UK: Recent Judgment Handed Down In Swaps Litigation

Last Updated: 2 October 2014
Article by Richard Caird, Sam Coulthard and Alexandra Doucas

Crestsign Limited V. (1) National Westminster Bank Plc; And (2) The Royal Bank Of Scotland Plc [2014] EWHC 3043 (Ch)

In the continuing march of swaps litigation, each new judgment handed down represents a fresh carcass over whose bones those involved in such litigation inevitably pick for insights as to how future cases are likely to be decided. The recent judgment in the Crestsign litigation may well prompt the same response, although the judge was at pains to emphasise at times that each case is highly fact-specific.

The judgment is ultimately a victory for the Bank, particularly as regards the effect of its contractual (and non-contractual) documentation, but that victory was not unequivocal and there are points in the judgment which claimants may find encouraging.

The judgment considers the odd combination of a finding of fact that advice was given, and the effect of documents asserting a non-advisory relationship. The key findings in the judgment are summarised in the Conclusions section below.

Relevant facts

It is unnecessary to recite the factual background to the dispute in full, save for a few key aspects.  Crestsign is a family owned and run property investment company, letting out commercial premises. Its borrowing at the relevant time was approximately £3.3 million and the judge accepted that the intention of its owners was to retain the properties they owned for approximately 10 years, following which they would be sold and the proceeds used to repay Crestsign's borrowing (which the owners wished to remain interest-only) and provide some surplus for the family.

In June 2008, Crestsign refinanced its borrowing with the Bank for a period of five years, and entered into an interest rate swap with a term of 10 years (subject to an option for the Bank to terminate at intervals before that time), incorporating a discounted rate for two years followed by a fixed rate of 5.65% thereafter (the Swap).

The Swap was agreed following a series of meetings and calls, and exchange of e-mails, between Crestsign and a representative of the Bank authorised to sell such products. There was some disagreement as to what was said in the meetings and conversations which took place, and in general terms the judge preferred Crestsign's evidence on those matters. He found, among other things, that:

  • the Bank's representative said that interest rates were likely to rise (with which prediction Crestsign's owners expressly disagreed) despite the fact that the Bank's own internal forecast was that they would fall;
  • Crestsign had not understood the explanations given;
  • a more limited oral presentation of possible interest rate hedging products had been provided than the Bank's witnesses suggested;
  • break costs were mentioned, but there was no attempt to explain or quantify them; and
  • Crestsign did not fully grasp the implications of the loan and swap contracts being separate, and for disparate terms.

The Bank's documents

The judge considered various documents produced by the Bank (the Documents), in particular:

  1. A Risk Management Paper provided to Crestsign after its initial meeting with the Bank, containing descriptions of four possible hedging products, a summary of relevant benefits and considerations, and a number of notes. The notes included:
    • reference to the fact that the hedging contract would be separate from any borrowing to which it might relate, and that terminating one would not necessarily terminate the other;
    • reference to possible exposure caused by a mis-match between the term of the loan and the term of the swap;
    • a statement that break costs might be payable on early termination, and that they might be substantial; and
    • statements that Crestsign would make its own evaluation of the transactions it entered into, that it should consult such advisers as it needed, and that no reliance could be placed on the Bank for advice or recommendations of any sort.
  2. The Bank's Terms of Business which included a provision stating that the Bank would not provide advice on particular transactions unless it specifically agreed to do so; and
  3. The Bank's Stand-Alone Derivatives Terms, which included representations and warranties that Crestsign had made its own independent decision to enter into the Swap and did not rely on any communication by the Bank as investment advice or as a recommendation.

The claims

In November 2011, Crestsign sought to refinance its borrowing with another bank, but was unable to do so because of the amount of break costs which would be payable to terminate the Swap. It complained in June 2012 that the Swap had been mis-sold, and issued its claim in June 2013.

It made two claims against the Bank:

  1. breach of a common law duty to use reasonable skill and care when giving advice and/or making recommendations to ensure that such advice and/or recommendations were suitable (the First Duty); and
  2. breach of a common law duty to take reasonable care when providing information, to ensure that such information was both accurate and fit for the purpose for which it was provided, namely to enable Crestsign to make a decision on an informed basis (the Second Duty).

The Bank denied that it owed the First Duty at all, and asserted that the Second Duty was limited to a duty to give information which was not misleading. It asserted that there was no breach, that the Documents precluded any interpretation that the sale of the Swap was advised, and that Crestsign was contractually estopped from making any such allegation.

The judge's conclusions

(a) the First Duty

The judge considered the arguments in this claim on the basis that Crestsign had to show first that the Bank did in fact give advice about the Swap in such a way as to give it "the force of a recommendation", and second that the interaction between the Bank and Crestsign was such that it gave rise to an assumption by the Bank of the duty for which Crestsign contended.

Crestsign succeeded on the first point, but failed on the second. The judge applied the test of whether an impartial observer would conclude that advice had been given, and decided that they would, in that the Bank had (he held) "steered" Crestsign towards a particular product rather than providing a set of equally weighted options. Interestingly for the broader context of swaps litigation, he also found that absent the existence of the Documents, he would have found that the nature of the interactions between Bank and client gave rise to an assumption by the Bank of a duty of care.

The Documents, however, tipped the scales against such a conclusion. The Bank asserted that the Documents clearly showed that the basis of the parties' dealings was that it would not act as adviser. Crestsign argued that there was (in effect) a collateral, unwritten advisory agreement between it and the Bank which came into existence when they entered into an advisory relationship. It argued that, on that basis, the provisions of the Documents on which the Bank relied simply did not apply, and that just as they did not succeed in disclaiming liability for negligent advice actually given, nor could they found a contractual estoppel. Crestsign further argued that the relevant clauses were unreasonable exclusions of liability within the meaning of the Unfair Contract Terms Act 1977 (UCTA) and should be struck down.

The judge agreed with the Bank that the relevant provisions in the Documents, stating that Crestsign could not rely on the Bank for advice, were "basis terms" rather than exclusion clauses. In other words, they set out the agreed basis on which the parties had conducted their dealings, rather than excluding a liability which would otherwise arise. The judge concluded that the position was effectively as it would have been had the Bank's representative said: "although I recommend one of these products as suitable, the Bank does not take responsibility for my recommendation; you cannot rely on it and must make up your own mind".

The consequences of this finding were first, that the First Duty did not exist, and second, that the provisions did not need to be assessed against UCTA for reasonableness.

The judge referred to the "fine line" which separates the provision of information from the giving of advice, the ease with which it can be crossed, and the difficulty for a salesman of knowing when he might inadvertently do so. In that context, he found it legitimate for parties to agree on a defined basis for their dealings. For the same reasons, the judge found that Crestsign was estopped from claiming that the Bank owed it the First Duty.

The second implication of the judge's finding, that the UCTA reasonableness test did not apply, turned out to be significant for the Bank. The judge held obiter that had he needed to assess the provisions of the Documents setting out the basis of the parties' dealings for reasonableness, he would have found them to be unreasonable. The judge's thinking on this point is (understandably) not developed in the judgment, but will doubtless be of interest to claimants attacking other clauses, or indeed were Crestsign to succeed in any appeal. The judge refers to being influenced in this view by the findings of the FSA's 2012 review into the sale of interest rate hedging products, but it is not clear in what way he considered that such findings would apply to UCTA's reasonableness test in the context of this specific relationship.

The judge made a further obiter finding that had he held the First Duty to exist, he would have found that it had been breached. Again, the reasons for this are perhaps not as well-developed as they would have been had the point been relevant, but the judge's view appears to have rested on a conclusion that a swap term which exceeded the term of the related loan inherently presented an unacceptable risk for this customer.

(b) the Second Duty

The argument between the parties in relation to the Second Duty was, in effect, a debate as to whether the Bank merely had a duty not to make any statement which was misleading, or whether it had a duty to provide information which was accurate and fit for the purpose of allowing Crestsign to make an informed decision.

The judge, having considered these competing assertions, articulated a hybrid duty which neither party had proposed. He accepted that the starting position was that the Bank did not have any duty to provide information at all, but it had chosen to do so and as a result had changed that position. He was unwilling to accept that the Bank had a duty to provide information in relation to a full range of products (in order to educate Crestsign sufficiently that it made an informed choice between them). Instead, he held it was under an obligation only in relation to information it provided as to the products it wished to sell.

Pausing here, the difference between the Bank and Crestsign could be described as a conceptual one. The Bank accepted that it had a duty in relation to information it actually provided, whereas Crestsign maintained that the Bank had a duty to provide more information than it actually did. On this distinction, the judge accepted the Bank's position.

He did not, however, agree with the Bank's characterisation of its duty as set out above. Rather, he preferred the articulation in Cornish v. Midland Bank plc [1985] 3 All ER 513 that "...if the bank does give an explanation or tender advice, then it owes a duty to give that explanation or tender that advice fully, accurately and properly. How far that duty goes must once again depend on the precise nature of the circumstances and of the explanation or advice which is tendered."

On that basis, the judge concluded that the Bank owed a duty to explain fully and accurately the effect of the products it offered to sell to Crestsign, but not to educate it further. The judge made it clear that, in his view, such a duty extended to correcting obvious misunderstandings on the part of Crestsign and answering reasonable questions.

On this basis, the judge found that the Bank had not been in breach of its duty, in that it had indeed provided a factually accurate, and not misleading explanation of the products it offered, including in relation to the mis-matching terms of swap and loan. With acknowledged anxiety, the judge also came to the conclusion that the Bank had given adequate information about break costs which mentioned that these could be substantial.

This series of conclusions is likely to raise a number of further questions. The Bank's proposed formulation of (in essence) a duty not to misstate had the benefit of relative simplicity. The requirement that any explanations given are full, accurate and proper necessarily provides more limbs over which to argue. Given the judge's hesitant conclusions on break costs, it is also likely that they will be the subject of some attention in future cases.


This judgment is curious in a number of respects. First, the judge was avowedly sympathetic to Crestsign and reluctant to find in favour of the Bank. This was perhaps the inevitable consequence of his finding that poor advice was actually given. The judgment shows too how the court will need to grapple with cases where the judge finds that advice was given, but where the relevant documents preclude an advisory duty. Such cases (which may seem more stark where counterparties are financially unsophisticated) are likely to continue to be among the harder swaps disputes to resolve, and this judgment provides no easy answers. Its key findings (referred to in more detail above) are arguably that:

  1. the statements in the Bank's documentation that it did not provide advice to Crestsign were descriptive of the relationship between the parties such that:
    • they precluded liability for advice which was actually given; and
    • they were not exclusion clauses and thus could not be judged for reasonableness;
  2. had those statements been subject to a test of reasonableness under UCTA, the judge would have found them to be unreasonable; and
  3. there is a duty on the part of banks to ensure that explanations given are full, accurate and proper, but no duty to "educate" unsophisticated clients.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
21 Sep 2017, Seminar, London, UK

Is there such a thing as "energy law"? What do "energy lawyers" do? And why should it be of interest to anyone else?

28 Sep 2017, Seminar, London, UK

On 26 July the FCA published its long-expected consultation paper on the extension of the SMCR to all FCA-authorised firms. The so-called "core regime" introduces the key concepts of regulator-approved senior managers, firm-approved certification staff and conduct rules applicable to virtually all staff.

3 Oct 2017, Conference, Zurich, Switzerland

As the founding Partner of the Europe-Iran Forum, Dentons Europe will once again support this year’s event. This compelling event which explores all Iran-related topics will take place in Zürich on 3rd and 4th October.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.