After a 38 day trial, Mrs Justice Asplin handed down a 187 page judgment just before Christmas in the long-running Property Alliance Group Ltd v The Royal Bank of Scotland plc case. She rejected claims of mis-selling, breach of good faith obligations and misrepresentations associated with LIBOR.

Property Alliance Group sued RBS over four interest rate swaps taken out between 2004 and 2008, linked to GBP 3 month LIBOR. RBS moved the relationship to a division known as the Global Restructuring Group (“GRG”) in Spring 2010. PAG terminated the swaps in June 2011, incurring an £8.3 million break cost. PAG brought claims that fell into three categories:

  • The Swaps Claims – that the swaps were mis-sold as hedging instruments by RBS and did not protect PAG from its interest rate risk. PAG claimed RBS had breached a duty to give a full and accurate explanation of the swaps. Had RBS done so PAG claimed it would not have entered into the swaps.
  • The GRG Claims – that the transfer of PAG’s affairs to and associated management by GRG breached implied duties of good faith and commercially fair dealing.
  • The LIBOR Claims – that RBS had made implied representations that LIBOR was a reliable benchmark not subject to manipulation. PAG claimed that had it known those representations were false it would not have entered into LIBOR-based swaps.

The Swaps Claim

The claims relating to the Swaps fell under three main headings:


The Court found that PAG was a substantial professional company and not a retail client. It had sophisticated staff, who although not derivative experts had entered into derivatives previously.  PAG’s managing director and majority shareholder had strong views about interest rates and swap products and actively sought particular types of trades. PAG was under no time pressure to enter into the swaps. PAG also had advisers who were aware of the potential for break costs. Break costs were flagged in an internal email but this was ignored.

There was no implied duty of good faith or requirement on RBS not to withhold “important information”. At the time it was not market practice to give information about potential break costs, mark-to-market values, or the credit line needed for the swaps. RBS was not required to provide a “scenario analysis” of this information. The Court found no wrongdoing by RBS in not doing so.

“Non-Reliance” provisions in the agreements were effective “basis clauses” that excluded any duty to advise and prevented PAG relying on any statements made as “investment advice”. The relationship was commercial and subject to clear contractual documentation.


Misrepresentation claims failed for similar reasons. The agreements contained non-reliance terms and expressly excluded any advisory duties or any fiduciary relationship. According to those terms PAG was making its own decisions and not relying on RBS for advice. The contractual documents made clear that PAG would be exposed to interest rate risks in certain circumstances. The term “hedge” was generic. It would not have been understood by a “reasonable representee” as an assurance that the swaps would hedge any particular risk. PAG’s enthusiasm for derivatives, seeking quotes from different banks, also weighed against reliance on a representation that the swaps were “hedges”.

Implied terms

The contracts did not contain implied terms that the swaps would be suitable for hedging PAG’s interest rate risk or that RBS would act in good faith deal fairly. Such terms were contrary to express provisions in the agreements excluding equitable and fiduciary duties, and were unnecessary between sophisticated commercial counterparties. A term that RBS would disclose important information about the hedging should also not be implied. That would “achieve by the back door what cannot achieved by the front and runs contrary to express terms”.

The GRG claim

PAG sought to imply terms that:

  • RBS would “perform the agreement in good faith and would not perform it in a commercially unacceptable or unconscionable way”. Mrs Justice Asplin considered this term unnecessary for the functioning of an arms-length contract between sophisticated parties, and contrary to “non-reliance” terms.
  • RBS would exercise powers to appoint valuers and require a security review “reasonably, in a commercially acceptable or rational way, in good faith, for a proper purpose… not capriciously or arbitrarily”. The court held that these terms were not to be implied: there was no contractual requirement on RBS to exercise any powers or discretions, conduct any assessment or give any opinion.
  • The same relationship team would continue to manage the PAG relationship. The court found that there was no basis to imply this term: this was a  perfectly proper matter of internal arrangement for RBS.


The Court also concluded that had such terms existed, RBS had not breached any of them.

The LIBOR misrepresentations claim

The Court dismissed the LIBOR claims after considering four elements:

  • Were the implied representations made? The Court said no. Proffering draft swaps referable to LIBOR was insufficient to infer the representations. The conduct of unknown LIBOR panel banks was not within the contemplation of the parties.
  • Did PAG rely on them? PAG did not in fact understand the representations to have been made: they did not cross the minds of the relevant people at PAG.
  • Were they false? The Court did not find that GBP LIBOR had been manipulated. No inference could be drawn from LIBOR manipulation in other currencies. There was a lack of factual evidence about the making of low LIBOR submissions. PAG’s expert evidence was considered unreliable. LIBOR submissions were subjective based on hypothetical borrowing rates: it was difficult to be satisfied that submissions had been wrong.
  • Where they fraudulent? PAG failed to prove that the relevant individuals at RBS knew that the LIBOR representations were being understood and relied upon, or even that they were false.


Whilst the case does not make new law, it shows how the Financial List can be expected to approach LIBOR claims. The robust decision offers comfort to banks that the contractual basis of their customer relationships will be respected. Only in special circumstances will courts imply duties that cut across that framework between sophisticated parties.

Some banks still hold substantial provisions for the potential cost of similar claims in the UK and US. This case will be closely scrutinised by claimants considering how to cast claims. While each case will turn on its facts, this judgment highlights the hurdles claimants will face and how they will need to differentiate themselves. For example the Court found PAG’s expert evidence to be unreliable and unconvincing. Banks will want to learn from this case and address areas of weakness, such as flaws in contractual documentation and how to ensure that relationships remain on a non-advisory footing.