Thornbridge Limited v Barclays Bank Plc: Court confirms Bank has no advisory duty in agreeing interest rate swap - DAC Beachcroft

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Thornbridge Limited v Barclays Bank Plc: Court confirms Bank has no advisory duty in agreeing interest rate swap

Published 3 febrero 2016

In yet another decision that will provide comfort to financial institutions, the High Court has confirmed that Barclays did not have an advisory duty when it sold an interest rate hedging product to its customer, Thornbridge. The Court also held that the bank's duty was limited to not misleading or misstating the information it gave. It did not have a duty to give full information about the swap.


In April 2008, Barclays provided a loan of £5,652,000 to Thornbridge to allow it to purchase a property. The loan agreement required Thornbridge to either execute an interest rate hedge so as to limit the interest payable for at least 5 years, or to pay a fixed rate of interest for the first 5 years of the loan.

Thornbridge entered into discussions with Mr Burgess, a Corporate Risk Adviser in Barclays' investment banking division, about interest rate hedging. In May 2008, the parties entered into a swap agreement which provided that Barclays would pay Thornbridge a floating monthly amount, calculated by reference to the base rate for that month, and Thornbridge would pay a fixed monthly amount to Barclays.

Following the economic crisis, the floating amount payable by Barclays decreased as the Bank of England base rate plummeted. The net amount Thornbridge was required to pay therefore increased significantly. Thornbridge considered restructuring the swap, but given the breakage costs associated with doing so, decided to allow it to continue to maturity in 2013.

Thornbridge's claim against Barclays alleged negligence, breach of contract and breach of statutory duty in relation to the information and advice provided in respect of the swap in 2008.


The Court found in favour of Barclays on all issues. In doing so it provided important guidance as to (i) when an advisory duty will arise; (ii) the effect of standard form representations in swap documentation; and (iii) what a bank's duties are in the absence of an advisory duty.

The following findings were of particular interest:

  • Even if advice was given by Mr Burgess, Barclays did not assume an advisory duty. His statements were understood by Thornbridge to be, at best, "predictions or views" rather than formal advice. Following the test in Springwell, the Court confirmed that they did not go beyond "the daily interactions between an institution's salesforce and a purchaser of its products";
  • The fact that Mr Burgess' job title was "Corporate Risk Adviser" could not be given significant weight when weighed against the actual discussions that took place;
  • The terms of the swap included a representation that Thornbridge had not relied on Barclays' communications as investment advice. As such, even if the Court had concluded that advice had been given, Thornbridge was contractually estopped from asserting that Barclays had advised it. Applying Raiffeisen v RBS, the representation in question was a "basis clause", defining the basis on which the parties did business, rather than an "exclusion clause" aimed at evading liability;
  • In the absence of an advisory relationship there was no broad duty to provide information. Barclays had an obligation not to provide information that was misleading, but there is no common law duty to provide full information about the comparative advantages and disadvantages of other hedging instruments.


This case will be of comfort to financial institutions in that it confirms the Courts' continuing sympathy with banks facing mis-selling claims. The firm line taken in relation to contractual estoppel arising from the standard form terms of interest rate swaps is likely to be particularly good news.

As a more practical point, the Court clearly placed reliance on the factual evidence provided by both parties, including the contemporaneous recordings of telephone conversations between Barclays and Thornbridge, and the oral evidence given in Court. This underlines the importance of (i) ensuring that effective document retention policies and procedures are in place; and (ii) carrying out thorough and early assessments of the strength and credibility of factual evidence in any litigation.


Laura Berry

Laura Berry

London - Walbrook

+44 (0) 20 7894 6343

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