Court of Appeal delivers judgment on non-contractual disclaimers and misrepresentation claims in secondary market purchases

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Court of Appeal delivers judgment on non-contractual disclaimers and misrepresentation claims in secondary market purchases

Published 2 febrero 2017

The recent case of Taberna Europe CDO II Plc ("Taberna") v Selskabet AF 1. September 2008 in Bankruptcy (formerly known as Roskilde Bank A/S ("Roskilde") concerned an appeal against an order of the High Court. In 2015, the High Court gave judgment for Taberna in the sum of €26,421,585 on its claim for damages for misrepresentation under section 2(1) of the Misrepresentation Act 1967 ("the Act"). The Court of Appeal's judgment offers clarification on claims for misrepresentation on purchases in the secondary market and the effectiveness of non-contractual disclaimers.


Prior to 2008, Roskilde was a successful Danish regional bank. Taberna is an investment company with a portfolio of financial assets. In December 2006, Roskilde issued fixed/floating rate subordinated notes with a face value of €80 million. In October 2007 Roskilde produced an “Investor Presentation”. It was originally directed to attendees of “road shows” designed to encourage investment but was subsequently made available on Roskilde's website.

The final page of the Investor Presentation contained a section headed “Disclaimer". The various paragraphs of the disclaimer were categorised as: (i) audience identifying clauses; (ii) clauses restricting the scope of representations ("Duty-Negating Clauses"); and (iii) clauses excluding liability for statements ("Liability Exclusion Clauses").

Some of the notes were acquired by Deutsche Bank ("DB"). In February 2008, DB sold notes with a face value of around €27 million to Taberna for the sum of €26,421,585. Later, in February 2009 Roskilde was put into bankruptcy and Taberna pursued a claim against it for damages for misrepresentation based on a misstatement by Roskilde of the amount of its non-performing loans ("NPLs").

The High Court found that there had been a misrepresentation by Roskilde in relation to the NPLs and that Roskilde was liable for damages notwithstanding that the notes had been bought pursuant to a contract between DB and Taberna, to which Roskilde was not a party. The High Court concluded that, on the facts of this case, there was a contractual relationship between Roskilde and Taberna. Roskilde appealed - the Court of Appeal allowed the appeal and gave judgment in its favour. It was found that there was no representation that Taberna could rely on and Roskilde had excluded liability for any representation.

Court of Appeal Judgment


It is a well-established principle of law that the maker of a statement should not be under a duty of care in respect of the accuracy of statements for an "indeterminate amount for an indeterminate time to an indeterminate class". Liability for economic damage in negligence claims should only be attributed where there is ‘proximity’ between the parties and in circumstances in which the statement maker knew: (i) that it would be communicated to an identifiable class; (ii) specifically in connection with a particular transaction or transactions of a particular kind; and (iii) that the reader would be very likely to rely on it for the purpose of deciding whether to enter into the transaction.

The High Court found that Roskilde had intended to make the Investor Presentation available for use by potential investors in the secondary market generally, including Taberna. It also found that there had been “more specific interactions” between Roskilde and Taberna and where a company invites potential investors to make use of information that had been produced for a different purpose, a company can be held liable for representations contained in that document. The Court of Appeal agreed that Roskilde had deliberately made the Investor Presentation available to Taberna with a view to its relying on it for investment purposes and that as a result any representations it contained were made by Roskilde to Taberna when considering whether to invest in its debt generally, including the subordinated loan notes.

The Court of Appeal disagreed with the High Court's conclusion that section 2(1) of the Act could apply to the claims where Taberna purchased notes in the secondary market. It was found that section 2(1) was concerned only with representations made by a person who enters into a contract with the representee and with losses arising as a result of entering into that contract: it does not extend to an obligation of a contractual nature which the representee acquires from a third party. Taberna was seeking to recover the price it paid for the notes and thus a loss which it says it incurred as a result of entering into the contract with DB. The Court of Appeal held that the contract that came into being between Taberna and Roskilde as a result of the purchase of the notes was a consequence of the contract with DB, not the cause of it.

The Disclaimer

The High Court held that Roskilde was not entitled to rely on the paragraphs in the disclaimer:

(a) The Duty-Negating Clauses were ineffective because they did not form part of the contract represented by the notes and were simply an attempt to exclude liability for misrepresentation otherwise than by contractual means; and

(b) Although the Liability Exclusion Clauses satisfied the requirement of reasonableness and may be regarded as exclusion clauses, on which Roskilde could rely, they were insufficiently clear to exclude liability for damages for misrepresentation under section 2(1) of the Act.

The Court of Appeal disagreed with the High Court and found that the Investor Presentation was intended to be read by experienced professional investors who are assumed to be aware of the need to read a document of this nature in its entirety. When read as a whole, it contained a clear message to the reader: in the absence of fraud, Roskilde was not willing to accept liability for the accuracy of its contents. It was held that, in principle, it is possible to use Duty Negating and Liability Exclusion clauses to limit or exclude liability - the fact that they may be non-contractual in nature does not prevent them being effective.

As regards the Liability Negating Clauses, the Court of Appeal agreed with the High Court that, in principle, subject to any rules of construction, Roskilde was entitled to rely on them. However, the Court of Appeal disagreed with the High Court's conclusion that the clauses were ambiguous and found that they were couched in language that made it clear that Roskilde accepted no responsibility for the information contained in the Investor Presentation: parties to commercial contracts are entitled to determine for themselves the terms on which they will do business.

Contributory negligence

The Court of Appeal accepted the High Court's finding that contributory negligence may in principle be a partial defence to a claim for misrepresentation under s2(1) of the Act but that it would be appropriate only in very special cases, of which, this was not one.


The Court of Appeal's judgment provides clarification on the applicability of section 2(1) of the Act to secondary market purchases in respect of subordinated notes. The judgment is also likely to have broader applicability to all secondary market purchases. When purchasing instruments on the secondary market, it is important to ensure that sufficient due diligence is undertaken. Whilst Taberna would not have been held to have contributed to its losses, they could have been avoided had further investigation been undertaken. If a purchaser cannot rely on representations made by the note issuer in financial documentation, then it will need to make itself comfortable that the information is accurate.

The judgment also highlights the need for companies to protect themselves from unwanted liability by utilising clear and unambiguous disclaimers in financial or other investment documentation and in all dealings with other commercial entities. The confirmation that non-contractual disclaimers can be effective is of great commercial importance for financial institutions. This is especially important when such documentation is made available to the public, for example, on a company's website.


Jonathan Brogden

Jonathan Brogden

London - Walbrook

+44 (0)20 7894 6290

Key Contacts

Jonathan Brogden

Jonathan Brogden

London - Walbrook

+44 (0)20 7894 6290

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