve rights set-off, remedies such as specific performance and similar matters, rather than preserving an additional right to terminate on ground falling outside the express terms of the Agreement. Termination for this Agreement', so that it is implicitly excluded by the fact that the Agreement contains a detailed code governing the circumstances in which termination is permissible, as well as its consequences."
It can be seen that this passage is dealing with the question of whether a common law right to terminate for anticipatory breach exists alongside the express contractual provisions contained in the ISDA 1992 Master Agreement. It is instructive, however, to have regard to what is stated in Firth in the preceding passages since it appears that the position as regards actual breaches is clearer still. Firth starts by identifying the question under consideration:
"At common law, in the absence of agreement to the contrary, a party to a contract may terminate the contract if the other party has breached his obligations under the contract in some essential respect or, through his words or conduct, he has unequivocally shown that he intends to do so (i.e. he commits an 'anticipatory breach' of the contract). This could involve either a refusal to perform the contract or the doing of an act which makes performance impossible. The question that arises, therefore, is whether such a breach constitutes an additional ground on which the transactions may be terminated."
He, then, sets out certain authorities, as follows:
"A similar issue arose in Dalkia Utilities Services Plc v Celtech International Ltd in which a company repeatedly failed to pay a series of invoices issued under an energy supply contract on time, so that about £332,450 was outstanding. The contract gave the claimant the right to terminate it if (amongst other things) the company was in material breach of its payment obligations, and prescribed the termination payment that became due in these circumstances. The claimant therefore served a notice of termination, which was held to be a valid exercise of the express termination rights. Christopher Clarke J went on to say, however, that, if the breach had amounted to a repudiation of the contract, the claimant would also have been able to terminate the contract at common law, in which case damages would be assessed at common law rather than in accordance with the contractual termination provisions. The existence of the express termination rights did not exclude the claimant's common law remedies, even though the contract provided that the termination consequences prescribed by it represented "the full extent of the parties' rights and remedies arising out of any termination". This simply meant that they represented the full extent of the rights and remedies where termination took place pursuant to the express terms of the contract. The fact that the consequences of a common law termination would have been radically different from those prescribed by the contract was not regarded as an obstacle to this conclusion.
Another case in which the remedies available following a repudiatory breach were held to be available notwithstanding the existence of a contractual termination provision is Stocznia Gdynia SA v Gearbulk Holdings Ltd. In this case, a company entered into a contract for the construction of certain vessels. The contract provided that, if the vessels were not delivered on time or the seller failed to proceed with their construction, the contract could be terminated by the buyer. The buyer would then be entitled to the return of any instalments that had been paid, but not to the liquidated damages provided by the contract for delayed delivery. When the seller failed to commence construction, the purchaser terminated the contract and claimed damages for loss of bargain. The seller argued that existence of the contractual termination provisions was inconsistent with a right to terminate at common law and, in any event, the contract excluded any claim for damages.
Both these arguments were rejected. The contractual termination provision, which identified situations that went to the root of the contract, did not oust the common law mechanism but embodied it within the express terms of the contract. In this instance, the contractual right to terminate and the right to terminate for a repudiatory breach were one and the same. The exercise of the right to terminate gave rise to the normal common law remedies since, as a matter of construction, they had not been effectively excluded. It was not credible that the parties had intended the seller's remedies to be limited to the return of any instalments paid: the liquidated damages exclusion simply made it clear that this provision had no further effect once the contract had been terminated."
He goes on, however, to say this:
"It is not always the case, however, that a right to terminate at common law will co-exist with a contractual termination provision. In Lockland Builders Ltd v Rickwood a building contract contained a clause which provided that the contract could be terminated by one of the parties following certain types of breach by the other, but only after an independent architect or surveyor had upheld the complaint and the defaulting party had failed to remedy the defects. This clause was held implicitly to exclude the innocent party's right to terminate for repudiatory breach, on the facts of the case, because it provided a machinery for the determination of the very type of dispute that arose. The position in relation to a dispute that did not fall within the scope of the clause (such as the builder walking off the site when the works were still substantially incomplete) may have been different.
There is therefore no universally applicable rule governing this issue. As Moore-Bick LJ pointed out in Stocznia Gdynia SA v Gearbulk Holdings Ltd:
'Whenever one party to a contract is given the right to terminate it in the event of a breach by the other it is necessary to examine carefully what the parties were intending to achieve and in particular what importance they intended to attach to the underlying obligation and the nature of the breach. The answer will turn on the language of the clause in question understood in the context of the contract as a whole and its commercial background. Sometimes, as in Lockland Builders v Rickwood, the parties will have intended to give a remedy of a limited nature for breaches of a certain kind; in other cases the terms of the contract may reflect an intention to treat the breach as going to the root of the contract with the usual consequences, however important or unimportant it might otherwise appear to be.'"
Firth, then, adds:
"In BNP Paribas v Wockhardt EU Operations (Swiss) AG, Christopher Clarke J considered these issues in the context of the 2002 ISDA Master Agreement. He held that the parties' obligations to make the prescribed payments and deliveries are conditions of the contract, given that a failure to perform that is not remedied by the end of the first business day after notice of the failure has been given entitles the Non-defaulting Party to terminate the contract. The Events of Default that are triggered by non-performance therefore embody within the express terms of the contract the common law right to terminate for a repudiatory breach based on non-performance. At the same time, the contract implicitly varies the remedies that are available where that right is exercised because, by prescribing the method of calculation of the sum to be paid on a termination, the parties have 'spelt out the consequences which result from a breach of condition'. This reasoning would apply equally to the 1992 ISDA Master Agreement, and to breaches of the Agreement that do not involve payment or delivery obligations.
As well as varying the remedies that follow from such a breach of condition, it appears that the contract also varies the steps that must be taken to terminate on the basis of the breach. As was pointed out in the BNP Paribas case, the parties have specified the consequences that follow from such a breach, 'both as to entitlement to terminate and measure of recovery'. Whereas at common law, the innocent party can terminate on notice, under the ISDA Master Agreement notice of termination can be given only if the Defaulting Party has been notified of the default and the default is continuing after the period prescribed by the Agreement has elapsed. There should therefore be no room for an argument that a failure to perform that goes to the root of the contract entitles the innocent party to terminate at common law immediately, with the normal common law remedies applying in such an event."
"It is necessary to begin with some preliminary observations about the correct approach to construction. The ISDA master agreement is one of the most widely used forms of agreement in the world. It is probably the most important standard market agreement used in the financial world. English law is one of the two systems of law most commonly chosen for the interpretation of the master agreement, the other being New York law. It is axiomatic that it should, as far as possible, be interpreted in a way that achieves the objectives of clarity, certainty and predictability, so that the very large number of parties using it know where they stand."
"(d) Remedies Cumulative. Except as provided in this Agreement, the rights, powers, remedies and privileges provided in this Agreement are cumulative and not exclusive of any rights, powers, remedies and privileges provided by law."
I need not, in the circumstances, reach a final view on this issue given my conclusions on the questions of implication of terms and breach. Had it been necessary, however, particularly given Clause 9(d), I would have been inclined to conclude that the correct position, as a matter of analysis, is not that there is an ouster of a party's right to complain that there has been a repudiatory breach but, instead, that, if it wishes to raise such a complaint and bring its contract to an end whether in accordance with the agreement itself or as a matter of the general law, that party is under an obligation to follow the ISDA Master Agreement procedure for termination with the agreed consequences under those provisions. If I am right about this, and it is to be noted that RBS accepts, indeed, that a breach of agreement may amount to an Event of Default under Clause 5(a)(ii), then, in order to terminate, Marme would have to give appropriate contractual notice and allow for the agreed grace period. That was not, of course, done in this case.
(1) I conclude that, although the EURIBOR Representations would have been materially falsified by the direct evidence, such representations do not fall to be implied. For this reason, Marme's action must fail. Although I do not consider that any of the EURIBOR Representations as pleaded can be implied in this case, nonetheless I do consider that RBS's conduct in going along with the Swaps was sufficient for the implication of a much narrower representation, namely that RBS was not itself manipulating, and did not intend to manipulate or attempt to manipulate, EURIBOR. That representation has not, however, been shown to be false.
(2) Had it been necessary:
(a) I would have concluded that fraud had been made out by Marme in that Mr Moryoussef's knowledge would, for these purposes, have been sufficient and it is not necessary that other people within RBS also had the relevant knowledge.
(b) I would have decided that Marme's case on reliance has not been established - whether in relation to Marme's fraudulent misrepresentation case or as regards its case under section 2(1) of the 1967 Act.
(c) I would have concluded that rescission is barred both on the ground of affirmation and on the basis that rescission is not permissible because of the rule against partial rescission.
(d) Marme's case on damages would also have failed since, even had the truth been known, the terms of the Transaction would have remained unchanged.
(3) As for Marme's claim against the Non-RBS Banks, there was no relevant holding out of RBS by the Non-RBS Banks and, even if there had been any such holding out, the apparent authority thereby created was not of sufficient scope to encompass the making of the EURIBOR Representations. In any event, Marme has not established that it relied upon any alleged holding out of RBS as having authority to make those representations in entering into the Swaps.
(4) It follows, for the reasons just stated and my having rejected the various defences raised by Marme (including its repudiatory breach case), that RBS and the Non-RBS Banks are entitled to the declaratory relief which they have sought.