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Standard contractual terms effective against borrower's claims of misrepresentation and breach of duty of care against lender

15 July 2014

​In Barclays Bank plc v Svizera Holdings BV & anr [2014] EWHC 1020 (Comm), 8 April 2014, the Commercial Court followed previous authority in ruling that a bank's standard contractual terms prevented a borrower from successfully alleging misrepresentation and breach of an advisory duty of care against the bank.


A syndicate of lenders, which included the claimant (Barclays), lent USD 45 million to the first defendant (Svizera) under a facility agreement dated 24 September 2007 (the Facility Agreement). After repaying several instalments as they became due, Svizera failed to make any further payments. Barclays served a demand on the second defendant (Maneesh) as the guarantor under the Facility Agreement, but Maneesh did not honour the guarantee. Svizera was a wholly owned subsidiary of Maneesh.

Borrower alleges misrepresentation and breach of advisory duty

Barclays brought proceedings on its own behalf and on behalf of the other lenders against the defendants for the amount which remained outstanding under the Facility Agreement, which was approximately USD 35 million. In resisting Barclays' claim, the defendants' allegations included misrepresentation by Barclays and breach of an advisory duty in tort.

The Commercial Court (Flaux J) held that all of the defences failed and that Barclays was entitled to recover in full the sums it claimed against the defendants.

No misrepresentation and no reliance

The defendants alleged that Barclays had represented that it would obtain, for Svizera, a currency swap, which would be entered into at the same time as the Facility Agreement, but that no such swap was ever entered into. Flaux J concluded that Barclays had not made any such representation. Even if a representation had been made, Flaux J found that the defendants had not relied upon it in deciding whether to enter into the Facility Agreement. 

Mandate Letter created contractual estoppel

Further, Flaux J held that the wording of a letter (the Mandate Letter) setting out the terms and conditions on which Barclays was prepared to arrange the financing was effective in creating a contractual estoppel against any reliance by Maneesh on any representation made by Barclays. Maneesh had signed the Mandate Letter several months before the Facility Agreement was signed. The Mandate Letter contained standard form wording by which Maneesh acknowledged that it had not relied upon any representation by Barclays in entering into the transaction. Flaux J followed decisions such as Peekay Intermark Ltd v Australia and New Zealand Banking Group [2006] EWCA Civ 386, Springwell Navigation Corporation v JP Morgan Chase Bank [2010] EWCA Civ 1221 and Cassa di Risparmio v Barclays Bank [2011] EWHC 484 in holding that clear words could contractually estop a party from alleging that it had relied on a representation by another party in entering into a contract.

No advisory relationship and duty of care

In the alternative, the defendants alleged that various assurances given by Barclays to Maneesh had resulted in an advisory relationship, under which Barclays owed the defendants a duty of care, which Barclays had breached. Flaux J found that Barclays had not given the defendants any advice but had acted on an execution-only basis. Even if Barclays had given advice, the consequence of the wording in the Mandate Letter stating that the defendants accepted that Barclays was not acting as their advisor, and that they were entering into the transaction on the basis of their own independent assessment of the transaction and the risks involved, was that the defendants were contractually estopped from alleging that Barclays had acted in an advisory capacity or owed them a duty of care.

Notwithstanding these findings, Flaux J considered the circumstances in which a tortious duty of care to advise would arise in the case of a bank or other financial institution. Flaux J applied the opinion of Lord Hodge in Grant Estates Ltd v Royal Bank of Scotland plc [2012] CSOH 133 at [73] in finding (i) the absence of a written advisory agreement and (ii) the terms of the Mandate Letter and the Facility Agreement excluding any advisory relationship meant that it could not be inferred that Barclays had assumed responsibility for any advice it had provided.


This decision will give some further comfort to banks that their standard "no reliance" and "no advice" clauses will generally be effective in excluding claims of misrepresentation and breach of a duty of care. However, following Cassa di Risparmio, two potential issues should still be borne in mind. A misrepresentation as to the effect of the contractual documents which are claimed to give rise to the contractual estoppel may prevent the estoppel from arising. In addition, the scope of the estoppel is a matter of construction of the contract so that (in less straightforward circumstances than those in this case) a court will analyse whether the representations made by the bank fell outside the terms of the specific clause which is claimed to give rise to the estoppel. Banks should also note the importance of recording the steps taken and discussions held with borrowers prior to entering into an agreement.