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Rapid Response Team: 0800 559 3500
Switchboard: +44 (0)203 947 1539
Rapid Response Team: 0800 559 3500
Switchboard: +44 (0)203 947 1539

Problems with establishing deceit in mis-selling claims

Author: Nicola Sharp  2 April 2024
3 min read

In Farol Holdings Limited & Ors v Clydesdale Bank PLC & Anor [2024] EWHC 593 (Ch) four SMEs brought a claim against Clydesdale Bank Plc arising out of fixed interest rate loans that the bank made to them between 2002 and 2010.

The claims related to the break costs charged by Clydesdale Bank to the claimants, and to the fixed element in the rate of interest charged under the Fixed Rate Tailored Business Loans (FRTBLs). As part of the second category of claims, the claimants contended that the banks made fraudulent, alternatively negligent, misrepresentations to them.

The claims in deceit were levelled against 15 individual current and former employees of the banks. Ultimately, Mr Justice Zacarolli found that deceit was not established against any of the individuals. His judgment explores some interesting elements of the tort of deceit.

Limited involvement of the alleged representors

Deceit requires an individual to (i) make a representation to another party which is false (ii) know that the representation is false, or be reckless as to the truth of the statement (iii) have an intention to deceive the other person. The other party must also suffer loss as a consequence. 

In this case, the individuals accused of deceit were employees at the bank. For many of them, their job was to confirm with the customer the terms of the loan on a booking call. There was an established procedure for these calls. The main function of these booking calls was to relay the terms of the loan which had been agreed between the customer and somebody else in the bank. 

The claimants’ case was that the employees were implying false statements in terms of the pleaded representations in every booking call with every customer entering the FRTBL.

The judge considered that if this were to be true, then all of the banks’ employees that participated in booking calls would be in the same boat. There was not an overarching case that there was a system within the banks to defraud customers, or an agreement between the employees to mislead customers. Which leaves the logical contention that these specific employees independently engaged in systematically deliberate (or reckless) behaviour. The judge found this to be ‘improbable’. 

On an individual level, it was found to be unlikely that people making the booking calls gave any thought as to whether they were making implied representations. The terms were already agreed with the customer by a colleague. The booking calls were simply confirming the terms of the transaction.

The judge therefore disagreed with a central theme of the claimants’ case on deceit – that those involved in the booking calls must have appreciated that what they were saying gave rise to the alleged implied representations.

Existence of a general practice

The employees were following a system that was well-established within the banks. Note that it is not a defence for an employee to say that they were merely following an established practice, if they were aware that they were making false representations. 

But can a party establish deceit where the employees were following an ‘inherently deceptive’ system? This argument worked in Brown Jenkinson & Co Ltd v Percy Dalton (London) Ltd [1957] 2 QB 621, but in that case, the representors knew ‘full well’ that the statements they had made were false, and were intended to be acted upon by third parties. 

The problem with that argument in the present case, was that the alleged representors did not appear to know that their alleged representations were false. The argument failed.


This claim falls within a wider category of cases about mis-selling interest rate hedging products. The Financial Conduct Authority (or the Financial Services Authority as it then was) began an investigation in 2012, which ended in around 2016. Many customers were compensated for their losses under the redress scheme. 

But some customers either missed the investigation, or were dissatisfied with the outcome, and pursued recourse through the courts. 

This case acts as a test case for around 900 other customers, who were sold similar FRTLBs. 

While this decision may be appealed, the first instance decision shows that the courts are unwilling to find fraud against individuals, particularly individuals who were employees, simply carrying out their jobs and following standard practice.

Previous cases have also failed to find deceit in mis-selling claims. For example, London Executive Aviation Ltd v The Royal Bank of Scotland Plc [2018] EWHC 74 (Ch) in which the deceit claim failed on the grounds that there was no relevant implied representation. 

Nicola Sharp C 09983

Nicola Sharp


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Nicola is known for her fraud, civil recovery, arbitration and business crime expertise, her experience of leading the largest financial disputes and multinational investigations and her skills in devising preventative measures and conducting internal investigations for corporates.

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