LIBOR: Misrepresentation and Amendment – Part II

Deutsche Bank AG & Ors v Unitech Global Ltd & Ors [2013] EWHC 471 (Comm) (28 February 2013)

This is another judgment about the London Interbank Offered Rate (LIBOR). The instant case, which is interesting to contrast with the Graiseley case highlighted earlier, relates to two actions concerning a credit facility agreement and a related interest rate swap agreement. Cooke J refused the defendants Unitech (U) permission to amend their statements of case – as these had no prospect of success – to plead allegations against the claimants Deutsche Bank (D) that it had manipulated LIBOR and that owing to D’s false representations, U was induced into the agreements. This robust judgment has been appealed and the Court of Appeal is seised of the matter.

The litigation involves D claiming £11 million from U in relation to an interest rate swap agreement and another £150 million under a credit facility agreement. U alleged that D proposed the swap agreement as a hedge against fluctuations in the interest rate and that the swap agreement and the credit facility had been part of a package deal. Aggrieved U thought that it had been induced into the swap agreement by D’s representations that made the agreement appear to be suitable whereas it was not. The interest for the credit facility was linked to LIBOR and U argued that like other banks D had manipulated LIBOR. Therefore, U applied to amend the statements of case to include claims for breach of contractual warranty which were argued to have occurred because of the fact that D was a LIBOR panel bank for the British Bankers’ Association. Similarly, U sought to add common law and statutory claims in respect of misrepresentation.

LIBOR: Misrepresentation and Amendment – Part I

Graiseley Properties Ltd & Ors v Barclays Bank Plc [2012] EWHC 3093 (Comm) (29 October 2012) also known as “Guardian Care Homes”.

The LIBOR scandal has added a fresh flavour to banking litigation in England and Wales and a handful of judgments, of which this was the first, have already been handed down. Apart from the fact that the decisions are published on BAILII, only scant Internet information is available on these interesting cases. Spread out over the next four posts, this LIBOR related miniseries sheds light on some of the decisions that the courts have made thus far. 

This widely anticipated LIBOR “test case” was initially scheduled for trial in the Commercial Court in October 2013. But because the Court of Appeal granted Barclays permission to appeal Mr Justice Flaux’s decision, it appears that the trial of the case in the High Court has been postponed until April 2014. Apparently, the quantum arising from this litigation is up to £37 million.

In this judgment, the Court held that, in the light of regulatory authorities’ findings of misconduct and wrongdoing on Barclays’ part in relation to LIBOR manipulation, Graiseley (G) was allowed to amend its claim for financial mis-selling against Barclays (B) to plead false and fraudulent implied representations made by B.

VTB v Nutritek: Piercing the Corporate Veil: UK Supreme Court Preview

The truly important and absorbing case of VTB Capital plc (Appellant) v Nutritek International Corp and others (Respondents) UKSC 2012/0167 has made it to the UK’s court of final recourse which granted permission to appeal on 26 July 2012. The case is going to be heard for three days by Lords Neuberger, Mance, Clarke, Wilson and Reed JJSC from 12 to 14 November 2012 . There are a lot of issues in this case. Notably a couple of juicy ones are (1) whether the court can pierce the corporate veil and treat a person as a party to a contract if that person uses a puppet company to enter into a contract with a third party in order to perpetrate fraud on that third party and (2) when determining whether England is clearly the appropriate forum, is there a presumption that a defendant who has committed a wrong in England ought to answer for that wrong in England. For some reason this case is not being broadcast live. Maybe it is just too high profile and controversial to show live. Too bad …  because upon appeal to the UKSC, even Special Immigration Appeals Commission dealing with national cases are aired. 

Facts

VTB (“V”), a London-based bank (the appellant) entered a facility agreement with a Russian company (“R”) in 2007. Under that agreement, V loaned R $225m to fund the purchase of six Russian Dairy Plants (“the dairy companies”) from the first defendant (Nutritek, “D1”: the “defendants” (at first instance) also became the “respondents” in subsequent proceedings). R subsequently defaulted on the loan. In 2010, V began claims in deceit, alternatively conspiracy to defraud, against the defendants. In May 2011, Chief Master Weingarten granted permission to serve the claims on the defendants out of the jurisdiction. In August 2011, V obtained a worldwide freezing order against Konstantin Malofeev or “D4”: see below.