Court Sets Limit on Bank’s Duty to Advise Customers

Finch v Lloyds TSB Bank plc [2016] EWHC 1236 (QB)

In a first-of-its-kind case, the Mercantile Court in Manchester has dismissed a claim that Lloyds Bank owed any kind of advisory duty to its customer for the sale of a fixed-rate loan.  The Court found that a positive duty of care in tort would only arise in “exceptional circumstances”, markedly different from the conventional banker-customer relationship.  HHJ Pelling QC heard argument on the nature of a break clause within a fixed-rate loan (described by the claimants as an “embedded swap”), and whether a bank owed a duty to warn customers about the presence of such a clause.  The Court rejected a gamut of claims in tort, contract and misrepresentation, finding that Lloyds Bank owed no such duty, and that the presence of a break clause would not of itself make a fixed-rate loan unsuitable for a customer.

Ian Wilson (instructed by TLT LLP) acted as sole Counsel for the successful Bank.

The judgment is available here.