The High Court has struck out paragraphs of four defendants’ pleadings that sought to rely on Royal Bank of Scotland’s LIBOR manipulation in a case over Ulster Bank loans and receiverships in Galway.
In a judgment delivered on 2 May 2018, Ms Justice Ní Raifeartaigh ruled on the plaintiffs’ motion to strike out parts of the defences and counterclaims as frivolous, vexatious and bound to fail. The court was not deciding the underlying loan recovery claims or the remaining issues in the case.
The plaintiffs include Ulster Bank and two receivers. They say the defendants defaulted on loan facilities and seek, among other relief, repayment, orders enabling the receivers to perform their functions, and declarations concerning leases over two properties. The defendants include Laszlo Fried and three companies. Two of the companies occupy the properties as tenants.
The disputed defence paragraphs alleged that LIBOR-based interest terms and representations applied to the loans, and that RBS’s admitted rate manipulation could be linked to Ulster Bank. Mr Fried’s affidavit relayed an expert’s theory that RBS had hedged the loans and that the relationship between the banks could amount to agency. The expert report itself was not before the court. Ulster Bank’s witness said the loans were hedged on a portfolio basis and that any RBS involvement was at arm’s length.
The judge found no basis on the affidavits to try whether Ulster Bank acted as RBS’s agent. She described the proposed agency theory as speculative and noted that it had not been pleaded. The judgment also found no suggestion that Ulster Bank had participated in or known about RBS’s wrongdoing. It said the reported misconduct appeared to have ended before the relevant loan contracts took effect and LIBOR rates began to be applied to them.
The defendants argued that factual disputes and the possibility that illegality could taint a contract meant the issue should go to trial. The judge accepted that such questions can require trial in other circumstances, but found this case far removed from them: the borrowers had not linked the rates applied to their defaults, and they had dealt with a different corporate entity from the one involved in the misconduct. The judgment also agreed that fraud was implicitly pleaded and should have been particularised.
The court granted the motion, striking out the challenged aspects of the first and third defendants’ defences and the equivalent paragraphs in the second and fourth defendants’ defences. It did not determine the loan claims, the receivers’ other claims, or the remaining matters in the proceedings.