Barclays Bank PLC v Henderson Enterprises Ltd

JUDGMENT

Mr Justice Butcher

1. This claim concerns an interest rate swap agreement entered into between the claimant bank and the defendant company in 2019. The defendant contends that the agreement is unenforceable on grounds of misrepresentation and breach of duty.

2. The defendant, Henderson Enterprises Ltd, is a medium-sized property development company. In 2019, it entered into a 10-year interest rate swap with the claimant in connection with a £15 million loan facility.

The Facts

3. The swap was recommended by the bank's relationship manager, who described it as a means of "protecting" the defendant against interest rate rises. The defendant was not advised that the swap could result in significant liabilities if interest rates fell.

4. When interest rates fell dramatically in 2020, the defendant found itself owing substantial sums under the swap. The break cost was approximately £2.5 million.

Analysis

5. The bank owed an advisory duty to the defendant in the circumstances of this case. The relationship went beyond a normal arm's length banking relationship. The bank held itself out as providing advice, and the defendant reasonably relied on that advice.

6. The bank breached its duty by failing to explain adequately the risks of the swap, including the potential break costs. The description of the swap as "protection" was misleading.

Conclusion

7. The defendant succeeds in its counterclaim. The bank is ordered to pay damages of £2.5 million plus interest.