The combined appeal of Graiseley Properties Limited v Barclays Banks PLC and Deutsche Bank v Unitech Global Limited and Others was recently heard by the Court of Appeal. Both cases arise from the alleged distortion or manipulation of LIBOR. At first instance, the borrowers in each of the actions sought permission to amend their pleadings to allege that the respective banks made implied representations as to the efficiency or non-manipulation of the LIBOR rate.  At first instance in Graiseley, Flaux J gave permission to amend, whereas in Deutsche Bank, Cooke J refused. This appeal hearing sought to reconcile these decisions.

The First Instance – Graiseley Action

In this case, the claimant alleges that the loan contracts offered to it by Barclays (which incorporated various interest rate swap provisions) were unsuitable. A fact, it is alleged, that Barclays’ personnel knew at the time the contracts were made.

The FSA has previously criticised Barclays for two distinct areas of wrong doing. The first area concerned LIBOR submissions from Barclays to the British Bankers Association (“BBA”), which took into account requests by interest rate derivative traders to the submitters (who were responsible for submitting the LIBOR rates to the BBA) which the FSA found were motivated by profit. Secondly, on instructions from senior managers at Barclays, the submitters lowered their LIBOR submissions to the BBA. It is against this background that the claimant sought to plead implied representations in relation to what Barclays knew about LIBOR and how it was conducted.

Essentially, the claimant argued:
(1) On any date up to and including the date of the loan agreement, LIBOR represented the interest rate as defined by the BBA, being the average rate at which an individual contributor bank could borrow funds;
(2) Barclays had no reason to believe that LIBOR represented anything other than this; and
(3) Barclays had not or in the future did not intend to:
a. make false or misleading LIBOR submissions; and/or
b. engage in the practice of attempting to manipulate LIBOR.

The Claimant argued that, as a result of the FSA findings, it was at least arguable that these implied terms were breached and therefore the amendment to their pleadings should be allowed.

It was Barclay’s case that the amendments should not be allowed because there was no basis of implication (previous objections were not in issue at this hearing). However, the Judge held that if Barclays were to oppose the amendments, then it had to show that there was no prospect of success. He went on to decide that Barclays could not show it had “an unanswerable case that the implied representations were not made” and on this basis the Court gave permission to rely on an implied term that Barclays would not manipulate or make false returns in respect LIBOR.

The First Instance – Deutsche Bank Action

The borrowers in this action were being pursued by Deutsche Bank for accelerated payments of a loan advance due to their various failures to pay the instalments. Similarly to the Graiseley action, the borrowers sought to amend their pleadings to include an allegation that Deutsche Bank represented that LIBOR was a rate based on good faith estimations and that Deutsche Bank had not and would not act in a way that would undermine the integrity of LIBOR. Additionally, it was argued that Deutsche Bank implied that it was not aware of any conduct of either itself, or of other banks, that would be likely to undermine LIBOR.

At first instance, Cooke J held that such pleas “sought to place in the mouth of one bank a statement about the overall integrity of the LIBOR system, or of an individual bank’s contributions to it”. Relying on the authority of Toulson J in IFE Fund v Goldman Sachs International [2007] EWCA Civ 811 that a Court should consider what a reasonable person would have inferred was being implicitly represented by the reprensetor’s words and conduct in context, Cooke J considered that the proposed amendments were not realistic and accordingly refused permission to amend the pleadings. However, the Court did grant permission to appeal.

The Appeal Decision

The Court of Appeal considered these apparently conflicting decisions and held:
(1) The proposed pleas of implied representations in both cases were at least arguable. Their Lordships did not want to go any further on this point, as they did not want to affect the trial Judge’s decision;
(2) Any case of implied representation is fact specific. However, their Lordships held that if the LIBOR scandal had occurred before the cases were issued and what are the proposed amended pleas were in fact the original pleas, they would not be amenable to a strike out application;
(3) As the banks proposed the use of LIBOR, it must be arguable that they were at least  representing that their own participation in the setting of LIBOR was honest; and
(4) The banks’ reliance on a disclaimer in a loan agreement was misguided, as the allegation was that the contracts were fraudulently induced;

Consequently, permission to amend in both cases was allowed.

Their Lordships also indicated that there is “considerable force” in the argument that the proposed representations amount to statements about the conduct of banks other than themselves, and no one could expect any statement of that effect to be made by one bank proposing LIBOR. However, their Lordships were reluctant to probe further on this issue, as they believed it was an issue for determination by the trial Judge.


At first blush, it would appear that by allowing the amendments, the Court of Appeal has decided against the banks. However, it should be remembered this was only an interlocutory hearing and the cases have yet to come to trial. At this stage, lenders should take comfort from the Court’s acknowledgement that there is force in the argument that an individual lender cannot be said to represent the actions of others.

For further information, please contact Georgina Squire or the Partner with whom you usually deal.