Following the judgment in JP Morgan Chase Bank v Springwell Navigation Corporation (2008), the court held that a bank did not assume an advisory duty in agreeing an interest rate swap and the court will look at all the evidence of the relationship between the parties to determine whether an advisory relationship exists.
Thornbridge was a property investment company. Thornbridge sought a loan from Barclays which was entered into in April 2008. In May 2008, as part of the conditions for obtaining the loan, Thornbridge entered into an interest rate swap agreement with Barclays. Later in 2008, there were a number of reductions in the Bank of England base rate, to which payments under the swap were linked. Subsequently, the swap payments due from Thornbridge increased significantly. After the swap matured, Thornbridge claimed against Barclays for damages for losses arising from alleged negligence, breach of contract and breach of statutory duty.
The court held that Barclays had not recommended the swap nor assumed an advisory duty. A factor against the finding of Barclays having provided investment advice is that Barclays did not receive a fee for any advice. The court drew a distinction between the advice of an investment adviser and the advice given by a salesperson.
Even if advice was given, Thornbridge was contractually estopped from asserting that Barclays had advised it to enter into the transaction. In the absence of an advisory relationship there was no common law duty to provide information, simply a duty not to mislead. Barclays did not mislead Thornbridge and there was no duty to give full information about the advantages and disadvantages of the products.
This judgment will be welcomed by banks and the detailed reasoning in the judgment may serve to prevent similar claims in the future. The judgment is currently being appealed.
Interest Swap Mis-Selling: Thornbridge Limited V Barclays Bank Plc (2015)
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