The High Court has delivered another blow to RBS in the action brought by Property Alliance Group (“PAG”) for the alleged mis-sale of various interest rate hedging products (“IRHPs”) and for alleged mis-representations in relation to LIBOR. This represents good news not only for PAG, but for all claimants pursuing, or considering pursuing, LIBOR manipulation claims; particularly claims against RBS.

The decision of Mr Justice Birrs, handed down on 13 November 2015, has sent shockwaves across the banking litigation sector, not least because it quotes extracts from a series of communications from very senior RBS employees (see paragraph 55), extracts which do not paint the individuals or the bank in a particularly favourable light. These communications, which are referenced in a schedule to PAG’s draft Amended Particulars of Claim, appear to demonstrate that very senior managers within RBS knew about the efforts their own traders were making to manipulate LIBOR in order to improve the bank’s own derivative fix position at the expense of its own customers. While these are only allegations at this point and have not yet been tested in Court, it is hard to conceive of more damning revelations being placed on the public record in an action of this sort.

These revelations have led to PAG obtaining permission from the judge to amend its claim to allow it to allege fraud. This in itself is a very serious issue for RBS, in terms of its defence to PAG’s claim and in respect of broader regulatory and reputational issues (it will also of course be of enormous concern to the individuals themselves). However, what may be of even greater concern to RBS is the potential ramifications of this material being placed on the public record. There is now the likelihood, perhaps inevitability, of a raft of further claims making the same or similar allegations to that now sanctioned in the PAG case.


PAG, a property developer with a portfolio worth about £200 million, is pursuing a claim for circa £13m against RBS alleging (1) that it was induced to enter into various IRHPs by misrepresentations made by RBS in relation to the setting of LIBOR and (2) that the IRHPs themselves contain implied terms in connection with RBS’ conduct relating to LIBOR. These IRHPs all used 3 month GBP LIBOR as a reference rate.

This argument (the “LIBOR Argument”) was also run by the claimant in Graiseley v Barclays plc, another claim against a bank for IRHP mis-selling. The case settled before substantive judgment on the merits was handed down, reportedly for a figure of circa £40m.


On 5 November 2015, PAG brought an application to amend its claim in various ways. One of the amendments was to introduce the claim that RBS made representations to PAG about LIBOR fraudulently, based on RBS’ awareness of, and participation in, manipulation of LIBOR. PAG claimed that this awareness and participation is evidenced by the involvement of senior management figures within RBS in the manipulation of the benchmark. The proposed amendment was opposed by RBS.

Birss J, before whom the application was brought, rehearsed the special scrutiny to which the courts subject allegations of fraud, pointing out thatassertions of fraud and dishonesty are easy to make but difficult to prove. Moreover, he stressed the seriousness of PAG’s submissions, both in that they were allegations of fraud and dishonesty and also in that they were beinglevelled against the most senior executives of a major bank. Nonetheless, in an explosive finding with the potential to cause enormous damage to RBS, he then went on to say (at paragraphs 58 and 59):

“In my judgment the material relied on by PAG and set out in the Amended Particulars of Claim and its schedule provides ample prima facie support for an inference of fraud and dishonesty at the highest level of RBS. The materials show that, arguably, members of the RBS board were aware that LIBOR was “broken” during a period in which RBS was selling swaps to PAG referable to LIBOR…

“…there is evidence from which a properly arguable inference can be drawn that knowledge of serious problems with LIBOR existed at a senior level inside the bank. The issues raised in this action do not only concern the RBS trading floor, they concern top management with overall responsibility for LIBOR and for swaps.“

Accordingly, the court granted PAG’s application to amend its claim to include the allegation of fraudulent misrepresentation. The court also granted a related application made on behalf of PAG for specific disclosure of (amongst other things) papers and minutes of the RBS Board of Directors as well as communications between RBS and the Bank of England.


The consequences of Birss J’s judgment will be widely felt, in particular by claimants who have been mis-sold LIBOR based swaps by RBS, or even by another bank which has been involved in LIBOR manipulation.

Many other RBS customers may have been affected in exactly the same way as PAG, and should consider including similar allegations of fraudulent misrepresentation (and the LIBOR Argument more broadly) in their claims.

Indeed, as the PAG proceedings march on, the LIBOR Argument angle seems to be a more and more fruitful assault. The blows the defendant bank has suffered as a result of the argument have already been keenly felt in a series of disclosure related applications made earlier this year (see the Carter-Ruck update here), which led to RBS being forced to disclose a number of sensitive documents. This latest development will no doubt pile on the pressure even further, with adverse findings as to RBS’ most senior executives’ involvement in the LIBOR scandal being made in a public forum.

Furthermore, there seems to be no reason why the LIBOR Argument couldn’t be adapted and used in the context of the sale of products other than IRHPs, as long as they reference LIBOR as a benchmark. In this way, even underlying finance agreements could be vulnerable to attack.


Birss J’s judgment also delivers an added bonus for claimants suing on LIBOR based swaps, in that it may help to provide circumvention of the ordinary six year limitation period. As many victims of IRHP mis-selling will be keenly aware, in most instances where more than six years has passed since the sale of the relevant product, a claim will be barred by statute. However, the same statute provides that where there is fraud, time does not start to run for the purposes of limitation until the fraud is discovered, or until the claimant could with reasonable diligence have discovered it.

It could quite reasonably be argued that without the resources available to a claimant such as PAG, it would have been extremely difficult for an ordinary IRHP customer to uncover the fact that the fraudulent misrepresentation had occurred. In this sense, the fraud could not with reasonable diligence have been uncovered, and accordingly the six year limitation period would only start to run from the point of this recent judgment (or perhaps even the point at which the final PAG v RBS judgment is handed down, assuming that such judgment includes a finding of fraud).


Assuming PAG v RBS does not go the way of Graiseley v Barclays and settle, the full trial of this case is due to start in the summer of 2016 and is listed for 8 – 10 weeks. Any party who is, or is considering, bringing a claim for the mis-sale of LIBOR-based financial products should keep a keen eye on these proceedings as they progress.

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