Mis-selling: The importance of Crestsign v RBS
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Mis-selling: The importance of Crestsign v RBS

A husband-and-wife business pursuing a negligence claim against RBS for product mis-selling is taking its fight to the Court of Appeal, in a gripping case that could open the floodgates for more mis-selling claims. It could even bring into question basic terms and conditions of standard banking contracts across all asset classes.

The interest-rate swap mis-selling scandal has been well-documented since it first made headlines a few years ago – most claims have been settled out of court or under the Financial Conduct Authority’s (FCA) compensation scheme.


 Potentially that will have massive repercussions for many kinds of contract in a banking context.

Anna Lintner,
Ely Place Chambers

However, one husband-and-wife property firm is doggedly pursuing their negligence case in court, which is the first of its kind and has attracted the rapt attention of the legal community.

Crestsign Limited v RBS

Crestsign failed last year in their negligence claim against NatWest/RBS over an interest-rate swap sold in 2007, but last month the Court of Appeal granted Crestsign permission to appeal the original High Court judgment.

The Lord Justice of Appeal ruled that the grounds relied upon by Crestsign have “a reasonable prospect of success” and lawyers acting for Crestsign hope a hearing will be scheduled in June or July.

Much of the High Court judgment was strongly critical of RBS, but the judge found the bank had absolved itself of any responsibility by using a ‘basis clause’ in its terms and conditions, which precludes any advisory duty.

For example, a car dealer might recommend a car to a prospective buyer and say “that is a very good car, I recommend it”, but if the small print includes a basis clause then the dealer bears no advisory responsibility to the buyer.

Seneca Banking Consultants is advising more than 300 businesses on interest-rate hedging product claims and gave evidence to the Treasury Select Committee for its report on mis-selling of hedging products.

“It seems absolutely ridiculous that [banks] can rely on [these] clauses, but the reality is their conduct is advice – advising customers down certain paths and leading to one product over another,” says Dan Fallows, founding director of Seneca.

Ripple effect

This legal doctrine, known as ‘contractual estoppel’, has only been around for about 10 years, but is widely used by banks and in the wider financial sector when drawing up contracts.

A win for Crestsign in the Court of Appeal could challenge this clause that is so favoured by the banks, says Anna Lintner, a barrister at Ely Place Chambers, which has worked on numerous mis-selling cases.

“Potentially that will have massive repercussions for many kinds of contract in a banking context. Banks enter into hundreds of thousands of contracts with SMEs and many of these contracts, not only those that relate to hedging products, will contain similar clauses,” she says.

Fraser Whitehead, head of the business and specialist litigation service division at lawyers Slater and Gordon, is representing Crestsign. He believes if the judge finds in favour of Crestsign, banks will no longer be able to rely on basis clauses to duck direct responsibility.

“They will have to give clear information to clients about certain aspects of transactions and be liable for the consequences of bad advice,” he says. “[We could see] hundreds, possibly even thousands of cases.”

Queue of claimants

It is not just the legal community watching this case. There are other disgruntled RBS customers who are waiting on tenterhooks for the Court of Appeal’s decision.

Some initiated court proceedings against RBS and have put them on hold, or have agreed a ‘standstill agreement’ with the bank that makes them immune from limitation rules, which state that claimants only have six years from when they first bought the interest-rate swap to file a claim.

Many of these swaps were sold between 2007 and 2010, so time is running out for potential claimants.

“No case in England has gone all the way to a trial completion, except Crestsign,” says Jackie Bowie, chief executive officer of consultancy firm JC Rathbone Associates.

“Some of these customers that went through the FCA redress scheme are now considering taking legal action. We have seen a fair amount of RBS customers that are extremely unhappy with the way RBS managed the process.”

RBS declined to comment.

Tim Kerr QC ruled in the original judgment that “it is not the role of the common law and this court to act as a regulator”.

It remains to be seen whether the Court of Appeal will use its power to reject the existing law of contractual estoppel and bring about far-reaching changes in banking.

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