The beginning of the end to mis-selling claims?

Mis-selling of interest rate products to unsophisticated customers has been the subject of intense regulatory scrutiny, with the banks paying out over £1.5bn to around 10,000 customers in the course of the Financial Conduct Authority's Interest Rate Hedging Product Review which began in May 2013.

Court challenges, however, have generally been less successful.

The recent decision of Crestsign Ltd v Natwest and RBS[i] is the latest of a series of cases relating to mis-selling of finanical products and provides an extreme example of how banks have been able to escape liability, notwithstanding findings of negligence and unreasonable disclaimers. For the full details of the case please click here.

The question of whether a disclaimer properly describes the future relationship between the parties (ie a basis clause not subject to UCTA) or whether it "rewrites history or parts company with reality" (an exclusion clause subject to UCTA) has generated much judicial commentary since the well known decision in JP Morgan Chase Bank v Springwell Navigation Corporation. The court in Crestsign readily acknowledged that the distinction between an exclusion clause and a basis clause will often involve drawing a fine line, which depends on the wording and context.  Nevertheless, even though the judge clearly sympathised with Crestsign, he was unable to find in its favour and the case is consistent with a long line of unsuccessful cases against banks.  Interestingly, however, outside the field of financial products, the courts have been more willing to find that disclaimers are exclusion clauses and not basis clauses.   Given the scope for argument, it seems unlikely that Crestsign will be the last word on the subject. 

[i] Crestsign Ltd v National Westminster Bank plc and Royal Bank of Scotland plc [2014] EWHC 3043 (Ch).