High Court dismisses claims against subsidiary for parent's Libor fixing and strikes out fraud allegations as inadmissible.

[2016] IEHC 58

THE HIGH COURT

COMMERCIAL

[2014 No. 5450 P]

[2014 No. 148 COM]

BETWEEN

EUROPEAN PROPERTY FUND PLC

PLAINTIFF

AND

ULSTER BANK IRELAND LIMITED

DEFENDANT

JUDGMENT of Ms. Justice Costello delivered on 28th day of January, 2016.

1. These proceedings commenced on 19th June, 2014, when the plaintiff and a co-plaintiff, Laurelmore Ltd. (“Laurelmore”) claimed

various reliefs arising out of two transactions referred to as the Belgrave Road Derivative and the Old Jewry Derivative. A statement

of claim was delivered dated 7th August, 2014, and there was a notice for particulars and replies to the notice. The defence was

delivered on 12th December, 2014, and a reply to the defence was delivered dated 22nd December, 2014.

2. The defendant brought a motion seeking to strike out the proceedings on the basis, inter alia, that they were statute barred and

alternatively were frivolous and vexatious and bound to fail pursuant either to the provisions of O. 19, r. 5(2) of the Rules of the

Superior Courts 1986 or the inherent jurisdiction of the court. The matter was heard over two days on 18th and 19th March, 2015,

and I delivered judgment on the matter on 2nd July, 2015. This judgment should be read in conjunction with my earlier judgment of

2nd July, 2015, which sets out the factual background and pleadings in detail.

3. On the basis of the pleadings as they then stood and the affidavits exchanged between the parties, I struck out the entirety of

the claim brought by Laurelmore against the defendant. In relation to the plaintiff, I held that its claims against the defendant fell into

four parts. The first related to a loan facility referred to as the EPF Facility (though referred to by the plaintiff sometimes as the

Belgrave Derivative), the second to the Old Jewry Derivative, the third to the sale of Belgrave Road and Old Jewry properties and the

fourth to the delay in closing out the EPF Facility and the Old Jewry Derivative. For the reasons set out in the judgment I dismissed all

of the claims of the plaintiff save those that related to the sale of the Belgrave Road and Old Jewry properties which the plaintiff

alleged was procured by coercion and intimidation on the part of the defendant and a claim for damages arising out of the alleged

delay in closing out of the EPF Facility and the Old Jewry Derivative.

4. In light of the judgment I granted the plaintiff liberty to bring a motion to amend its statement of claim.

5. The plaintiff brought a motion pursuant to O. 28, r. 1 of the Rules of the Superior Courts seeking leave to amend its statement of

claim. Order 28, r. 1 provides:-

“[t]he Court may, at any stage of the proceedings, allow either party to alter or amend his indorsement or pleadings in

such manner and on such terms as may be just, and all such amendments shall be made as may be necessary for the

purpose of determining the real questions in controversy between the parties.”

6. The proposed amendments are extensive. The draft amended statement of claim runs to 40 pages. A notable feature of the

plaintiff’s application is that all of the information was available to it or in the public domain before the proceedings were commenced,

with the exception of certain testimony provided by former officers of the defendant to the Joint Committee of Inquiry into the

Banking Crisis between 7th May and 6th August, 2015, and the House of Commons Treasury Committee Conduct and Competition of

SME Lending Report published on 10th March, 2015. The plaintiff now wishes to add several new causes of action:-

i) Claims based upon the relationship between the plaintiff and the defendant which give rise to a duty on the part of the

defendant to act fairly and in good faith in relation to the plaintiff.

ii) A claim that the defendant mispriced the EPF Facility and therefore sought wrongfully to increase the rate of the

interest chargeable on foot of the two facilities granted by the EPF Facility. In the alternative due to the mispricing of the

facilities the defendant wished wrongfully to terminate these performing facilities.

iii) A claim that the defendant established limits with respect to internal credit lines based, inter alia, upon the plaintiff’s

contingent liabilities (which were not disclosed to the plaintiff) which adversely affected the creditworthiness of the

plaintiff which in turn influenced the defendant in calling in or terminating the EPF Facility and the Old Jewry Derivative.

iv) A claim that the defendant misrepresented to the plaintiff that the EPF Facility would be restructured if the plaintiff

sold the Belgrave Road property and the Old Jewry property. This is advanced as either an aspect of the intimidation and

coercion claim or as a claim in its own right.

v) A claim that the defendant assured the plaintiff that it would not enforce breaches of the terms of the EPF Facility and

therefore wrongfully called in the facilities and coerced and intimidated the plaintiff to force it to sell the two properties

the subject of this litigation.

vi) A claim based upon alleged rigging of Libor by the defendant and/or its parent, Royal Bank of Scotland (“RBS”), and

misrepresentations as to the interest chargeable pursuant to the EPF Facility as a result of the manipulation of Libor and a

wrongful overcharging of interest as a result of the manipulation of Libor.

The legal principles

7. The plaintiff relies upon the judgment of Geoghegan J. in the Supreme Court in Croke v. Waterford Crystal Ltd. [2005] 2 I.R. 383

where he noted that O. 28, r. 1 was intended to be a liberal rule based on the proposition that the interests of justice are best

served if the real issues and controversy between the parties are before and can be determined by the court. At para. 31 he stated:-

“[w]hile I quite agree that other factors have to be taken into account in the exercise of the discretion, the primary

purpose of the rule is to give the court wide powers of amendment so that the real issues between the parties can be

determined. This is always subject to questions of real prejudice to the defendant…”

8. The plaintiff also relied upon the decision of Clarke J. in Woori Bank & Anor v. KDB Ireland Ltd. [2006] IEHC 156. At para. 3.2 of the

judgment he stated:-

“…the starting point for a consideration of whether to allow the amendment should be to have regard to the fact that

the party could have included the plea in the first place without requiring any leave from the court. Prejudice needs to

be seen against that background. The prejudice that needs to be established must be prejudice which stems from the

fact that the proceedings have progressed on one basis and are now sought to be altered. The prejudice must stem,

therefore, from the fact of the belated alteration of the pleadings rather than the presence (if allowed) of the

amendment itself.”

At para. 5.2 he held that:-

“…the court should lean in favour of allowing an amendment if… it is otherwise appropriate so to do, unless it is manifest

that the issue sought to be raised by the amended pleading must necessarily fail.”

Therefore it is necessary to this limited extent to assess the strength of the issue sought to be raised before leave to amend the

pleading should be granted.

9. The plaintiff submitted that the pleas set out in the draft amended statement of claim were not statute barred and that the

plaintiff would be entitled to institute new proceedings bringing these claims if leave to amend the existing proceedings were not

granted; the defendant had not asserted that it would suffer any prejudice if the amendments were permitted and there had not been

undue delay on the part of the plaintiff in seeking leave to amend the statement of claim. It was emphasised that it was not seeking

to circumvent the earlier judgment of 2nd July, 2015, dismissing many of the existing pleas in the case and confirmed that the

judgment was not subject to appeal.

10. The defendant opposed the application. It urged that the amendments went considerably beyond what remained to be determined

in the case following the judgment of 2nd July, 2015. It submitted that many of the matters now sought to be raised were in fact res

judicata or thinly disguised attempts to circumvent the effects of the judgment and order of July, 2015.

11. Insofar as the plaintiff now sought to advance new claims which had not previously been raised in the proceedings, it submitted

that to permit the plaintiff to expand its case in this fashion after most of its case had been dismissed on the grounds that it had no

prospect of success amounted to an abuse of process and offended the principle described as the rule in Henderson v. Henderson.

12. Much of the argument in court related to whether the rule in Henderson v. Henderson applied to the application or whether the

Court was required to follow the more liberal principles set out in Croke and Woori Bank. Ultimately, this perceived dichotomy is

unhelpful. The court has discretion under O. 28, r. 1 whether or not to allow an amendment and the court has discretion in

appropriate circumstances whether or not to apply the rule in Henderson v. Henderson. The rule is essentially an example of how the

courts police their own processes by preventing an abuse of process where it is perceived that the attempt to plead and litigate a

claim that could have been brought earlier amounts to an abuse of process which the courts will not permit. Applications to amend

pleadings are ultimately determined by assessing where does the balance of justice lie (as was pointed out by Barron J. in Shepperton

Investment Company Ltd. v. Concast (1975) Ltd. (Unreported, High Court, Barron J., 21st December, 1992)), with the starting point

being the fact that the party could have included the pleas in the first place without requiring any leave of the court.

Issue estoppel

13. The defendant argues that many of the claims raised in the proposed amended statement of claim relate to matters that have

already been the subject of determination by this Court. That being so, the amendments should not be permitted. The defendant

referred to the judgment of Keane J. in Belton v. Carlow County Council [1997] 1 I.R. 172 where it was stated at p. 180:-

“[t]he law as to issue estoppel was stated by Sir Owen Dixon in Blair v. Curran (62 C.L.R. 464 at pp.531/2) as follows:-

‘A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it

cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters

which the prior judgment, decree or order necessarily established as the legal foundation or justification of its

conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded

or be restrained or that rights be declared. The distinction between res judicata and issue- estoppel is that in the

first the very right or cause of action claimed or put in suit has in the formal proceedings passed into judgment,

so that it is merged and has no longer an independent existence, while in the second, for the purpose of some

other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter

necessarily decided by the prior judgment, decree or order.’”

14. In my judgment of 2nd July, 2015, I held that in fact there was no Belgrave Road Derivative and there was no novation of that

Derivative to the plaintiff. The facility was replaced by the EPF Facility. Therefore any references to the Belgrave Road Derivative and

any claims based upon the so called Belgrave Road Derivative cannot be permitted. I also held that the Old Jewry Derivative and the

novation of the Old Jewry Derivative were governed exclusively by the terms of the contracts. The parties had agreed that their

rights were to be governed by the terms of the contractual documentation and expressly excluded any other claims. On the basis of

those express terms, I dismissed all claims not permitted by the express terms and in particular those founded upon the quality or

type of relationship between the plaintiff and the defendant on the basis of the clear contractual terms governing the rights and

obligations of the parties.

15. The claims now brought forward in the proposed amended statement of claim do not relate to the Old Jewry Derivative or the

novation of the Old Jewry Derivative. They relate to the loan agreement I referred to as the EPF Facility. In my judgment of 2nd July,

2015, I noted that the EPF Facility was a fixed interest rate demand loan facility and that the terms and conditions were set out in

the facility letter and subject to the defendant’s standard terms and conditions governing business lending to companies. At paras.

74-76 I summarised the claim advanced in relation to the EPF Facility:-

“74. The pleas in relation to the transaction are set out in paras. 35, 37, 41, 42 and 43 of the Statement of Claim. It is

said that Ulster Bank concealed the true nature and extent of the liabilities associated with the Belgrave Facilities at the

time of the assumption by EPF of the liabilities associated with the facility (In fact it did not assume those liabilities but

assumed liabilities in respect of a new facility. The Belgrave Facility was repaid in full by Laurelmore). At para. 41 it is

clarified that what is alleged to be concealed is that any break costs would be associated with the facility at any time

over their term. In argument, it was clarified that the concealment relied upon was an alleged failure to bring to the

attention of the plaintiffs, in this case, EPF, the fact that there were break costs associated with the facility. However,

in Replies to Particulars the plaintiffs accept that the general terms of a fixed rate loan include an early repayment

penalty and the general terms and conditions attaching to the EPF Facility expressly state that break costs can arise if

the facility is terminated prematurely. It was further confirmed that all the misrepresentations upon which the plaintiff

sought to rely predated the entry into of the relevant transactions. There was no particular misrepresentation pleaded

in relation to this plea of concealment in relation to the EPF Facility.

75. It is pleaded that the EPF Facility was inappropriate and entirely at odds with the financial objectives of EPF. The

plaintiffs plead that Ulster Bank represented and warranted that the EPF facility was consistent with the financial

objectives of EPF and that this amounted to a misrepresentation of the utility, effect and financial benefit or advantage

of the facility. In para. 50, it is pleaded that Ulster Bank advised and recommended that EPF execute the EPF Facility and

that such advice and recommendation was inconsistent with the plaintiffs’ and in particular, EPF’s financial objectives.

The financial objectives of EPF as pleaded in para. 32 of the Statement of Claim were to acquire from Laurelmore the

investment property at Belgrave Road and Old Jewry and hold them for the ultra long-term using excess income to

amortise debt and the long-term strategy was to expand by acquiring new assets, constantly building its income base.

76. It was also pleaded that the EPF Facility was predicated on certain financing costs which it is said were unsustainable

into the future and would more than likely give rise to an event of default. It was, therefore, deceitful behaviour on the

part of Ulster Bank to offer the EPF Facility in the circumstances when it knew or ought to have known this to be the

case. It was pleaded that Ulster Bank set the financing costs of the EPF Facility at an artificially low rate in order to

induce and encourage EPF to enter into the EPF Facility when it knew or ought to have know that the financing costs

associated with the EPF Facility were unsustainable into the future, particularly in light of the cash flow impact of the

break costs and/or other financing costs associated with the EPF Facility (and the Old Jewry derivative). This argument

is made in the context of the interest in respect of the facility being a fixed rate of 5.045% until 31st March, 2012, plus

0.90% per annum.”

It is clear that the plaintiff’s original plea in relation to the EPF Facility was relatively net. At para. 88 of my judgment I held as

follows:-

“[t]he EPF Facility was a demand loan which nonetheless was intended to run till 31st March, 2021, and the terms were

clear on the face of the letter as regards the fixed interest rate chargeable. The possibility of incurring break costs was

set out in the general terms and conditions and the plaintiffs accept that costs are likely to be incurred when a fixed

rate loan is terminated. The EPF Facility was accepted by its Davy directors following a resolution of the board of EPF

expressly resolving that the acceptance of the proposed facility was in the interests of EPF. It is not possible in the

circumstances for EPF to argue with any credibility that Ulster Bank concealed from it the true nature and extent of the

liabilities under the EPF Facility. These are stated to be that break costs could be incurred or the interest payable under

the terms of the facility. As the EPF Facility is a loan the MiFID Regulations can have no relevance to the loan. Based

upon the pleadings and the evidence before me, I can see no basis upon which EPF might avoid the terms of the

EPF Facility. It follows that all claims in EPF proceedings in relation to terms of that facility ought to be dismissed

in order to do justice to Ulster Bank as required by the authorities cited above.” (Emphasis added)

16. It is thus clear that I dismissed any claims that were based upon allegations by the plaintiff that the terms of the EPF Facility

were other than as set out in the facility letter of 27th February, 2008, and the standard terms and conditions governing business

lending to companies.

17. The EPF Facility was issued as part of the transaction whereby the plaintiff was to acquire the assets held by Laurelmore (the

Belgrave Road and Old Jewry properties). This involved a number of connected transactions. It was to fund the acquisitions by

borrowing the money set out in the EPF Facility and it was to take a novation of the Old Jewry Derivative. In the circumstances, it is

not possible in my judgment to treat the plaintiff as having contracted with the defendant upon one basis in respect of the EPF

Facility and on a separate, different basis in relation to the novation of the Old Jewry Derivative. Each transaction was part of a

larger scheme of transactions whereby the assets of Laurelmore and associated liabilities were to be acquired by the plaintiff instead.

I previously ruled that there was no basis for asserting that there existed a fiduciary relationship between the parties in relation to

the Old Jewry Derivative or the novation of the Old Jewry Derivative (two of the transactions comprised in the overall scheme). That

being so, it is not now open to the plaintiff to raise claims predicated upon the alleged relationship between the plaintiff and the

defendant which is said to give rise to a duty to act fairly or in good faith in relation to the EPF Facility, another transaction, likewise

part of the overall scheme.

18. The parties agreed that the terms of the documents executed by them should govern their respective rights and obligations. The

plaintiff may not now advance claims arising out of the EPF Facility on a basis other than the express terms set out in the facility

letter and the general terms and conditions and the general implied common law contractual terms governing the relationship of

banker and customer, such as an implied term as to confidentiality. Thus, the pleas based upon the alleged implied terms and/or

representations and/or duties of the defendant in relation to the EPF Facility set out in the proposed amended statement of claim

cannot be permitted. I reject the submission that they can be revived as part of the claim for damages for coercion and intimidation,

having previously been struck out.

19. The plaintiff is free to advance the case that the defendant wrongfully intimidated and coerced the plaintiff to force it to sell the

Belgrave Road property and the Old Jewry property. If the plaintiff wishes to advance a case that the defendant was not entitled to

call in the loan or rely upon its security in the circumstances, it is entitled to advance this claim. However, the manner in which it is

presented in the statement of claim does not make it clear that this is the case that it being advanced. The pleading as drafted is

open to the interpretation that the wrongdoing alleged against the defendant is based upon duties or obligations other than those set

out in the transaction documents and in particular the EPF Facility. I have ruled out a claim based upon duties or obligations of the

kind now set out in the draft amended statement of claim. It is not the function of the court to plead a party’s case. The proposed

version cannot be permitted, but subject to my judgments, the plaintiff may replead this claim within these parameters and therefore

I do not allow the amendments set out in paras. 9-24.

Mispricing of the Facility

20. At paras. 25-34 of the draft amended statement of claim under the heading “The Mispricing of the Facility and the Requirement

to Increase Margin” the plaintiff recasts its plea that the defendant mispriced the EPF Facility and therefore wrongfully sought to

increase the rate of interest chargeable on foot of the two facilities granted by the EPF Facility or, in the alternative, wrongfully

sought to terminate the two facilities. Mr. Richard (Rick) Larkin, in his affidavit sworn on 2nd September, 2015, in fact concedes on

behalf of the plaintiff that paras. 25, 26 and 27 are a restatement of the original allegation which appeared at paras. 42 and 43 of the

original version of the statement of claim. They read as follows:-

“42. Up until late 2009, there were no issue between the Defendant and EPF in respect of the assets, the subject of the

EPF Facility. It appears to be the case that there was an increase in funding costs for the Defendant which triggered the

amounts for EPF to restructure its loans at this time. It is asserted and pleaded that the facility agreement was

therefore mispriced since it was priced at a level which did not take into account the true nature and the extent of the

costs associated with the facilities in question and it is asserted and pleaded that the Defendant deceitfully

characterised the EPF Facility as being one which could continually finance and provide stability to EPF in light of the

projections and cash flows, which the Defendant knew or ought to have known, discharged the liabilities in question. It is

therefore asserted and pleaded that the Defendant set the financing costs of the EPF Facility at an artificially low rate in

order to induce and encourage EPF to enter into the EPF Facility when it knew or ought to have known that the financing

costs associated with the EPF Facility were unsustainable into the future, particularly in light of the cash flow impact of

the break costs and/or other financing costs associated with the Belgrave Derivative and the Old Jewry Derivative.

43. It is therefore asserted and pleaded that the entry into and the execution of the EPF Facility predicated on certain

financing costs was deceitful behaviour on the part of the Defendant when it knew and ought to have known that the

financing costs associated with the EPF Facility were unsustainable into the future and would more than likely give rise to

an event of default.”

21. This plea was dismissed for the reasons set out in my earlier judgment of 2nd July, 2015. The revised pleas concerning the pricing

of the facilities all refer to implied terms and/or representations and/or duties of the defendant. They are therefore based upon the

proposition that the defendant owed obligations to the plaintiff over and beyond the obligations set out in the EPF Facility and the

associated general terms and conditions and the banker/customer relationship.

22. The defendant points out that at para. 31 of the draft amended statement of claim it is pleaded that the defendant was obliged

to disclose to the plaintiff any and all criteria that it might rely upon in deciding whether or not to exercise its rights under the EPF

Facility. It says that there was no such term in the EPF Facility. That facility sets out the objective circumstances of which the

plaintiff could demand repayment.

23. I accept these submissions. To permit the plea which the plaintiff now proposes to advance has the effect of reversing the finding

that the terms of the EPF Facility are as set out in that Facility and the general terms and conditions incorporated in the Facility. For

these reasons the pleas set out in paras. 25-34 ought not to be permitted. In reaching this conclusion I rely also upon the plaintiff’s

written submissions that:-

“…the claims for mispricing have been paraphrased from the previous Statement of Claim and now serve only to explain

and put in context the constituent elements of the coercion and intimidation which is now at the heart of these

proceedings…. Mr. Larkin also avers that the issue of mispricing is also directly relevant to the issue of the calculation of

loss.”

New claims

24. The plaintiff now seeks to bring new claims which were not pleaded in the original pleadings. The plaintiff advances a variety of

reasons to explain why these claims were not originally pleaded. It says that the focus of the proceedings was elsewhere and that

now the case has been refocused. It says that it has the benefit of new advisors it consulted in August, 2015 and new evidence has

become available in the public domain as set out in para. 6 above.

25. It relies upon the judgment of Geoghegan J. in Croke and submits that the primary consideration for the court must be whether

the amendments are necessary for determining the real questions in controversy in the litigation. It submits that unless the defendant

can establish irreparable prejudice then the amendments ought to be permitted. It refers to the decision of Laffoy J. Shell E & P

Ireland Ltd. v. McGrath & Ors [2006] IEHC 99 where she considered amendments that involved “a completely new and expanded

case, involving a multiplicity of new causes of action” but nonetheless held that such objections to the amendments were “very

much the type of technical argument which a court will subordinate to the primary consideration of ascertaining whether the

amendments sought are necessary for the purpose of determining the real issues in controversy.”

26. The plaintiff argued that it had not delayed in seeking the amendments as the motion was brought on 2nd September, 2015,

following the judgment of 2nd July, 2015. I do not accept this argument. Most of the amendments do not in fact arise out of the

previous judgment. There has been no explanation offered to the Court as to why the experts who were consulted in August, 2015

could not have been consulted earlier. It seems to me that the plaintiff could have advanced all of the pleas which it now seeks to

advance when it initiated its proceedings.

27. Some emphasis is placed upon the emergence of new evidence relating to the relationship between the defendant and its parent,

RBS, in the context of the claim that the Libor market was rigged and also in the context of the significance of the GRG Group within

RBS and the defendant. However the plaintiff had previously pleaded a claim based on the activities of the GRG Group and the plaintiff

was at all times aware of the fact that the defendant was a subsidiary of RBS. RBS was the subject of various investigations into

Libor rigging prior to the institution of these proceedings. Therefore this does not truly explain the failure to bring forward these claims

when the proceedings were originally drafted.

28. Since the decision of the Supreme Court in Croke less emphasis is to be placed upon the plaintiff’s conduct and the failure to

provide an explanation for the delay in pleading the case sought to be advanced in the amendments proposed to the statement of

claim. However, Croke was not a case entered into the Commercial List of the High Court. Cases entered into the Commercial Court

are to be determined justly, expeditiously and in a way which minimises cost. The cases are subject to case management and in

particular to court determined time limits. The overriding principle is that the court must do whatever the interests of justice require.

While this undoubtedly includes the objective of a fair trial on the merits it also brings in the two new procedural objectives of an

expeditious resolution of the proceedings and the minimising of costs. If these objectives are to be giving any meaning, as they must,

then in the appropriate circumstances, they may limit the latitude that might otherwise be afforded to litigants to a fair trial on the

merits. In Woori Bank, Clarke J. considered the disruptive effect which could be caused by the late amendment of a party’s case in

the Commercial Court. He stated at para 4.2:-

“[t]he effectiveness of case management can be significantly reduced if parties who do not comply with the directions

of the court can escape the consequences of such failure without significant adverse results. Similarly belated

applications to amend (after, for example, the parties have filed witness statements and the like) can have a significant

effect on the ability to conduct a trial in a timely and orderly fashion. In that context it should also be noted that the

nature of the relief sought can be a material factor in assessing the adverse consequences of a delay in trial. For

example, claims for specific performance or other similar proceedings (whose existence can have an effect on the ability

of parties to deal in a commercial fashion with their assets) should be disposed of as quickly as possible and

amendments which could have the effect of significantly delaying such proceedings can, in an appropriate case, give rise

to a significant degree of what I have described as logistical prejudice”.

29. In Moorview Developments Ltd. & Ors v. First Active Plc [2008] IEHC 274, Clarke J. stated at para. 3.6:-

“I am satisfied that it is appropriate for a court in this jurisdiction to at least place some weight on the need to

discourage significant non-compliance in the case management process. Otherwise there is no point in case

management in the first place. It is, of course, the case that significant non-compliance (which is the matter to be

discouraged) will only be encouraged where the court indulges individual cases of non-compliance which are very

significant indeed. It is unnecessary to rigidly enforce time limits to encourage broad compliance with case management

directives. However it is equally the case that excessive indulgence can only create a climate where there will be a

significant level of non-compliance, thus defeating the very object of case management in the first place.”

30. Of course in this case the plaintiff is seeking leave to amend its statement of claim. It is not in breach of any express limits set

down as part of the case management process. However, the effect of permitting the amendments sought would be to significantly

expand the case more than eighteen months after the institution of the proceedings, with all of the inevitable resulting delays arising

from the need to raise further particulars, to reply to those particulars and to amend the defence. This is to be assessed in the

context of the conduct of the proceedings to date and in particular in the light of the motion brought to strike out the proceedings

which was largely successful.

31. In Citywide Leisure Limited (In Receivership) v. Irish Bank Resolution Corporation Ltd. [2012] IEHC 220 McGovern J. stated at

para. 12 that:-

“[w]here there is delay, a party may not be entitled to amend pleadings”.

32. Previously, Clarke J. had to consider the issues of delay in seeking to amend proceedings, the absence of any explanation for the

delay and the discretion of the court in Porterridge Trading Limited v. First Active Plc [2007] IEHC 313. He stated as follows-

“3.4 …there will always be an effect on the party itself which will not give rise to formal legal costs and which will not,

therefore, be capable of being compensated. The extent of any such effect is part of the balancing exercise that needs

to be taken into account. Set against such considerations will also be the extent to which there is any reasonable basis

for the failure to plead the case properly in the first place. That is not to suggest that it is an issue upon which any

great weight ought to be placed, save where there is a fine balance involved in assessing the competing interests of

justice arising. In substance if it is clear that the amendment is necessary to allow the true issues between the parties

to be determined and if there is no prejudice which is not capable of being substantially met by appropriate orders or

directions in the proceedings, then the amendment should ordinarily be allowed.”

33. I turn now to apply these principles to the balance of the draft amended statement of claim. In paras. 35-46 and 58-67 the

plaintiff sets out claims for misrepresentation against the defendant. These are different to those which had previously been pleaded

and therefore they are not subject to any issue estoppel. The defendant says that the amendment should not be permitted as it

offends the rule in Henderson v. Henderson. It refers to O’Donnell & Anor v. Lehane & Anor [2015] IEHC 228 and Morrissey v. Irish

Bank Resolution Corporation Limited (In Special Liquidation) and Ors [2015] IEHC 200. In O’Donnell, I applied the rule in an application

to annul an adjudication of bankruptcy. Both the petition and an appeal had been fully argued and finally determined. In those

circumstances, there had clearly been a full hearing on the merits (and appeal) before the application to annul the adjudication was

heard before me. In Morrissey, the plaintiff commenced proceedings in circumstances where there were already extant proceedings

where he was the defendant. Initially Irish Bank Resolution Corporation Limited (In Special Liquidation) was the plaintiff but the

purchaser of Mr. Morrissey’s facilities was subsequently substituted as plaintiff in those proceedings. These debt proceedings (in

which Mr. Morrissey was a defendant) had involved a modular trial and a number of lengthy hearings which had been case managed

over several years by Finlay Geoghegan J. A number of issues had been disposed of during the course of those hearings and the sole

issue remaining to be determined in the last module of the debt proceedings was the validity or otherwise of the assignment of the

facilities and the litigation to the substituted plaintiff. In those circumstances I held that to institute new proceedings seeking to re-

litigate matters which either had been raised and disposed of in the debt proceedings or which could have raised and disposed of in

those proceedings offended the rule in Henderson v. Henderson.

34. The situation here is different. The proceedings have not been determined. While I have significant reservation about the delay in

raising the issues set out in these pleas and there has being no real explanation as to why they were not included in the proceedings

from the beginning or at the hearing of the motion to strike out the proceedings, the fact still remains that the plaintiff would have

been free to plead any case from the outset if it had wished so to do. It wishes to amend its pleadings to include these new claims. It

will be necessary to determine these matters in order to determine the issues between the parties. In seeking to amend the

statement of claim at this stage in the proceedings, albeit after the motion to strike out the pleadings on the grounds that they

disclosed no reasonable cause of action or were frivolous and vexatious, will not cause such prejudice to the defendant as cannot be

dealt with by means of appropriate orders as to costs. The application has been brought before discovery has been sought or made

and before a date for trial has being fixed or witness statements have been directed, prepared or exchanged. In the circumstances I

conclude that to permit these amendments would not amount to an abuse of process (as is required if the rule in Henderson v.

Henderson is to apply) and accordingly I allow the amendments to the statement of claim set out in paras. 35-46 and 58-67 save

that the words “[i]n light of the mispricing of the EPF facility” at the beginning of para. 35 will not be permitted. The plea in relation

to this alleged mispricing of the EPF Facility has not been allowed so it cannot be reintroduced into the proceedings in this indirect

fashion in para. 35.

35. Paragraphs 47-51 are headed “Threats, Coercion and Duress by the Defendant”. These pleas were specifically permitted by me

following my judgment of 2nd July, 2015. The plaintiff may amend its statement of claim to include these pleas.

36. Paragraphs 52-55 of the draft amended statement of claim is headed “The Conduct of the Defendant’s GRG”. Paragraph 52 relates

to the change in the relationship between the parties alleged to have occurred by virtue of the transfer of the business and lending

relationship of the plaintiff to the defendant’s global restructuring group. The paragraph is predicated upon the relationship being as

previously pleaded in the statement of claim i.e. other than that of lender and borrower and as solely set out in the contractual

documentation. However, I have held that the proposed amendment to the pleadings setting out the basis and details of this alleged

relationship cannot be permitted. It therefore follows that para. 52 as drafted cannot be permitted either. In any event the plaintiff

has already pleaded that the defendant used illegitimate, inappropriate and unlawful means to pressurise it and to force its servants

or agents to divest itself of its assets. It was conceded that the plea was included solely to set the context for the alleged

subsequent events. In those circumstances I refuse to permit this statement of claim to be amended by including para. 52.

37. Paragraphs 53, 54, 55 sets out the facts of the report of Mr. Lawrence Tomlinson in the United Kingdom concerning the practices

of RBS, the parent of the defendant and the conclusions of the report. RBS is not a party to these proceedings. The defendant is a

subsidiary of RBS. There is no plea that the findings by Mr. Tomlinson in relation to RBS relate also to the defendant. The pleas

therefore as they stand are not relevant to the case advanced by the plaintiff against the defendant and accordingly I refuse leave

to amend the statement of claim by including paras. 53-55.

38. Paragraphs 56 and 57 of the draft amended statement of claim are headed “Breaches by the Defendant of its Duties and

Obligations”. They deal with implied obligations, duties and representations which I have previously rejected (with the exception of

the representations pleaded in paras. 35-46 which I have permitted). Therefore these pleas, predicated upon implied terms and

conditions, obligations and duties, cannot be permitted and for this reason I refuse leave to amend the statement of claim as set out

in paras. 56 and 57 of the draft amended statement of claim.

39. Paragraphs 68-72 set out the plaintiff’s case against the defendant to the effect that the defendant wrongfully delayed in closing

out the Belgrave Road Derivative (which I have called the EPF Facility) and the Old Jewry Derivative thereby incurring additional,

unnecessary costs which were charged to the plaintiff. It is also claimed that these costs were improperly increased by the

application of an incorrect interest rate. The paragraphs also set out the plaintiff’s case in relation to its allegation that it was

coerced and intimidated into selling the Belgrave Road and Old Jewry properties. These are all matters which I declined to strike out in

the original motion before me. I therefore permit the amendments set out in paras. 68-72 of the draft amended statement of claim

save that it should be clarified that what was pleaded as the Belgrave Road Derivative is in fact the demand loan facility to EPF.

40. At paras. 73-82 the plaintiff pleads that the defendant made certain representations in respect of Libor and that those

representations were made carelessly and/or negligently and that the defendant had no reasonable grounds for believing that the

Libor representations were true. Insofar as the plea relates to representations made upon the alleged assumption of the novated

interest obligations of Laurelmore by the plaintiff, this plea cannot be permitted. I have already held that the EPF Facility amounted to

a new loan agreement entered into between the plaintiff and the defendant and the interest rates are fixed interest rates and are not

related to Libor. An amendment which effectively overturns this ruling cannot be permitted.

41. The plaintiff says that the calculation of the interest break costs or break penalties by the defendant at the time of the sale of

the Belgrave Road and Old Jewry properties was referable to the applicable inter-bank offered rate know as Libor. At para. 74 the

plaintiff sets out four representations it alleges were made by the defendant to the plaintiff. At para. 75 it is pleaded that “[t]he Libor

representations were false and can be particularised at the moment as follows”. There follows a number of pleas which in fact do not

support the contention that the defendant’s alleged representations to the plaintiff in relation to Libor were false. For example, the

first plea refers to “[t]he Defendant’s conduct in relation to the fixing of Libor rates was such as to cause the Defendant to report its

own conduct to the Financial Services Authority and other Authorities”. This clearly is not a representation by the defendant to the

plaintiff and it does not explain how any representation by the defendant to the plaintiff was false. Furthermore the plea in fact refers

to the defendant’s parent, RBS, and therefore cannot amount to a particular of a false representation by the defendant to the

plaintiff. Paragraphs 75 (iii), 76, 77 and 78 all relate to the actions of RBS, the parent company of the defendant and its employees.

The pleadings do not link these alleged wrongdoings of RBS to the representations allegedly made by the defendant to the plaintiff,

which representations in turn allegedly resulted in unlawfully increased interest break costs or break penalties incurred at the time of

the sale of the Belgrave Road property and the Old Jewry property. On that basis, these pleadings are not in fact advancing the case

of the plaintiff against the defendant. They neither elucidate nor clarify the case being advanced. For this reason, I refuse to permit

the amendments set out in paras. 75-78 of the draft amended statement of claim. (For completeness sake, I should state that the

fact that a party is subject to an investigation cannot of itself render a representation false (unless it be to the effect that it was

not under investigation) and therefore the pleading in para. 75(ii) to the effect that the defendant is the subject of an investigation

by the Financial Services Authority and the European Commission and other authorities in relation to rates does not amount to a

misrepresentation.)

42. In paras. 79 and 80 the plaintiff wishes to amend its statement of claim as follows:-

“The Defendant was careless and/or negligent in making the Libor representations and had no reasonable grounds for

believing that the Libor representations were true. In particular, the Defendant was proposing to customers that they

enter into financial transactions containing obligations measured by reference to Libor such that it knew the Libor

representations were being made, or might be made, to such customers and therefore ought to have taken care to

ensure that such representations were not false.

80. Further, if and insofar as necessary, the Plaintiff will contend that individuals within the Defendant could have

prevented the false Libor representations from being made had they made the facts which rendered the Libor

representations false more widely known and/or had a duty, power or responsibility to see that false Libor

representations were not made to persons such as the Plaintiff”.

43. It is clear from these two paragraphs that the plaintiff is conflating permissible and impermissible pleas. Insofar as the plaintiff

wishes to say that the defendant was careless or negligent in making Libor representations to it and that the defendant had no

reasonable grounds for believing that the Libor representations made by the defendant to the plaintiff were true, it may do so.

However, it may not plead a generalised case relating to the manner in which the defendant may have dealt with other customers. As

stated above, it is no function of the court to plead a party’s case. I will therefore refuse to permit amendment of the statement of

claim in the terms proposed in respect of paras. 79 and 80 of the draft amended statement of claim but I will permit the plaintiff to

advance its own case in relation to Libor representations made to it by the defendant.

44. Paragraphs 81 and 82 relate to the duty owed by the defendant to the plaintiff in relation to the Libor representations and the

damage or allegedly thereby occasioned to the plaintiff. I accept that the plaintiff may amend its statement of claim as set out in

these two paragraphs.

45. Paragraphs 83 to 86 of the draft amended statement of claim is headed “Libor Implied Terms”. It is pleaded that “[i]t was an

implied term of the contractual arrangements between the parties that the floating rates payable under the interest instruments

would be calculated by reference to Libor…” I do not understand this plea as it stands. The EPF Facility comprised two fixed rate

loans and therefore this plea cannot refer to these facilities. That being so, what are the contractual arrangements or the interest

instruments referred to? If an amendment is to be permitted it should elucidate and clarify the true issues between the parties. While

I accept that the court is not concerned with assessing the strength or otherwise of the proposed amended plea (save to extend

that it may be bound to fail) it nonetheless may have regard to whether or not the proposed amendment actually pleads the plaintiff’s

case with clarity. As I am satisfied that this is not the case in respect of para. 83 and I refuse leave to amend the statement of claim

in the manner pleaded in para. 83.

46. If the pleas advanced in paras. 84 to 86 are to set out the plaintiff’s case that it was obliged to incur unlawfully increased or

inflated break costs and penalties upon the sales of the Belgrave Road and Old Jewry properties by reason of the wrongful acts of the

defendant or that certain demands were unlawful, this is permissible and the plaintiff should be permitted to amend its pleadings to

set out its case in this regard. However, the case as in fact pleaded in this respect cannot be permitted as it remains extremely

unclear and confusing. The plaintiff may recast this plea but it must make clear the precise contracts referred to, the terms upon

which interest was chargeable, the demands for payment made by the defendant and precisely how the plaintiff alleges that the

calculation of interest was unjustified and the demands unlawful. Furthermore insofar as the contracts referred to include those

contracts the subject of my earlier judgment, the plaintiff is bound by the terms of that earlier judgment.

47. Furthermore, I will not permit an amendment which raises pleas that there were implied contractual terms (which contracts are

not identified) between the plaintiff and the defendant regarding the conduct of RBS when no case has been pleaded that the

defendant had any control of or involvement in the actions of RBS and where I have ruled that the plaintiff may not raise pleas of

implied terms in respect of the only relevant contracts identified to date in the proceedings, the EPF Facility, the Old Jewry Derivative

and the novation of the Old Jewry Derivative. Therefore those parts of draft para. 84 relating to RBS will not be permitted.

48. At para. 84 the plaintiff seeks to plead that the defendant made false or misleading representations to the BBA and/ or that it

engaged in the practice of attempting to manipulate Libor and that it was an implied term of the “contractual relationship” that it

would not engage in this behaviour. I have already ruled that the plaintiff may not advance a case that there were implied terms

applicable to the three contracts. It would appear that these are the contracts referred to in paras. 84-86. I refuse to allow any

amendment to the statement of claim based upon any alleged implied terms of these contracts.

The reliefs sought

49. The proposed amended prayer for relief seeks a number of declarations. Two of them are as follows:-

“2. A Declaration, that in interpreting the written instruments evidencing the financial arrangements between the

parties, that the Defendant owed the Plaintiff a duty to act honestly and fairly…

5. A Declaration that the Defendant, in terminating or demanding the financing arrangements between the parties, would

only rely on clear, transparent and express terms of the written documents evidencing those arrangements”.

It appears to me that these reliefs ought not to be permitted. The first is based upon an issue which I ruled out of the proceedings (a

duty allegedly owed by the plaintiff to the defendant other than as previously set out). The second is predicated upon a plea which I

have not permitted in this judgment.

50. At relief number three the plaintiff seeks restitution of the penalty or break costs associated with and charged to the plaintiff on

the sale of the Belgrave Road and Old Jewry assets. In fact it has not pleaded a case in restitution as such. It advanced a case for

damages. This prayer for relief should be recast. This is particularly. so, in the light of prayer number four which reads:-

“[r]estitution of the amount lost by the Plaintiff on the delay in closing out the interest rate arrangement associated

with and/or related to the sale of the Belgrave Road asset”.

51. Prayer number six reads:-

“[d]amages for fraudulent misrepresentation with respect to the deliberate and conceded behaviour of the Defendant in

fixing LIBOR”.

The plaintiff has not pleaded that the defendant conceded behaviour which amounted to the fixing of Libor by it. (Mr. Richard (Rick)

Larkin’s affidavit of 2nd September, 2015, erroneously refers to the defendant in this regard though all the material exhibited to

support his averments relates to RBS and none of it relates to the defendant). The pleas in the draft amended statement of claim all

relate to the actions of RBS and its employees. No basis for the attribution of liability to the plaintiff for these alleged actions has

been advanced, other than the fact that the defendant is the subsidiary of RBS. This is clearly contrary to the fundamental principles

of company law. In the course of the hearing of this motion to amend the statement of claim, the plaintiff referred to certain

evidence which was led before the Joint Committee of Inquiry into the Banking Crisis in order to demonstrate that the RBS Group

operated as an integrated group and RBS exercised a high level of control over the Group including the defendant. There is nothing

remarkable about this and certainly nothing to say why the defaults of the parent should be attributed without further allegations to

be proved at trial to the subsidiary.

52. In any event, this evidence is not admissible in other proceedings by virtue of the provisions of s. 29 of the Houses of the

Oireachtas (Inquiries, Privileges and Procedures) Act 2013 which provides:-

“[n]one of the following is admissible as evidence against a person in any other proceedings (including disciplinary

proceedings) except proceedings in relation to an offence under this Act or the offence of perjury:

(a) a statement or admission made by the person to the committee during the course of the Part 2 inquiry”.

Furthermore, in its terms the prayer at relief number six asserts a fraudulent claim. The previously advanced case in fraud has been

dismissed. The draft amended statement of claim does not in fact seek to allege fraud. For these reasons I refuse to permit the

statement of claim to be amended to include prayer number six.

Conclusions

53. In redrafting the statement of claim the plaintiff sought to present its case in a more readily understood and coherent fashion

than if it had simply deleted those portions of the statement of claim which had been struck out and inserted the proposed

amendments into that statement of claim as appropriate. Unfortunately, in the light of this judgment this laudable end cannot be

achieved. I therefore direct that a further draft amended statement of claim be prepared by the plaintiff which goes no further than

was sought in the draft amended statement of claim the subject of this judgment but which complies with the rulings in this

judgment. The redrafted amended statement of claim should be furnished to the defendant and to the Court to ensure that a useable

statement of claim which conforms with the scope of my two judgments in this case may be permitted by order of the Court and the

proceedings continue on the basis of that new statement of claim. The new statement of claim is to be delivered within three weeks

of this judgment.