1 See Chapters 17 and 18 above. Possible liabilities arising in the course of the arrangement of syndicated loans are particular to that market, and have accordingly been considered in Chapter 21 above. It should be appreciated that liabilities of that type are likely to be incurred (if at all) to other members of the syndicate. The present chapter is concerned with potential liabilities to the bank’s direct customer or client.
2 See the discussion of contaminated land in the context of the bank’s position as mortgagee of such assets, at paras 32.49–32.53 below. Equally, the issues that may arise from the mis-selling of derivative transactions have been considered at paras 23.35–23.39 above.
3 For an extremely useful work that discusses this area as an independent subject, see Hood, Principles of Lender Liability (Oxford University Press, 2011).
5 The present chapter is therefore not concerned with particular rights or remedies which may be available to consumers. That subject is considered at various other points: see, for example, the discussion in Chapter 3 above.
6 On default and acceleration, see para 20.46 above.
7 On the obligations of the bank as mortgagee in this situation, see para 32.30 below.
8 Section 214(1) and (2) of the Insolvency Act 1986.
9 Section 214(7), read together with s 251, of the Insolvency Act 1986. A person who acts as a professional adviser to the company is not to be regarded as a ‘shadow director’ for these purposes. However, a lender will not usually fall within the ‘professional adviser’ exemption: see Fatupaito v Bates  3 NZLR 386.
10 For confirmation of the second point, see Vivendi SA Centenary Holdings III Ltd v Richards  EWHC 3006 (Ch).
11 This defence is set out in s 214(4) of the 1986 Act.
12 For a discussion of this defence as it might apply under present circumstances, see Hood, n 3 above, paras 14.50–14.70.
13 Re A Company (No 005009 of 1987), Ex p Copp  BCLC 13; Re M C Bacon Ltd  BCC 78. The cases are considered by Hood, n 3 above, para 14.08.
17 Re PFTZM Ltd, n 16 above, p 367.
18 See Smithton Ltd v Naggar  All ER (D) 118 (Jul);  EWCA Civ 939. The ‘separate entity’ approach also appears to have been accepted by the majority of the Supreme Court in Revenue and Customs Commissioners v Holland  UKSC 51.
20 Although it may be noted that one of the lenders involved in that case was held to be a ‘de facto’ director of one of the borrowers.
21  NZHC 1 (High Court of New Zealand).
22  EWHC 1186 (Comm), a decision of Gloster J. It should be emphasized that the evidence and factual background to this case are very complex, and the present section attempts only a brief summary. For a useful discussion, see Ryan and Yong, ‘Springwell—are the English Courts the Venue of Last Resort for Complex Investor Claims?’ (2009) 1 JIBLR 54. For follow-up litigation dealing with the bank’s conduct in the aftermath of the Russian default, see JP Morgan Chase Bank v Springwell Navigation Corp  EWHC 1793 (Comm).
23 See Henderson v Merrett Syndicates  2 AC 145 (HL).
24  AC 465 (HL). For an early decision allowing in part a claim against a bank in respect of negligent advice, see Royal Trust Co (Trinidad) Ltd v Pampellone  UKPC 50 (PC).
25  4 All ER 256 (HL). This case concerns liability in tort for failure to observe the terms of a freezing injunction. The case is accordingly considered in more depth at para 43.34 below.
26 See the discussion in Springwell, n 22 above, at para 48.
27 See para 104 of the judgment.
28 See para 100 of the judgment.
29 See, for example, National Commercial Bank (Jamaica) Ltd v Hew  UKPC 51 (PC). In a recent case, the court adopted the same view in the context of a sale and purchase of a derivatives product, noting that (i) the bank had acted on an ‘execution only’ basis, (ii) the bank owed no duty of care to advise the customer on the suitability of the product, and (iii) to the extent to which the usual disclaimer clause fell within the scope of the Unfair Contract Terms Act 1977, they satisfied the test of reasonableness: see Titan Steel Wheels Ltd v Royal Bank of Scotland plc  2 Lloyds Rep 92;  EWHC 2111 (Comm). The decision has recently been followed in Bailey v Barclays Bank plc  All ER (D) 151 (Aug);  EWHC 2882 (QB).
30 For an early decision to this effect, see Williams & Glyns Bank Ltd v Barnes  Com LR 205.
31 See, for example, National Commercial Bank (Jamaica) Ltd v Hew  UKPC 51; Murphy v HSBC Bank plc  All ER (D) 211 (Mar);  EWHC 467 (Ch).
32 Frost v James Finlay Bank Ltd  EWCA (Civ) 667 ;  All ER (D) 365 (May). On the particular facts, this may be viewed as a slightly hard case from the borrower’s perspective.
33 For some of the cases in which this has occurred, see Woods v Martins Bank Ltd  1 QB 55; Cornish v Midland Bank Ltd  3 All ER 513 (CA); Verity and Spindler v Lloyds Bank plc  CLC 1557 and Rubenstein v HSBC Bank plc  1 All ER (Comm) 915 (CA), where a member of the bank’s staff erroneously advised the customer that a structured product was equivalent to a bank deposit, and had failed to comply with the terms of the COBS Sourcebook in assessing the suitability of the product for that particular customer. Even if the bank does assume an advisory role, it does not thereby become responsible for the periodic review or updating of that advice: see Fennoscandia Ltd v Clarke  1 All ER (Comm) 365 (CA). But the cases in which an advisory duty has been found to exist have generally involved financially inexperienced customers where it may have been reasonable to expect them to rely on the bank’s views. As the court noted in Springwell, this is unlikely to arise in relation to a sophisticated client.
34 ie in accordance with the COBS Sourcebook of the FCA Handbook.
35 Al Sulaiman v Credit Suisse Securities (Europe) Ltd  1 All ER (Comm) 1105;  EWHC 400, and further cases there discussed.
36 See Zaki v Crédit Suisse (UK) Ltd  BCLC 640;  EWCA Civ 14.
38 It appears that courts in the United States will adopt a similar approach in upholding provisions of this kind: see, for example, Banco Espirito Santo de Investimento SA v Citibank NA (SDNY, 2nd Cir, 2003).
39 See Springwell, n 22 above, para 573. In Hospital Products Ltd v United States Surgical Corporation  HCA 64, the High Court of Australia observed, at para 70, that contractual and fiduciary obligations can subsist within the same relationship. In such a case, however, the contractual relationship enjoys primacy and ‘…the fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction…’. This approach was approved by the Privy Council in Kelly v Cooper  1 BCLC 395 (PC).
40 See, for example, the court’s refusal to infer such a relationship in Power & Telephone Supply Co v Sun Trust Bank 447 F 3d 923 (6th Cir, 2006).
41  EWCA Civ 386. For a helpful review of this case, see Gooding, ‘Selling Investment Products to Sophisticated Clients: Reflections on Peekay v ANZ’ (2006) 11 JIBLR 628.
42 The Court of Appeal decision in Peekay on the effect of a disclaimer notice and estoppel has been followed on a number of occasions: see Springwell, n 22 above; Raiffeisen Zentralbank Osterreich AG v Royal Bank of Scotland plc  Bus LR D65;  EWHC 1392 (Comm), already noted in the context of syndicated loans at para 25.27 above; Cassa di Risparimo della Republica di San Marino SpA v Barclays Bank plc  All ER (D) 189 (Mar);  EWHC 484 (Comm), dealing with an alleged misrepresentation in the context of a sale of structured notes; Bank Leumi (UK) plc v Wachner  All ER (D) 278 (Mar);  EWHC 656 (Comm), concerning losses on FX trading facilities; Standard Chartered Bank v Ceylon Petroleum Corp  All ER (D) 317 (Jul);  EWHC 1785 (Comm), on the sale of a derivatives contract and Barclays Bank plc v Svizera Holdings BV  All ER (D) 65 (Apr);  EWHC 1020 (Comm), concerning statements made about available exchange rates.
43 PT Dharmala Sakti Sejahtara v Bankers Trust Co  CLC 518.
44 See, for example, Kwiatkowski v Bear Sterns Co Inc 306 F 2d 1293 (2nd Cir, 2002).
45 This will be an implied term of the advisory/management contract, even if it is not explicitly stated.
46 Of course, it would be open to the customer to argue that the bank had misrepresented the effect of the mandate, but that would be a separate issue.
47 See the situation which arose in Valse Holdings SA v Merrill Lynch International Bank Ltd  All ER (D) 70 (Nov).
48 Valse Holdings, n 47 above.
50 See the discussion at paras 725–727 of the judgment.