Mary Poppins the creative lawyers the Banks and the banks: What 2018 brought and what 2019 has in store.

Did you see the film Mary Poppins Returns over the Christmas break? It’s the sequel to the 1964 Disney classic.

One of the earlier scenes involves two lawyers acting for the Fidelity Fiduciary Bank (Fidelity), acting on the instructions of William ‘Weatherall’ Wilkins, the bank’s Chairman (played by Colin Firth), serving Michael Banks (played by Ben Whishaw) with what appears to be a warrant of possession. He had taken out a loan with the bank but had fallen in arrears and whilst he could pay the arrears Fidelity was demanding full repayment of the loan (something unlikely to happen today in light of Section 36 Administration of Justice Act 1970 and following Cheltenham & Gloucester Building Society v Norgan [1996] 1 WLR 343 but the film is set in 1930’s London).

The serious scene is momentarily punctuated with a classic lawyer joke as Ellen (played by Julie Walters), who thinks the men at the door are plumbers come to fix a leak, learns that they are lawyers and quips that she thought they were there to do something useful. Disturbed at the prospect of losing his home, Michael sets about trying to find his father’s share certificate in Fidelity whilst the Banks children look at ways of raising money to pay off the loan as Mary Poppins (played by Emily Blunt) takes them on a series of magical adventures.

Meanwhile, back at Fidelity, Weatherall is complementing his lawyers on the bank’s bumper profits arising from targeted acquisitions of defaulting debtors’ properties. It would appear that he had inadvertently written the playbook for the Royal Bank of Scotland’s (RBS) ‘West Register’ which was in 2018 still the main protagonist in the redress claims arising from RBS’s Global Restructuring Group (GRG). RBS’s redress scheme closed on 22 October 2018 with RBS having reportedly made refunds of fees totalling £115m. RBS fared better in the Courts in 2018 with an action arising out of the activities of GRG being dismissed by Chief Master Marsh on 30 July 2018 in Standish v Royal Bank of Scotland Plc. Weatherall’s fate was not so fortunate as when Mr Dawes Junior (played by Dick van Dyke, yes he’s in the sequel too!) resumes his post as chairman of Fidelity he puts an end to Weatherall’s scheming and promotes the virtues of treating customers fairly because it was on the basis of their trust that the bank was built. If Weatherall is Fred Goodwin, Dawes is Metro Bank’s Vernon Hill II whose book Fans Not Customers encapsulates Metro’s modern twist on good old fashioned customer service.

But what else did 2018 have in store for the banks in the Courts? In Carney and others v NM Rothschild & Sons Ltd [2018] EWHC 958 (Comm) the Court dismissed a borrower’s claim that the defendant bank’s relationship with the borrower was unfair as a result of negligent advice and misrepresentation about an investment for which the bank made the borrower a loan. In a hark back to JP Morgan Chase Bank and others v Springwell Navigation Corporation [2008] EWHC 1186 (Comm) the Court placed a significant amount of importance on the lack of advisory duty on the part of the bank. In Crowther & Crowther v Arbuthnot Latham & Co Limited [2018] EWHC 504 (Comm) the defendant bank was found to have unreasonably withheld its consent to the disposal of a property as its refusal was not based on the sale price. Lloyds Bank Plc (Lloyds) had mixed results before the Courts. In Lloyds Bank Plc v McBain Cooper Consulting Ltd [2018] EWCA Civ 452 the Court held that the bank had to bear a greater share for its losses due to its failures in initially approving a loan for works and then continuing to fund a project in spite of breach of duty by the project monitor. In March 2018, however, the media reported that Premier Motor Actions Ltd (In Liquidation) had dropped its claim against Lloyds (and PwC) notwithstanding an eagerly awaited trial set to start in that April. This followed a successful trip to the Court of Appeal for Lloyds on a ‘security for costs’ application. The bank in Playboy Club London Ltd & Ors v Banca Nazionale Del Lavoro Spa [2018] UKSC 43 also escaped liability following a Supreme Court appeal in a case which involved a negligent bank reference as the reference had been procured via an intermediary agent and the bank had not assumed a duty to the Playboy Club.  RBS also scored another victory in the Court of Appeal round of Property Alliance Group Ltd v Royal Bank of Scotland plc [2018] EWCA Civ 355 with the Court of Appeal dismissing PAG’s various claims including one arising out of LIBOR fixing. Whilst PAG lost the case, the infamous Just Hit Budget memo, published on 17 January 2018 by the Treasury Select Committee has Weatherall’s fingerprints all over it!

So what does 2019 have in store? The banks are still reeling from the PPI misselling claims and it would appear that Claimants are now sidestepping the Financial Ombudsman Service for more generous awards from the Courts. In Doran v Paragon Personal Finance Ltd the Manchester County Court found that the relationship between the Claimant and the lender was unfair due to a failure to disclose a large commission paid to a broker for a PPI policy. The Court also held that when considering whether or not the relationship was unfair the limitation period started to run when the relationship ended and not when the loan was originally taken reviving the potential for claims which might otherwise have been statute barred. The banks are also now bracing themselves for a deluge of mortgage misselling claims with regard to standard variable rate mortgages. In the SME sphere banks are set to introduce a voluntary ombudsman scheme by September 2019 following pressure for the All Parliamentary Group on Business Banking (APPG). SMEs with turnover between £6.5m and £10m and a balance sheet of up to £7.5m are set to be able to use the scheme which is reported to be expected to be able to deal with larger and more complex cases.

And then there’s Brexit! What effect will that have on banking litigation? One rather frustrating Brexit case, involving the European Medicines Agency’s attempts to treat its lease at Canary Wharf as frustrated, is set for trial in March 2019. Brexit will certainly be a catalyst for litigation across sectors and the banking sector will not be immune. One thing is for certain lawyers, like Marry Poppins, will have a lot of imagination and are sure to come up with creative means to pray in aid of their clients using a spoon full of the Brexit sugar to make the case medicine go down!

This article was written by Luke Harrison, Chairman of the Commercial Litigation Association and lead Commercial and Insolvency Disputes Partner at Debenhams Ottaway LLP.