Finance Litigation LegalEye — winter 2014: financial mis-selling claims: latest Court of Appeal decision

The Court of Appeal has now considered the claimants’ appeal in Green & Rowley v The Royal Bank of Scotland plc [2012] EWHC 3661 (QB), dismissing their mis-selling claim in relation to an interest rate swap.

The claimants, Green & Rowley, had taken out variable-rate loans with the Royal Bank of Scotland to finance various property development projects. In 2005, they also entered into an interest rate swap with the bank. At that time, the conduct of the bank in arranging the swap transaction or advising upon it was governed by the FSA Conduct of Business Rules.

The purpose of the swap was to protect Green & Rowley against the risk of the base rate increasing and it did so by effectively converting the variable rate of interest under the loans to a fixed rate for 10 years. The swap achieved its purpose of insulating Green & Rowley from the various changes to the base rate in the period 2005 to 2009. However, when Green & Rowley sought to terminate the swap mid-way through its term (in 2009) when interest rates were very low (and thus when the bank was ‘in the money’), they were told that the break costs would exceed £130,000…

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