UK banking and financial services litigation: 2021 in review

A number of decisions from the English courts in 2021 illustrate the litigation trends that are likely to have implications for the financial services industry in 2022 and beyond.  

The start of the year saw the Supreme Court hand down its decision in the Financial Conduct Authority’s (FCA) business interruption insurance (BII) test case (Financial Conduct Authority v Arch Insurance (UK) Ltd and others [2021] UKSC 1). The decision assists in resolving coverage and general causation issues in respect of disputed BII claims arising during the COVID-19 pandemic under certain affected policies.

In a sign that claims arising out of market misconduct during and pre-dating the financial crisis are coming to an end, the High Court found that claims arising out of alleged misconduct in the foreign exchange markets and in relation to LIBOR were time-barred (ECU Group Plc v HSBC Bank Plc [2021] EWHC 2875 (Comm) and Boyse (International) Ltd v Natwest Markets plc and another [2021] EWHC 1387 (Ch) respectively).

A number of decisions saw the courts decline to extend the scope of the Quincecare duty. The duty does not extend to protecting individuals from frauds where the instructions themselves were validly given by the customer (Philipp v Barclays Bank UK plc [2021] EWHC 10 (Comm); Luk Wing Yan v CMB Wing Lung Bank Ltd [2021] HKCFI 279), nor does the duty extend to a customer’s creditors (Stanford International Bank Ltd v HSBC Bank plc [2021] EWCA Civ 535). Permission to appeal to the Court of Appeal and Supreme Court has been granted in Philipp and Stanford International Bank respectively. The scope of the duty will also be considered in The Federal Republic of Nigeria v JPMorgan Chase Bank, N.A, which is due to go to trial in February 2022.

The Supreme Court reconsidered the application of principles for determining whether a claimant’s loss falls within the scope of a professional’s duty of care, moving away from a strict application of SAAMCO in favour of a more straightforward test looking at what purpose the duty of care assumed by the professional was objectively intended to serve and whether it was intended to guard against the loss actually suffered (Khan v Meadows [2021] UKSC 21; Manchester Building Society v Grant Thornton UK LLP [2021] UKSC 20).

With financial institutions beginning to find themselves the subject of shareholder claims under s.90A Financial Services and Markets Act 2000, watch for developments in Allianz Global Investors GmbH & Ors v RSA Insurance Group plc, as well as a claim issued by shareholders against Standard Chartered PLC in late 2021 (The trustees for the Victory Portfolios and others v Standard Chartered PLC).

Competition law infringements continue to generate follow-on litigation involving financial institutions. Financial institutions practitioners should look out for developments in Walter Hugh Merricks CBE v Mastercard Incorporated and others following the granting of the UK's first ever collective proceeding order (CPO) on an “opt-out” basis by the Competition Appeal Tribunal in those proceedings ([2021] CAT 28). Other cases of interest include Allianz Global Investors GmbH and others v Barclays Bank plc and others, Mr Philip Evans v Barclays Bank plc and others and Michael O’Higgins FX Class Representative Limited v MOL (Europe Africa) Ltd and others, all relating to alleged losses arising out of misconduct in the foreign exchange markets.

Sarah Parkes and I discuss these and other trends in our article published in Practical Law Magazine on 27 January 2022.