In Boyse (International) Ltd v NatWest Markets plc and another [2021] EWHC 1387 (Ch), Mr Justice Trower dismissed an appeal against an order granting summary judgment in relation to LIBOR fraudulent misrepresentation and interest rate hedging products mis-selling claims on the basis that the statutory limitation period had expired. This decision will be of interest to banks and financial institutions seeking to rely on limitation defences to claims arising out of or related to regulatory or other enforcement action.

Boyse purchased certain LIBOR referencing derivatives which proved to be unprofitable. In 2007 and 2008, Boyse (the “Claimant”), a company whose business was to hold commercial property investments for the ultimate benefit of two individuals (the “Beneficiaries”), entered into two LIBOR-referencing interest rate hedging products (“IRHPs”) with the defendants, NatWest Markets plc and Royal Bank of Scotland plc (collectively referred to as the “Bank”). The Claimant was forced to sell two properties as a result of the IRHPs, which had significant adverse consequences on the Beneficiaries. 

The Bank had received a Final Notice in relation to its LIBOR submissions. In early 2012, the Bank’s conduct in relation to the fixing of LIBOR rates gained traction in the press and, in mid-2013, the Financial Services Authority (as it was then known) issued a final notice which gave details of its findings that the Bank had dishonestly manipulated LIBOR (the “Final Notice”). The Claimant alleged that it was not aware of these findings at the time of the publication of the Final Notice or for a significant time thereafter owing to the fact that the Beneficiaries (whose statement of minds were relevant) did not follow the financial press.

The Claimant issued proceedings. The Court ordered strike out and summary judgment. In 2019, the Claimant brought proceedings against the Bank, claiming (among other things) deceit to the effect that the Bank made implied misrepresentations about how the LIBOR benchmark was set, upon which the Claimant relied when entering into the IRHPs and suffered consequential loss as a result. The Bank argued that the claims were time-barred by reason of sections 2 and 32(1) of the Limitation Act 1980 (the “Act”), which provide that the limitation period for actions founded in tort expires six years after the date that the cause of action accrued. 

Of relevance to the appeal, summary judgment was granted in favour of the Bank in May 2020 by Chief Master Marsh, because the Claimant could with reasonable diligence have discovered the fraud no later than the publication of the Final Notice in 2013 – this was more than six years before the commencement of its proceedings and so the action was time-barred. 

On appeal, the Judge held that the Claimant’s claims were time barred. On appeal, the Claimant argued that the Claimant only became aware of the Bank’s deceit in May 2017 (not 2013, as the Chief Master found), and therefore its claim was not time barred. However, Trower J said that section 32(1)(a) of the 1980 Act provides that, in the case of an action based upon the fraud of the defendant, the period of limitation will not begin to run until the claimant could with reasonable diligence have discovered the fraud. The Chief Master held that the Final Notice by the FSA should have completed the picture required to plead the case. A reasonably diligent person in the Claimant’s shoes would have been alert to the widespread publicity even before 6 February 2013. The question is not whether the Claimant should have discovered the fraud, but whether they could have with reasonable diligence. 

The Claimant’s own case hinted at their actual awareness. In any event, the Claimant allegedly suffered significant loss in 2011 and 2012 due to the poor performance of the IRHPs. Trower J held that this would have alerted a reasonably diligent person in the Claimant’s shoes to the widely available news covering the Bank’s LIBOR-related misconduct on or before February 2013. It was ultimately the Claimant’s own pleaded case that they were influenced by LIBOR representations when they entered into the IRHPs. 

This case can be distinguished from other recent LIBOR cases concerning section 32 of the Act. For example, in Federal Deposit Insurance Corporation v Barclays Bank Plc & Ors [2020] EWHC 2001 (Ch), Snowden J refused to strike out on the basis that a solid foundation of evidence is needed for the limitation period to start to run. The claimant could not have with reasonable diligence discovered the defendant bank’s deceit based on speculations and inferences in the press. It was only sufficiently conclusive when regulatory findings were published against the defendant bank in 2012.

Jenna Lee, Trainee Solicitor and Slavena Sarbeva, Associate in London

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