Deutsche Bank in £100m ‘mis-selling’ legal battle
Case relates to complex investment and real estate financing package on a property portfolio.
A £100m legal battle is raging between Deutsche Bank and a wealthy family over a complex investment and real estate financing package on a property portfolio that includes some of the most exclusive addresses in Britain.
Apartments worth around £40m and a stunning home on one of the nation’s most expensive streets have become a battleground between the eminent family and one of the world’s largest banks.
Deutsche Bank (Suisse) has issued a £50m lawsuit against the Khan family, who countered with a £100m action alleging the mis-selling of the investment products and mismanagement by the bank.
At the heart of the dispute are alleged misselling of the structured products and unsupported ‘drive-by’ valuations of the portfolio that includes apartments in The Knightsbridge and a detached home on The Bishop’s Avenue, in north London, rated among the top 10 most expensive addresses in the UK.
It is claimed that valuers did not set foot inside the properties, which were given a ‘fire sale’ value rather than a fair market value.
Court papers lodged by the Khan family state: “They were drive-by valuations with no access to the property and no request for access. Deutsche Bank used these reports to maintain the prime London real estate devalued by 40 per cent from the original value.”
The Bishops Avenue property, set in two acres, had planning permission and financing for a redevelopment that could have made it the third largest private residence in London with a potential value of £100m.
The case, scheduled for trial in January 2013, is being viewed as a landmark in contractual disputes between major banks and customers.
Respected financial QC Raymond Cox, of the Fountain Court chambers, recently highlighted it as legal test case.
The family claims it only knew about the alleged ‘drive-by’ valuations when they were presented with a £12,500 bill for the valuer’s reports, which are being used to claim the portfolio is now worth less than the original value. This puts the family into default on the original loan.
Deutsche Bank issued proceedings and the family has alleged mishandling of their account, misrepresentation and mis-selling of structured products, court papers reveal.
The FSA fined DB Mortgages, a division of Deutsche Bank, £840,000 and ordered it to repay £1.5m to customers last year for what it deemed irresponsible lending practices and unfair treatment of customers in arrears.
The US department of justice also launched a £800m lawsuit against the bank in a dispute over government guaranteed mortgages. A Deutsche Bank spokesperson said it does not comment on ‘ongoing litigations’. The Khan family declined to comment.