Litigation alert: Green and Rowley — the final chapter

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In July 2013, the first English swaps mis-selling case reached the Court of Appeal. The appellants, John Green and Paul Rowley (GR), had hoped to overturn an earlier High Court judgment that had dismissed their claim in its entirety. Their appeal failed. The Court of Appeal has just published its written judgment.

GR had a pre-existing loan liability of £1.5m with Royal Bank of Scotland (RBS). Keen to hedge against movements in the interest rate, in May 2005 they entered into a 10-year base-rate swap with RBS for a notional amount of £1.5m at a rate of 4.83 per cent (the prevailing base rate at that time was 4.75 per cent).

Initially the swap worked well for GR and they were ‘in the money’ as base rates exceeded the swap rate, but when interest rates plummeted in 2008 they fared very badly. Wanting to restructure their partnership, they enquired about the cost of terminating the swap in 2009, at which point they learned that the break costs would amount to £138,650…

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