Biannual Banking Litigation Update (Spring 2025)

The content of this edition of our Banking Litigation Update is as follows:

Duties in financial services

• High Court clarifies relevance of related regulated mortgage contracts in connection with unfair relationship claims under Consumer Credit Act
• Court of Appeal finds lenders liable in motor finance broker commission cases
• Court of Appeal clarifies jurisdiction to re-open settled unfair relationship claims under s.140A of the Consumer Credit Act 1974
• County Court appeal confirms motor finance broker commission case correctly allocated to the small claims track
• High Court confirms 5,800 motor finance claimants can use omnibus claim forms and do not need to issue separate claim forms
• Court of Appeal confirms that dishonesty is essential ingredient in half-secret commission claims
• High Court confirms no novel "retrieval" duty owed by receiving banks to non-customers

Contractual construction

• Court of Appeal decision highlights relevance of public law principles in the financial sector
• High Court considers first LIBOR cessation test case: key implications for financial institutions
• Material Adverse Effect clause not triggered by geotechnical event at mine between signing and completion
• Contractual construction vs rectification: High Court judgment illustrates the contrasting approaches
• High Court gives guidance on the interpretation of deeds of priorities and mortgagee duties in property sales
• Court of Appeal finds contractual cap had to be applied to each party's liability before set-off
• High Court finds lenders' exercise of contractual right to demand loan repayment is not subject to implied Braganza duty
• Court of Appeal considers securitisation noteholders' rights following default
• High Court considers whether "success fee" is payable by client to investment bank in respect of capital raise
• High Court finds lender pursuing its own commercial best interests does not constitute Braganza-style irrationality
• High Court finds Letter of Comfort creates binding guarantee and Ralli Bros principle not engaged where foreign illegality arises from failure to seek regulatory permission

Impact of sanctions on financial services agreements

• High Court orders payment into court pending outcome of arbitration despite potential breach of US sanctions
• High Court declares arbitral tribunal lacks jurisdiction following bank's invocation of asymmetric option clause
• Court of Appeal grants bank's request to discharge final anti-suit injunction in its favour in order to avoid Russian court-imposed penalty

Securities litigation and class actions

• The potential impact of the new UK Listing Rules on securities litigation
• Representative actions under CPR 19.8: Settlement means key questions on funding and damages will have to wait
• Class Actions radar: Scanning global trends and risks
• High Court rejects "price/market reliance" for s.90A and Schedule 10A FSMA claims
• High Court finds companies can assert privilege against their shareholders
• Group litigation orders: Court of Appeal considers binding effect of decisions in test cases
• Data class actions: Court of Appeal upholds decision blocking "opt-out" representative action for misuse of private information
• Le Patourel v BT - First competition class action to go to trial fails: key takeaways and implications for the regime
• UK prospectus regime reform: potential impact on securities litigation
• Opt-out competition class action rejected due to unsuitability of proposed class representative (PCR)
• Court of Appeal rejects attempt to bring securities class action using CPR 19.8 representative action as an "opt-in" procedure
• High Court refuses to allow representative action to be brought on behalf of copyright owners in IP case

ISDA

• Jurisdiction clauses: High Court finds English courts have exclusive jurisdiction under bespoke ISDA clause
• High Court upholds validity of derivative transactions and related settlement agreements in latest Italian swaps judgment
• High Court considers distinction between guarantees and indemnities and the interpretation of payment deferral provisions under 1992 ISDA Master Agreement

Costs and funding

• European Law Institute publishes principles governing third party litigation funding
• Civil Justice Council publishes Interim Report and Consultation on Litigation Funding

Disclosure and privilege

• Legal professional privilege: High Court finds no privilege in identity of third party that provided lawyers with document for purpose of litigation
• The without prejudice rule: High Court finds there is no separate "mediation privilege"
• High Court emphasises narrow scope of the "Norwich Pharmacal" jurisdiction 
• Non-party access to court documents: Court of Appeal interprets leading Supreme Court authority
• Litigation privilege: High Court takes realistic approach in finding privilege applied to witness interviews conducted by administrators
• Norwich Pharmacal order against foreign financial services firm refused
• Litigation privilege: High Court finds privilege applies to valuation report prepared for potential company sale
• High Court partially overturns order for defendant to provide disclosure in jurisdiction dispute
• High Court rejects without prejudice privilege for audit report produced for purpose of settlement negotiations
• High Court dismisses late application for disclosure of transcripts of audio files despite rejecting claim for litigation privilege

Governing law and jurisdiction

• Supreme Court confirms foreign trustee in bankruptcy cannot deal with English property due to the "immovables rule"
• Hague 2005 Choice of Court Convention now applies to Switzerland
• Supply chain risk: Court of Appeal finds claims against Dyson relating to actions of Malaysian manufacturer should proceed in England
• Asymmetric jurisdiction clauses: CJEU finds jurisdiction clause in favour of EU courts may be valid despite giving one party greater choice
• High Court allows case to proceed against defendant companies domiciled in England despite claims having more real and substantial connection with Brazil

Procedural developments

• Court of Appeal clarifies restrictions on adding new claims to existing claim form despite arguable limitation defence
• Pre-action protocols: Civil Justice Council proposes bespoke protocol for commercial cases, including mandatory pre-action "dispute resolution process"
• High Court orders commercial parties to mediate shortly before trial
• High Court orders evidence of settlement with other claimants to be excluded from trial

Other significant developments

• 2024 Global Bank Review - Adaptation: Change is the only constant
• Court of Appeal upholds decision to reduce damages to reflect benefit claimant received as a result of steps taken to mitigate its loss
• Supreme Court confirms broad interpretation of section 423 Insolvency Act 1986 relating to transactions defrauding creditors
• Greenwashing Exposed – Sanctions and Claims in Financial Services Across Europe

We hope you find our update useful and, as ever, please feel free to contact your usual Herbert Smith Freehills contact if there are any topics that you would like to discuss further.