Are the forces of Hell about to be unleashed on the LIBOR-rigging banks?
Quite possibly, if Mr Justice Flaux’s decision in Graiseley Properties Limited and others v Barclays Bank plc  EWHC 3093 (Comm) is anything to go by.
Although this was only an application by the claimants to amend their Particulars of Claim, it was an amendment which made allegations of fraudulent misrepresentation and implied fraudulent misrepresentation at that; not something lightly allowed.
Implied misrepresentations were said to have been made to induce the claimants to enter into a series of loan agreements and associated hedging transactions. The case concerns, in effect, two derivatives contracts which the claimants were obliged to enter into as a condition of Barclays granting the relevant loan facilities. They had cost the claimants dear and bring into focus not only the LIBOR issue, but the use of unsuitable hedging products.
There was a claim for rescission for innocent misrepresentation in the original pleading, but , since the pleading was originally drafted and served, the various conclusions and findings of the regulatory authorities on LIBOR-rigging, both in this jurisdiction and in the United States of America against Barclays, had been published. This provided the launch-pad for the amendments both as to misrepresentation and, in the alternative, that similar terms were to be implied into the contracts.
The proposed amendments were as follows:
“(1) On any given date up to and including the date of the Swap and the date of the Collar, 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 11.00 am on that date.
(2) Barclays had no reason to believe that on any given date, LIBOR had represented, or might in the future represent, anything other than the interest rate 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 11.00 am on that date.
(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”.
Given the importance that the court attaches to proper particularisation of allegations of misrepresentations (see CPR 16 PD.8.2)and, especially, fraudulent ones, it is not surprising that lack of particularity was the bank’s main line of attack as the judge summarised their submissions at §12:
“The objections raised by the bank to the granting of permission to amend fall essentially into three categories. First, whether there is any basis for implication at all; secondly, whether or not it can be said that it must have been obvious to the people who are alleged to have had the relevant knowledge that the representations were being made and were false, and thirdly, there is an objection related to the issue of authority or authorisation to make the representations.”
In rejecting these submissions Flaux J. took a robust line:-
3. Taking this case to trial is likely to be very expensive. For relatively small claims, wait and see what happens may be a sensible approach if there are no limitation issues. But, in every case, it is going to be in the client’s interest to start gathering information and evidence to support any prospective claim as early as possible.
4. Getting preliminary advice from counsel at an early stage to assist in:
Related link: Profile of Richard Perkoff