The Court of Appeal has rejected an appeal against Royal Bank of Scotland over interest rate swap mis-selling in what was seen as a major test case, after upholding the original High Court’s judgement that the clients did not receive ‘advice’.
In December, the High Court dismissed the claim of estate agent John Green and hotelier Paul Rowley as the Judge decided that the bank did not advise the claimants but only provided them with information.
Lawyers acting for the businessmen had argued that under conduct of business rules the bank owed a common law duty of care to its customers that it did not fulfil in selling them the product.
Both courts deemed that the corresponding common law duty only applies in “advice scenarios”.
The Financial Conduct Authority had intervened in the appeal to clarify its position on the extent of any risk warning required under Cobs, in what was widely expected to be a dmaning indictment against the bank.
However, the court did not deal with this point and were not pressed by the FCA to do so, according to Clarke Willmott, the solicitors instructed for the appeal.
The firm said in a statement that it is “very disappointed by the outcome”, which it said were the result of “the specific facts of this case and of limited wider application”.
It added that it is waiting to review the court’s written judgement, expected in the autumn, “on the extent in an information only situation to which the Cobs rules sound in a common law duty of care”.
It said: “We would hope and expect that any Cobs rules which governed information situations would be applied by any financial adviser exercising a reasonable standard of care.”
Jon Green, lawyer at the firm, had previously told FTAdviser that deals brokered with major banking groups over the mis-selling of interest rate swap products are failing to generate redress for clients as banks are fighting compensation claims in court.
This follows the FSA’s pilot review into sales of interest rate hedging products by major banking groups to small businesses which revealed that up to 90 per cent of 173 sales constituted mis-selling.
This case was widely seen as a test case that could prompt redress to begin being paid.