The Royal Bank of Scotland plc v Highland Financial Partners LP and others
On 12 April 2013, the Court of Appeal held that RBS had procured judgments of the commercial court against Highland by fraud and refused on account of RBS's dishonesty and lack of clean hands to grant anti-suit injunctions sought by the bank in relation to proceedings in Texas. Highland were represented by Stephen Auld QC, Ben Strong and Laurence Emmett of One Essex Court.
By way of background, proceedings were begun by RBS in England in 2009 against Highland. RBS claimed monies allegedly owed pursuant to a terminated CDO transaction. RBS’s claim was for the shortfall on a loan, following what it claimed was realisation of the collateral. RBS obtained summary judgment on liability in that claim in February 2010, a decision affirmed by the Court of Appeal in July 2010. In December 2010 RBS obtained judgment on quantum, but for a materially lower amount than that which it had claimed. It emerged as a result of the dispute as to quantum that RBS’s claim was based not prices for the collateral derived from genuine sales, but that it simply appropriated to itself the assets which it wanted for itself and then conducted what Burton J called a “sham auction” to determine what credit to give to Highland.
Highland then brought proceedings in Texas, on the basis that it had been defrauded by RBS.
RBS’s response was to seek an anti-suit injunction in England, relying on jurisdiction clauses in the agreements in the CDO transaction, and contending that Highland should not be allowed to carry on litigating in Texas matters which were already the subject of an English judgment. Highland contended that RBS’s conduct meant that it should be refused an injunction, because it did not come to the court with “clean hands”. Highland also brought a counterclaim to set aside the earlier liability and quantum judgments on the basis that they had been procured by RBS’s fraud.
Burton J decided at first instance that RBS’s misconduct meant that it should not be granted an injunction. But he refused Highland’s claim to set aside his earlier judgments for fraud, deciding that, while RBS had suppressed information, it had not made positive false statements and that this suppression of information in any event did not cause his judgment.
RBS appealed against the refusal of its claim for an injunction and Highland appealed against the refusal to set aside the prior judgments.
In a lengthy and detailed Judgment, the Court of Appeal accepted the submission of Highland’s legal team that RBS had knowingly misled the Court and its customer over a prolonged period, refused RBS’ appeal and granted Highland’s appeal. The Court held that RBS’s serious misconduct did indeed debar it from obtaining the equitable remedy of an injunction, and that RBS was guilty of fraud which had caused in the judgments. The Court of Appeal accordingly set aside the liability and quantum judgments given in 2010.