The Court of Appeal has dismissed an appeal by Laszlo Fried and Jaszai Limited against the striking out of paragraphs in their defence that linked Ulster Bank’s lending to alleged LIBOR manipulation by its parent company, Royal Bank of Scotland (RBS). The court left the rest of the dispute for plenary hearing and did not decide the underlying claims about the loans, receivers or leases.
The appeal concerned a High Court order removing paragraphs 23 to 38 of the defence and counterclaim, described in the judgment as “The Laszlo Fried LIBOR Claim”. The High Court had struck them out as frivolous and vexatious and bound to fail. The Court of Appeal, in a judgment delivered by Ms Justice Máire Whelan on 17 July 2019, found no basis to disturb that decision.
The wider proceedings arise from loan facilities Ulster Bank offered in 2009 and 2010, including Swiss franc loans secured on premises in Galway. The bank alleges that sums due were not paid. Receivers were appointed in April 2013. The respondents seek orders concerning the receivers’ functions, rents and the validity of leases; the bank also seeks repayment. The borrowers deny liability, plead estoppel and bring counterclaims. Those matters were not resolved by this appeal.
In the struck-out paragraphs, the appellants sought to connect RBS’s admitted LIBOR-related misconduct to Ulster Bank and the loans. They argued that the banks had an agency relationship, that RBS’s conduct could provide a defence to repayment, and that the loan agreements were tainted by illegality. The Court of Appeal said the proposed agency link rested on speculation relayed through Mr Fried’s affidavit. No affidavit or report from the financial expert whose views were referred to was before the court. The bank’s evidence, by contrast, described portfolio hedging and said it dealt with RBS at arm’s length.
The court also held that fraud had been implicitly alleged in the defence but not pleaded with the required particularity. It declined to consider several arguments raised for the first time on appeal, including a claim that EURIBOR, rather than LIBOR, should have applied. The court said the respondents had not had a proper opportunity to address those points in the High Court.
The ruling was limited to the challenged paragraphs. The Court of Appeal concluded they were unsustainable and had no realistic prospect of being salvaged through discovery or otherwise, and dismissed the appeal.