John Green & Paul Rowley v Royal Bank of Scotland Plc (2013)
The existence of an action for breach of statutory duty consequent on the contravention by a bank of the Conduct of Business Rules did not give rise to a co-extensive common law duty of care.
The appellants (C) appealed against a decision ( EWHC 3661 (QB)] dismissing their claim against the respondent bank (D) for breach of duty of care in relation to an interest rate swap transaction.
D had sold C an interest rate swap as a form of hedge against their existing loan liabilities with D. D was governed by the Conduct of Business Rules. Under r.2.1.3 D had to take reasonable steps to communicate information in a way which was clear, fair and not misleading. Under r.5.4.3 D had to take reasonable steps to ensure that a private customer understood the nature of the risks involved in their transactions. C's claim that D had breached its duty of care under Hedley Byrne & Co Ltd v Heller & Partners Ltd  A.C. 465 by making various negligent misstatements and giving negligent advice about taking on the swap was dismissed, Hedley Byrne cited. C's potential claim under the Financial Services and Markets Act 2000 s.150, which provided a statutory remedy for contravention of the Rules, was time-barred.
C submitted that a common law duty of care co-extensive to that imposed by statute arose in circumstances where a bank undertaking a regulated activity had failed to comply with a statutorily imposed regulation and where such failure was likely to give rise to damage to the counterparty.
C's argument essentially amounted to saying that the mere existence of the Rules gave rise to a co-extensive common law duty of care. Section 150 provided a remedy for contravention of r.5.4.3 in the shape of an action for breach of statutory duty. There was nothing to justify imposing a common law duty of care to advise as to the nature of the risks inherent in the regulated transaction. The bank did not cross the line which separated the activity of, on the one hand, giving information about and selling a product and, on the other, the activity of giving advice. Absent that feature, there was neither justification nor need for the imposition of a common law duty independent of, but co-extensive with, the statutory remedy provided. Additionally, neither r.2.1.3 nor r.5.4.3 provided any pointer as to the assumption of a duty of care to advise or as to the appropriateness of imposing such a duty since both imposed statutory duties which were owed by firms which were in a non-advisory or execution-only relationship with their counterparty as well as firms which had undertaken an advisory role. That was clearly demonstrated by r.5.4.3 which imposed the duty to take reasonable steps to ensure that the private customer understood the nature of the risks involved on both a firm which made personal recommendation of a transaction and on a firm which arranged or executed a transaction. The existence of the action for breach of statutory duty consequent on contravention of a rule did not compel the finding that D owed a common law duty of care to ensure that C understood the nature of the risks involved in entering into the swap transaction. The existence of a statutory duty might have given rise to a common law duty of care in circumstances where breach of the statutory duty was not actionable in private law. The more usual case was where in performance of a statutory duty a party, usually but not always a public authority, brought about a relationship between itself and another person such as was recognised to give rise to a duty of care owed to that person. However, the duties were not co-extensive and the common law duty did not arise by reason of the imposition of the statutory duty, but rather out of the relationship so created, X (Minors) v Bedfordshire CC  2 A.C. 633 considered (paras 29-30).
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