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Know your limits – LIBOR fraud claim time barred

A fraud claim against NatWest Markets plc and the Royal Bank of Scotland plc has been struck out after it was held to be time barred due to knowledge deemed acquired from widespread press coverage. The decision emphasises the importance of acting promptly to establish what the limitation period is for any claim as soon as it is apparent there is a problem and the potential for proceedings.

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Published 4 June 2020

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A banking fraud claim against NatWest Markets plc and the Royal Bank of Scotland plc (together, “the Bank”) has been struck out after it was held to be time barred.

The Claimant, Boyse (International) Ltd (“Boyse”), is a trust company, which held Sterling loan facilities with the Bank in order to fund its commercial property investments.

In 2007 and 2008, Boyse had entered into two LIBOR-referenced interest rate hedging products (“IRHPs”) with the Bank. However, in 2011 and 2012 the Claimant was forced to sell its properties as a result of the cost of the IRHPs and their negative effect on its cash flow and profitability.

On 6 February 2013 the FSA issued a Final Notice detailing the Bank’s misconduct in relation to JPY, CHF and USD LIBOR (but not GBP LIBOR). Readers will be aware that those findings received widespread publicity in the mainstream media and financial press.

Relying on the FCA’s findings, Boyse ultimately claimed that it had been induced to enter into the IRHPs by the Bank’s fraudulent misrepresentations in relation to LIBOR and sought damages for consequential losses. The claim form was issued on 19 February 2019.

The Bank applied to strike out the claim, arguing that it was issued just outside the applicable 6-year limitation period, which (on the Bank’s case) started running from the date of the Final Notice on 6 February 2013.

Where a claim is based on allegations of fraud, the period of limitation does not begin to run until a claimant has either discovered the fraud or could with “reasonable diligence” have discovered it.

Boyse argued that it could not with “reasonable diligence” have discovered the Bank’s LIBOR misconduct for at least two weeks after publication of the Final Notice on 6 February 2013. If the Court was prepared to accept that argument, then Boyse’s claim form would have been issued within time.

The Court, however, disagreed. Boyse had been aware that the IRHPs were referenced to LIBOR. It was because of their poor performance that the Claimant was forced to sell its properties at a loss long before 6 February 2013. There had been widespread publicity about the manipulation of LIBOR and the undermining of its integrity prior to the FSA issuing a Final Notice in relation to this particular Bank.

The Court considered that, objectively, Boyse was on notice that something had gone wrong and that a reasonably diligent person in Boyse’s shoes would have been alert to the widespread publicity before 6 February 2013. The Final Notice was a trigger that started time running and therefore Boyse’s fraud claim was held to be statute barred.

This decision emphasises the importance of acting promptly to establish what the limitation period is for any claim as soon as it is apparent there is a problem and the potential for proceedings. Particularly for claims for fraud and negligence the date on which the limitation period starts is very specific to the potential claimant’s situation regarding when the relevant knowledge was acquired. Establishing the extent of the knowledge or awareness necessary to start time running is also often complex. There are many traps for the unwary in the law of limitation periods and getting this correct is crucial because failing to do so is fatal to any prospect of recovering losses, no matter how strong the claim may be in substance.

The full judgment is available here: https://www.bailii.org/ew/cases/EWHC/Ch/2020/1264.html

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Shorter Reads

Know your limits – LIBOR fraud claim time barred

A fraud claim against NatWest Markets plc and the Royal Bank of Scotland plc has been struck out after it was held to be time barred due to knowledge deemed acquired from widespread press coverage. The decision emphasises the importance of acting promptly to establish what the limitation period is for any claim as soon as it is apparent there is a problem and the potential for proceedings.

Published 4 June 2020

Associated sectors / services

Authors

A banking fraud claim against NatWest Markets plc and the Royal Bank of Scotland plc (together, “the Bank”) has been struck out after it was held to be time barred.

The Claimant, Boyse (International) Ltd (“Boyse”), is a trust company, which held Sterling loan facilities with the Bank in order to fund its commercial property investments.

In 2007 and 2008, Boyse had entered into two LIBOR-referenced interest rate hedging products (“IRHPs”) with the Bank. However, in 2011 and 2012 the Claimant was forced to sell its properties as a result of the cost of the IRHPs and their negative effect on its cash flow and profitability.

On 6 February 2013 the FSA issued a Final Notice detailing the Bank’s misconduct in relation to JPY, CHF and USD LIBOR (but not GBP LIBOR). Readers will be aware that those findings received widespread publicity in the mainstream media and financial press.

Relying on the FCA’s findings, Boyse ultimately claimed that it had been induced to enter into the IRHPs by the Bank’s fraudulent misrepresentations in relation to LIBOR and sought damages for consequential losses. The claim form was issued on 19 February 2019.

The Bank applied to strike out the claim, arguing that it was issued just outside the applicable 6-year limitation period, which (on the Bank’s case) started running from the date of the Final Notice on 6 February 2013.

Where a claim is based on allegations of fraud, the period of limitation does not begin to run until a claimant has either discovered the fraud or could with “reasonable diligence” have discovered it.

Boyse argued that it could not with “reasonable diligence” have discovered the Bank’s LIBOR misconduct for at least two weeks after publication of the Final Notice on 6 February 2013. If the Court was prepared to accept that argument, then Boyse’s claim form would have been issued within time.

The Court, however, disagreed. Boyse had been aware that the IRHPs were referenced to LIBOR. It was because of their poor performance that the Claimant was forced to sell its properties at a loss long before 6 February 2013. There had been widespread publicity about the manipulation of LIBOR and the undermining of its integrity prior to the FSA issuing a Final Notice in relation to this particular Bank.

The Court considered that, objectively, Boyse was on notice that something had gone wrong and that a reasonably diligent person in Boyse’s shoes would have been alert to the widespread publicity before 6 February 2013. The Final Notice was a trigger that started time running and therefore Boyse’s fraud claim was held to be statute barred.

This decision emphasises the importance of acting promptly to establish what the limitation period is for any claim as soon as it is apparent there is a problem and the potential for proceedings. Particularly for claims for fraud and negligence the date on which the limitation period starts is very specific to the potential claimant’s situation regarding when the relevant knowledge was acquired. Establishing the extent of the knowledge or awareness necessary to start time running is also often complex. There are many traps for the unwary in the law of limitation periods and getting this correct is crucial because failing to do so is fatal to any prospect of recovering losses, no matter how strong the claim may be in substance.

The full judgment is available here: https://www.bailii.org/ew/cases/EWHC/Ch/2020/1264.html

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