[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> WW Property Investments Ltd v National Westminster Bank Plc [2016] EWCA Civ 1142 (29 November 2016) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2016/1142.html Cite as: [2017] 1 CLC 388, [2017] 2 All ER (Comm) 624, [2016] EWCA Civ 1142, [2017] 1 Lloyd's Rep 87

[New search] [Printable RTF version] [Help]

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM LEEDS DISTRICT REGISTRY
HIS HONOUR JUDGE ROGER KAYE QC
B40LS775

		Royal Courts of Justice Strand, London, WC2A 2LL
		29/11/2016

Lord Justice Christopher Clarke:

1. This is an application by WW Property Investments Limited ("WW") to appeal from a decision of HH Judge Roger Kaye QC dated 1 March 2016 whereby he struck out the entirety of WW's claim against the National Westminster Bank plc and refused it permission to add a new claim.
2. The basic facts are as follows. Between 2004 and 2010 WW borrowed money from National Westminster Bank Ltd ("NatWest"). Over the same period it entered into four interest rate hedging contracts. The first 3 of them were what are called Collars. These were entered into on the following dates with the following reference amounts.

9.12.04	£ 2,070,000
15.7.05	£ 1,000,000
12.10.07	£ 861,000

The fourth was a Swap agreement which was entered into after the close-out of each of the three Collar agreements.

11.1.10 £ 4,000,000

3. The Collars were intended to hedge WW's exposure to interest obligations arising under the loans made by NatWest, which provided for interest to be paid at a percentage above NatWest's Base Rate. It was a term of the loans that they should be hedged. The effect of the Collars was that if NatWest's weighted average sterling base rate for each calculation period exceeded a certain amount NatWest would pay WW under the instrument but if the rate dropped below a certain level WW would pay NatWest. If rates increased WW thus had protection against the increase above the specified level. If rates fell WW would find itself making payments which increased the interest that it would otherwise be paying. Under the Swap WW was the fixed and NatWest the floating rate payer. The fixed rate was 5.45%, the floating rate was 1 month Sterling Libor, and the payment dates were monthly from 1.2.10 to 1.12.14. In the events which happened interest rates dropped in 2008 and remained low thereafter so that these agreements were disadvantageous to WW.
4. Each of the hedges had a mark to market value at day 1 in favour of NatWest.

The IRHPR

5. In 2013 NatWest entered into a Review Agreement, as did other banks, with the Financial Services Authority whereby NatWest agreed to carry out an Interest Rate Hedging Product Review (IRHPR), which would involve an independent firm of reviewing accountants. In accordance with the terms of the IRHPR the Collars were categorised as Category A business. This resulted in the automatic provision of some redress to WW subject to the assessment process.
6. On 15 October 2014 NatWest made offers in respect of the Collars. In the end WW accepted the offers and received redress of over £ 424,152.06 from NatWest. On 9 January 2015 WW executed acceptance forms. In each form WW ticked the box against the following words:

"I/We accept the Offer as set or in the offer letter of 15 August 2014 relating to the review of the sale listed above and do want to make / have already made a claim for additional losses."

7. Beneath that were the words:

"If you decide to accept this Offer, and subject only to the qualifications in the tax and consequential loss sections of the offer letter of 15 August 2014 permitting you to claim respectively for (1) additional losses incurred as a result of a difference in your tax position caused by receipt of the provisional basic redress payments and (2) Consequential Losses you have incurred as a result of the IRHP you were sold, this will represent full and final settlement of any claims, actions, liabilities, costs or demands that you may have against the bank arising under or in any way connected with the sale of this IRHP, as identified above. For this avoidance of doubt this applies to any past, present or future claims, actions liabilities, costs or demands, regardless of whether or not you are aware of them at the date of this letter. However, there are some causes of action (e.g. a claim for fraud), which as a matter of law you will always have available to you."

8. The offer letters included the following paragraph

"Additional losses not included in the Offer

The Offer shown above includes interest but no redress in relation to any additional losses you may have incurred as a result of the IRHPs you were sold. Where you have already provided information in relation to any additional losses you may have incurred as a result of the IRHPs you were sold, we will consider it and we will contact you shortly to discuss this further. Where you would like to provide further information in relation to additional losses you may have incurred as a result of the IRHPs you were sold, we set out at Appendix 2 generic guidance for all customers on additional losses (referred to as 'Consequential Losses' in that guidance) for you to read, after which you will need to let us know if you wish to make a claim.

Please submit details in writing and within 28 days of the date of this letter. Any information that you provide will also be assessed by the Independent Reviewer. The final redress payment will take into account our assessment of any claims for additional losses you may have."

9. Appendix 2 set out guidance in respect of claims for consequential losses. This included the following paras:

"The Financial Conduct Authority has confirmed the basis on which we must consider claims for Consequential Loss. More details can be found on the FCA's website:

http://www.fca.org.uk/consumers/financial-services-products/banking/interest-rate-hedging-products/questions

Where it is determined, based on principles agreed with the FCA (as explained in further detail below) that you have incurred Consequential Losses as a result of us not fully meeting the sales standards agreed with the FCA, we will provide redress to you for those additional losses.

When will redress for Consequential Losses be provided?

We will pay Consequential Losses which you have suffered where you are able to show that it is more likely than not that the particular loss claimed:

Was materially caused by us not fully meeting the sales standards agreed with the FCA in respect of the IRHP

and

Was a kind of loss that a reasonable person standing in the shoes of the bank at the time the IRHP was sold to you should have foreseen.

You will need to tell us the amount of Consequential Loss that you have suffered and provide suitable evidence to support your claim. We provide more information on the evidence required later on in this Appendix. Please provide us with written evidence which quantifies or enables us to quantify your claims for Consequential Loss. Where appropriate we will also take into account how you sought to reduce your losses.

The outcome of your claim will depend on the specific facts of your case."

10. The Appendix went on to explain how a customer could submit a claim for Consequential Loss, what needed to be shown and the need to provide the claim for Consequential Loss within 28 days. It then said:

"If we determine that you are entitled to additional redress for a Consequential Loss you have suffered we will pay this separately to you".

11. WW made a claim for consequential losses which was ultimately rejected by NatWest with the sanction of the independent Reviewer in November 2015.
12. The Swap was categorised as Category B business. This meant that redress was not automatic and would only be afforded if the sale failed to meet the appropriate standards. NatWest invited WW to include the Swap in the IRHPR process and that offer was accepted. The eventual outcome was a decision that NatWest had met the standards applicable and hence no redress was appropriate.
13. The present proceedings were commenced on 6 March 2015. The strike out application before the judge was conducted by reference to a proposed amendment to the POC the revised draft of which is dated 21 October 2015. The pleading contains four principal claims (a) the Wager Claim; (b) the LIBOR Claim; (c) the PPA and Guarantee Claim; and (d) the Tort Claim.

The compromise issue

14. The judge accepted the submission that WW's claims in respect of the Collars (but not the Swap) had all been compromised by reason of the binding settlement agreements entered into pursuant to which WW was provided with redress in excess of £ 420,000. He accepted the submission that additional or consequential losses could, following the acceptance letters, only be claimed within the IRHPR process. Those claims had been made and rejected. Accordingly, the Wager, LIBOR and Tort Claims could only be maintained in relation to the Swap Agreement.
15. Whilst I see the force of that contention, it does not seem that matters are as clear-cut as that. The exception from the compromise is that it is subject to "the qualifications in the tax and consequential loss sections of the offer letter of 15 August 2014 permitting" WW "to claim for Consequential Losses you have incurred as result of the IRHP". The letter indicates that it is open to WW to make such a claim and that, if NatWest determined that WW was entitled to additional redress for Consequential Loss it will pay this amount separately. But it does not say that any such determination will be conclusive; or that, if NatWest does not make such a determination, there can be no further claim. I regard it as arguable with a realistic prospect of success that the words of the compromise do not have the effect relied on and that if NatWest wanted to exclude any such claim following an adverse determination by itself it needed to have used clearer words than it did.
16. I note in this connection that the FSA's pilot findings on Interest Rate Hedging Products, which proposed the Review, indicated that:

"If a customer is dissatisfied with the outcome of the review, they may have recourse to the Financial Ombudsman Service where they are eligible. Other customers may be able to take action through the courts."

17. Similarly there appears on an FSA webpage a report that the banks expected to deal with the small number of outstanding cases in the coming weeks, which includes the following:

"Should they decide not to accept the bank's offer, customers who are eligible can of course refer their complaint to the financial Ombudsman Service, or pursue their case through the courts (subject to time limits for making a complaint or brining a claim)."

There has, of course in this case been an acceptance of NatWest's offer in respect of losses other than Consequential Losses but there has been no offer in respect of those losses. However, on 25 November 2015, when NatWest gave a final

determination of the Consequential Loss claim in respect of the Collars, it said in a letter to WW's solicitors:

"For the avoidance of doubt the findings and outcome of this review do not amount to an admission of liability for the purpose of any legal proceedings you may bring or have brought against the banks, which are separate and distinct from this review".

The Wager Claim

18. The most significant of WW's claims is the Wager Claim. Its essence is as follows. The Collars and the Swaps are wagering contracts. They are contracts for differences and such contracts are inevitably wagers at common law. Since they are wagers it is a condition of their validity at common law that the parties possess equal ignorance or equal knowledge about the prospects of the bet succeeding. This contention was put in two ways: first that the legal validity of a wager depended on the bet possessing these characteristics. The second was that there was an implied term to that effect.
19. If that condition was satisfied the agreements should have had on Day 1 a market value of zero. This would be so if the anticipated payments of each party to the other over the term of the agreement would, when netted off, produce a nil balance. In fact each of the agreements had a market value at Day 1 in favour of the defendants. That reflected the fact that NatWest had greater knowledge than WW of the prospects for the hedge and more favourable chances. Failure to disclose such knowledge amounted to cheating or skewing the odds in favour of NatWest. In consequence NatWest is liable to repay the entire net payments under the Swap either because the contract was invalid (for a reason of which it was unaware) or as damages for breach of the implied term.
20. As the judge observed these arguments have been raised on a number of previous occasions, two of them at least by Mr Roberts, who appeared before us for WW. In Nextia Properties v Royal Bank of Scotland [2013] EWHC 3167 HH Judge Behrens QC, sitting as a judge of the High Court, dismissed a case raising the same contention. I refused permission to appeal on paper and Vos LJ, as he then was, refused permission on the oral renewal and, thereafter, refused permission to reopen the appeal. [2014] EWCA Civ 740.
21. In Derek Gladwin v Barclays Bank Plc 8^th July, unreported, HHJ Mark Raeside QC sitting as a judge of the High Court in the Chancery Davison struck out a similar claim against the bank. Permission to appeal was refused by Briggs LJ.
22. In the light of that history HH Judge Kaye QC decided, in the present case, that WW had no real chance of success in relation to the Wager issue.

Wagering contracts

23. The first question is whether the Collars and the Swap are wagering contracts. In Nextia I gave detailed reasons for refusing permission to appeal, the first of which was:

"There is no realistic prospect of Nextia establishing: (a) that the Swap contract was a wagering contract, given that it was made for the commercial purpose of hedging the risk of increases in Base Rate (the avoidance of an increase in the floating element of Nextia's borrowing costs being the major consideration for the making of the Swap contract) over the five year period for which it was contemplated that Nextia would be a borrower: Morgan Grenfell v Welwyn [1995] 1 AER 1. Even if it was a wagering contract it was not unenforceable and there was no requirement to disclose the Day 1 MTM value…"

24. Mr Roberts submits that it is well arguable that the Collars and the Swap are wagering contracts. They are contracts for differences which do not involve physical delivery of anything and therefore amount to wagering contracts. Hobhouse J, as he then was, was wrong in Morgan Grenfell Ltd v Welwyn Hatfield District Council [1995] 1 All ER 1 to treat the swap in that case as not being a wagering contract. He did so because he misunderstood the significance of what Leggatt LJ had said in City Index Ltd v Leslie [1992] 2 QB 98.
25. There is no statutory definition of a wagering contract. The classic definition is that of Hawkins J in Carlill V Carbolic Smoke Co [1862] 2 QB 484, 490-1:

"..a wagering contract is one by which two persons, professing to hold opposite views touching the issue of a future uncertain event mutually agree that, depending upon the determination of that event, one shall win from the other, and that other shall pay or hand over to him, a sum of money or other stake; neither of the contracting parties having any other interest in that contract than the sum or stake he will so win or lose, there being no other real consideration for the making of such contract by either of the parties".

26. There is also no definition of a contract for differences. Historically it was a term applied to contracts ostensibly for the delivery of goods in the future where the parties had no intention that the goods should ever be delivered but only that the prices should be netted off, only the difference between the two being paid by whoever ended up in the money: Universal Stock Exchange Ltd v Strachan [1896] AC 166. There is nothing feigned about swaps but they can readily be regarded as a form of contract for differences.

Morgan Grenfell

27. In Morgan Grenfell the plaintiff bankers had entered into a ten-year interest rate swap contract with the defendant local authority on the basis that the bank would be the fixed interest payer and the local authority the floating rate payer. The local authority as fixed rate payer entered into another contract with another local authority which was the third party on the same terms but with a variation to the upfront payment payable so as to give it an assured element of profit. The action was brought after contracts of the type in question had been held by the House of Lords to be ultra vires local authorities and wholly void. The bank sought repayment of the sums it had paid from the local authority and the local authority defendant made a similar claim against the third party. The preliminary question was whether the third party had a good defence to the claim on the ground that the contract between the defendants and themselves was a wagering contract within s 18 of the Gambling Act 1845.
28. Hobhouse J cited the definition of gaming or wagering in Carlill and the following passage from Lord Hanworth MR in Earl Ellesmere v Wallace [1929] 2 Ch 1 at 25:

'It is clear from other like cases that the substance of the matter is to be regarded; and if so, it may be more accurate to say that if there is no other purpose in the contract than that of gaming or wagering, it is void – the interest of the parties being evidence of the purpose for which it is entered into.'

He then cited the following passage from the judgment of Leggatt LJ in City Index:

"Although before the 1986 Act came into force, contracts for differences were void, other contracts which are superficially similar were not. These were contracts entered into for a commercial purpose, such as hedging. Such contracts may result in no more than the payment of a difference. But because they were made for a commercial purpose, they are not void as wagering contracts."

29. Having done so he said this:

"Certain contracts are by their very character gaming or wagering contracts, such as a bet upon what horse will win a particular race. Entering into such a contract inevitably has the purpose of wagering. Other contracts may on their face appear to have nothing to do with any wager but it may be possible to prove that the purported contract was a sham and that the true transaction was a wagering transaction. In between there are, as visualised by the passages I have quoted, contracts which may or may not be wagering contracts, depending upon the interests of the parties and their purpose in entering into the particular contract. Interest rate swap contracts are such contracts. Since they provide for the payment of differences they are capable of being entered into by way of gaming or wagering. They have, at least potentially, a speculative character deriving from the fact that the obligations of the floating rate payer are to be ascertained by reference to a fluctuating market rate that may be higher or lower than the fixed rate at any given time. Such a contract is capable of being entered into by two parties with the purpose of wagering upon future interest rates."

30. He considered that the fact that in Hazell v Hammersmith and Fulham London BC [1992] AC 1, 23-4 the House of Lords had not treated transactions undertaken by a local authority in the swaps market (in the hope that the burden of interest payable in respect of borrowings by the council would be mitigated by the profits from the swaps) as wagers indicated that the House proceeded upon the assumption that they were not. On the contrary the reasoning in that case clearly supported the inference that prima facie they were legitimate and enforceable commercial contracts. He went on to hold that "the mere fact that there is a provision for the payment of differences does not mean that the contract must be a wagering contract".
31. He held that:

"In the context of interest rate swap contracts entered into by parties or institutions involved in the capital market and the

making or receiving of loans, the normal inference will be that the contracts are not gaming or wagering but are commercial or financial transactions to which the law will, in the absence of some other consideration, give full recognition and effect.

I now turn to the evidence regarding the purpose and interest of the respective parties to the relevant transaction to see whether the normal inference is to be rebutted. It will only be if the purpose and interest of both parties to the transaction was to wager that the consequence of legal invalidity and enforceability will follow. If either party was not wagering, the contract is not a wagering contract."

32. Mr Roberts submits that this authority is a misapplication of City Index. In order to address this argument, it is necessary to record the regulatory provisions in force at the time.

The Financial Services Act 1986

33. Section 63 of the Financial Services Act 1986 is headed "Gaming contracts" and provides:

"(1) No contract to which this section applies shall be void

or unenforceable by reason of-

(a) section 18 of the Gaming Act 1845, section 1 of the

Gaming Act 1892 or any corresponding provisions in

force in Northern Ireland;

or

(b) any rule of the law of Scotland whereby a contract by

way of gaming or wagering is not legally enforceable.

(2) This section applies to any contract entered into by either

or each party by way of business and the making or

performance of which by either party constitutes an activity

which falls within paragraph 12 of Schedule 1 to this Act or

would do so apart from Parts III and IV of that Schedule."

34. Schedule I, paragraph 12 to the Act provides "Buying, selling, subscribing for or underwriting investments or agreeing to do so either as principal or as an agent". By section 1 "investment" is defined as meaning any asset right or interest falling within any paragraph in Part 1 of Schedule 1 to the Act.
35. Paragraph 8 of Part 1 of Schedule 1 to the Act provides:

Futures

"8. Rights under a contract for the sale of a commodity or property of any other description under which delivery is to be made at a future date and at a price agreed upon when the contract is made.

Notes (1) This paragraph does not apply if the contract is made for commercial and not investment purposes."

36. Paragraph 9 of Part 1 of Schedule 1 to the Act provides:

"Contracts for differences etc.

9. Rights under a contract for differences or under any other contract the purpose or pretended purpose of which is to secure a profit or avoid a loss by reference to fluctuations in the value or price of property of any description or in an index or other factor designated for that purpose in the contract.

Note. This paragraph does not apply where the parties intend that the profit is to be obtained or the loss avoided by taking delivery of any property to which the contract relates."

37. It is apparent that the exception in paragraph 8 of Schedule 1 - that the paragraph does not apply if the contract is made "for commercial purposes" - is not applicable to contracts for differences under paragraph 9. That does not, however, appear to me to cast any light on whether at common law a contract for differences is always a wagering contact. It simply provides that futures contracts under which there is a genuine intention to deliver, if made for a commercial purpose do not, and if made for an investment purpose do, fall within the regulatory provisions of the 1986 Act as do contracts for differences.

City Index

38. In City Index v Leslie the plaintiffs who were licensed bookmakers carried on a business in which their clients entered into a series of spread bets with them on the movement of certain share price indices and commodity prices. Mr Leslie, a 21-year-old man, ran up an indebtedness of £ 43,080 and the question was whether in relation to the transactions into which he had entered the provisions of the Gaming Acts had been disapplied by section 63. The fact that the transactions were wagering transactions was admitted; it was, not, therefore, a case which considered the meaning of a wager at common law.
39. Lord Donaldson held that, whilst Mr Leslie was a speculator, City Index was contracting by way of business. He held that the contracts were not contracts for differences [108H] because that expression related to contracts for the sale and purchase of shares or commodities to be fulfilled by the payment of differences in price and not delivery. The bets in question were on the Dow Jones index and the price of Treasury Bonds. But the contracts concerned rights under "any other contract" in the alternative part of paragraph 9. McCowan LJ's decision was to similar effect. So, City Index had a valid claim.
40. Leggatt LJ was satisfied that the contracts were contracts for differences or, if not, that they were "any other contract" in the alternative part of paragraph 9. Having quoted Paragraph 9 of Part 1 of Schedule 1 he said:

"Although before the 1986 Act came into force, contracts for differences were void, other contracts which are superficially similar were not. These were contracts entered into for a commercial purpose, such as hedging. Such contracts may result in no more than the payment of a difference. But because they were made for a commercial purpose, they are not void as wagering contracts. That in practice is determined by whether the parties intended that any stock or commodity or other property should be delivered, by reference to which the contract was made. So in paragraph 9 of Schedule 1 the note declares:

"This paragraph does not apply where the parties intend that the profit to be obtained or the loss avoided by taking delivery of any property to which the contract relates."

From this it follows that (a) delivery of property is made the test for distinguishing between a commercial contract and a contract for differences, (b) the intention of both parties is made relevant, and (c) the obtaining of profit is equated with securing it. The references in the note to "the profit" and "the contract" suggest that it is intended to apply to every contract which is the subject of paragraph 9."

A little later he referred to three categories of contracts:

"those which are rendered null and void by the Gaming Act 1845, those which are regulated by the [FSA] Act, and those which are outwith both Acts by reason of their commercial purpose".

41. Mr Roberts submits that Hobhouse J misunderstood or misapplied what Leggatt LJ was saying as is apparent from his omission of the sentences immediately following the portion of the above passage which he quoted: see [29] above. He submits that, taken as a whole, what Leggatt LJ was saying was that before the 1986 Act contracts for differences were void as wagers but hedging contracts under which the parties intended that property should be delivered were not because, having regard to the intention to deliver, they had a commercial purpose. If, however, delivery was not intended they were void. His reference to those contracts which were outwith both Acts because of their commercial purpose was limited to those contracts falling within paragraph 8 of Schedule 1.
42. I do not regard Hobhouse J's decision as invalidated by a misunderstanding of the decision of Leggatt LJ. The basic principle is that a contract entered into for a genuine commercial purpose, and which is not a disguise for something else, is not to be treated as a wager. Leggatt LJ said (obiter) that in practice that was determined by whether the parties intended that any stock or another commodity should be delivered. A contract in which fixed and floating sums are swapped can, depending on the circumstances, perfectly properly be regarded as a contract made for the commercial purpose of hedging the risk inherent in having a loan with a floating interest rate of losing out, if rates increase. In such a contract the party in the position of WW has an interest in the contract other than the supposed bet itself i.e. to protect its position from an unfavourable change in interest rates. Hobhouse J's decision was not based on any construction of the paragraphs of Schedule 1 to the 1963 Act nor derived from the fact that paragraph 8 of that schedule refers to commercial purposes. It was based on a wider consideration of what does or does not amount to a wagering contract namely whether at least one party has a commercial purpose. He cited the portion of Leggatt LJ's judgment that related to the wider principle. He applied that principle to the context of interest rate swaps where "delivery" no longer served as the sole means of deciding whether a contract was a wager.
43. Mr Roberts submits that Hobhouse J's decision cannot stand in the light of what was said by Lord Goff in an introductory paragraph in Westdeutsche Landesbank Girozentrale v Islington [1996] AC 669 where he said:

"Interest rate swaps can fulfil many purposes, ranging from pure speculation to more useful purposes such as the hedging of liabilities. They are in law wagers but they are not void as such because they are excluded from the regime of the Gaming Acts by s 63 of the Financial Services Act 1986."

44. Whether or not swaps were wagers was not in issue in Westdeutsche. Morgan Grenfell was not cited. It cannot be said that Lord Goff impliedly overruled City Index; nor can I regard his opening words, written in a different context, as intended to cast doubt on the validity of the decision of Hobhouse J.
45. In short I see no reason to regard the judgment of Hobhouse J in Morgan Grenfell as flawed. On the contrary it seems to me consistent with principle and prior authority. Not surprisingly it has stood the test of time. In the light of the principles established in it I can see no realistic prospect of persuading the court that the Collars and the Swap were wagers.
46. That is sufficient to rule out the Wager Claim. I shall, however, consider whether, if the instruments were wagers WW would be entitled to any relief. I begin by doing so on the assumption that the relevant law is the common law prior to the Gaming Act 1845 without regard to the current provisions for financial regulation under the Financial Services Act 2006 and the Gambling Act 2005.

What if the contracts were wagers?

47. At common law gaming or wagering contracts were not per se illegal. But section 18 of the Gaming Act 1845 provided:

"That all Contracts or Agreements, whether by Parole or in Writing, by way of gaming or wagering, shall be null and void; and that no Suit shall be brought or maintained in any Court of Law or Equity for recovering any Sum of Money or valuable Thing alleged to be won upon any Wager"

48. Section 63 of the Financial Services Act 1986 had disapplied the 1845 Act to anything which counted as an investment within Schedule 1: See [33] above. The Gambling Act 2005 repealed the 1845 Act.
49. The effect of this repeal of the 1845 Act is, Mr Roberts submits, to restore the common law. The common law, as he submits, did not countenance all forms of gaming. He relies on a decision of Lord Mansfield in Jones v Randall (1774) 1 Cowp 37. In that case a bet was made on whether a decree of the Court of Chancery would be reversed on appeal to the House of Lords. If it was reversed the defendant, who was the appellant, and who had been ordered to pay the plaintiff 50 guineas, was to pay the plaintiff 50 guineas and if it was affirmed he was to receive 50 guineas. The decree was reversed and the plaintiff obtained a verdict for the amount of the bet.
50. Lord Mansfield held that the wager was enforceable, rejecting the contention that it was contra bonos mores in these words:

"This contract is equal between the parties; they have each of them equal knowledge, or equal ignorance …… it is a future event equally uncertain to the parties, whether the House of Lords would be of the same or of a different opinion with the Chancellor the presumption, if any, rather against the person betting in opposition to the Chancellor's judgment.

And saying

"...the second question is, whether this contract is against sound policy? And supposing it clear of all the circumstances before-mentioned, such as its being upon equal terms, without fraud…. I see no objection to it in sound policy".

51. Mr Roberts submits that it is apparent from this judgment that for a wagering contract to be valid the parties must have equal knowledge or equal ignorance of the likelihood of the relevant event occurring.
52. I cannot regard Lord Mansfield as having laid down any such rule, to which no reference appears to have been made in the 242 years since the decision. No doubt the outcome of the future event must be uncertain and unknown to the parties. But that does not mean that the expectations of the parties as to the outcome or the extent of their information as to the likelihood of it occurring must be the same. Here, whatever the expectations of the parties, the outcome of future interest rates, and, in particular, 1 month sterling LIBOR, was uncertain and the chance of there being set at any particular level was the same for each party, neither of whom knew what would happen. The fact that the contracts had a positive MTM on day 1 represented the expectations of the market, or of those whose calculations produced this value, as to what would happen to interest rates.
53. Many bets are made when the expectations of each side (and their state of knowledge) are different. The owner of a thoroughbred who bets on his horse because he thinks him to be a sure fire winner may well have much greater knowledge about the horse than the bookmaker. The bookmaker who knows how the course of bidding has gone prior to the race may know much more about people's expectations than the punter who bets at the last minute. The position would be different if either party to the bet somehow influenced the course of the event so that he alters in his favour the chance of the event on which he bet occurring.
54. There is nothing contra bonos mores in two persons betting in circumstances where their expectations of what will happen in the future differ, whether or not they have the same knowledge or ignorance of matters which would assist in forecasting the outcome of the event in question. There is no need to imply a term to that effect (as opposed to a term that neither party will cheat) on any of the bases set out in Marks and Spencer Plc v BNP Paribas [2015] UKSC 72. The suggestion that there should be such a term might well be greeted by at least one of the parties with some amusement.
55. Much reliance was placed before us on the case of Ivey v Genting Casinos Ltd, now upheld in this court at [2016] EWCA Civ 1093 (4 November 2016) where Mitting J held that a man who won £ 7.7 million at Punto Banco had cheated. The reason why he had done so was that he had used a method of play known as "edge sorting" by which he got an innocent croupier to rotate the cards so that those of high value could be distinguished before the first card for any coup was taken out of the shoe and, therefore, before the bets were placed. In effect he altered the chances of the events on which he bet (which were that the cards of the side on which he bet would add up to a total nearer to 9 than those of the side on which he did not bet) being successful because he knew whose cards – player's or banker's - had 7, 8s or 9s. As Arden LJ put it:

"86. The crucial factor in this case is that Punto Banco is a game of pure chance (see, on this Jenks v Turpin (1884) 13 QBD 505, which deals with Baccarat played by several players). What Mr Ivey caused Crockfords' staff to do was to take steps which would alter the chance of his winning materially by some 8% in his favour. In my judgment, because of his plan to play using the knowledge obtained from the reorienting of the cards under his direction, those matters amounted to interference with the process by which the game was conventionally played. It was quite different from card-counting which involves memorising where particular cards are".

56. I recognize that in Ivey v Genting Arden LJ contemplated that a person might be guilty of cheating if he had material information (for example as to whether a star player would play in a particular game) which was not in the public domain and placed a bet on the result of the game on the basis of that information, the possible cheating arising because he had used access to confidential information to make the profit. It is not clear to me whether what Arden LJ contemplated was the use of information which would itself be a breach of confidence on the part of the punter (a circumstance which would not apply to the owner of the thoroughbred in my example). I do not regard this example as supporting the contention that there is an implied term of equal knowledge/ignorance of the likelihood of the relevant event occurring, which would, presumably, be broken even if, in the example, the fact that the star player would be in the team was no secret but was in fact not known to the better.
57. There was no obligation on NatWest to declare what value they attributed to the contracts or what their expectations were as to interest rates in the future. These were not contracts uberrimae fidei nor was NatWest a fiduciary: see Judge Behrens in Nextia at [76]; Bankers Trust v Dharmala [1996] CLC 518; Intesa Sanpaolo v Regione Piemonte [2013] EWHC 1994 [55].
58. Mr Roberts further submitted that if a bank enters into a swap with a customer without saying that it is charging him a premium (the contracts in this case referred to a premium of "0") and without telling him that the contract has a mark to market value of more than zero, the bank acts unlawfully and is liable to make reparation of at least the MTM value. When asked by my Lord what was the basis for such a submission he accepted the suggestion that it must be either (i) some implied representation; (ii) an implied term; or (iii) some duty of disclosure.
59. In my view there is no realistic basis for saying that there is an implied representation that the MTM value of the contract is zero; nor an implied term to that effect. It would also be odd if those in the swap market were not able to contract (save with express disclosure) if the contract had an MTM value in excess of zero on its date. Banks may seek to set terms whose practical effect is that there is a positive MTM either to take account of the credit risk, or simply to make a profit, or because another bank which they intend to have as a counterparty itself requires a positive MTM. Lastly I do not regard it as realistic to say that the fact that the premium was said to be zero means that the MTM value was also zero. There was no premium to be paid.
60. Accordingly if the Swap was a wager that does not provide WW with a claim.

The Gambling Act 1845

61. All that I have said so far assumes that with the repeal of the Gambling Act 1845 the common law prior to that repeal is applicable. In refusing permission to appeal in Nextia Vos LJ expressed himself satisfied that, following the Gambling Act 2005, it was not.

The Gambling Act 2005

62. The Act includes the following provisions:

3 Gambling

In this Act "gambling" means–

(a) gaming (within the meaning of section 6),

(b) betting (within the meaning of section 9), and

(c) participating in a lottery (within the meaning of section 14 and subject to section 15)

Betting

9 Betting: general

(1) In this Act "betting" means making or accepting a bet on–

(a) the outcome of a race, competition or other event or process,

(b) the likelihood of anything occurring or not occurring, or

(c) whether anything is or is not true.

….

10 Spread bets, &c.

For the purposes of section 9(1) "bet" does not include a bet the making or accepting of which is a regulated activity within the meaning of section 22 of the Financial Services and Markets Act 2000 (c. 8).

.....

335 Enforceability of gambling contracts

(1) The fact that a contract relates to gambling shall not prevent its enforcement.

(2) Subsection (1) is without prejudice to any rule of law preventing the enforcement of a contract on the grounds of unlawfulness (other than a rule relating specifically to gambling).

63. Section 22 of FSMA 2000 provides as follows:

"The classes of activity and categories of investment

(1) An activity is a regulated activity for the purposes of this Act if it is an activity of a specified kind which is carried on by way of business and–

(a) relates to an investment of a specified kind; or

(b) in the case of an activity of a kind which is also specified for the purposes of this paragraph, is carried on in relation to property of any kind.

…..

(4) "Investment" includes any asset, right or interest.

(5) "Specified" means specified in an order made by the Treasury"

64. The relevant order is the Financial Services and Markets Act 2000 (Regulated Activities) Order 2000 which provides:

"Art 14. Dealing in investments as principal

(1) Buying, selling, subscribing for the underwriting securities or contractually based investments (other than investments of the kind specified by article 87, or article 89 so far as relevant to that article) as principal is a specified kind of activity.

Art 3. Interpretation

  "contractually based investment" means—

(a) rights under a qualifying contract of insurance;

(b) any investment of the kind specified by any of articles 83, 84, 85 and 87; or

(c) […]

Art 85.— Contracts for differences etc.

(1) Subject to paragraph (2), rights under—

(a) a contract for differences; or

(b) any other contract the purpose or pretended purpose of

which is to secure a profit or avoid a loss by reference to fluctuations in—

              (i) the value or price of property of any description; or

 (ii) an index or other factor designated for that purpose in the contract.

(2) There are excluded from paragraph (1) —

(a) rights under a contract if the parties intend that the profit is to be secured or the loss is to be avoided by one or more parties taking delivery of any property to which the contract relates;"

65. By virtue of these provisions the Collars and the Swap fall within Article 85 of the Order. By virtue of section 10 of the Gambling Act 2005 Act they do not fall within section 9 of that Act.
66. Vos LJ was satisfied that the old law of wagering had not survived the provisions of the FSA 1986, the FSMA 2000 and the Gambling Act 2005. These provisions, he held, had established an entirely new and separate regime for the regulation of financial contracts. It was perfectly clear to him from a perusal of the entirety of the Gambling Act 2005 that the legislature intended to replace the entire common law regime. He did not see how it could be clearly stated in section 10 of the Act that a contract of the kind in question was not betting and in section 35 that the fact that a contract related to gambling should not prevent its enforcement if the common law incidences of wagering were intended by the legislature still to apply. When considering the application to re-open he said that what he meant was that the common law related to wagering did not apply, because of the statutes, to contracts such as the present.
67. It seems to me that, in the light of the comprehensive regime established under the Gambling Act and the FSMA 2000 there is now no room for any common law rule (if there ever was one) that wagering contracts in which there is unequal knowledge are invalid. A contract such as the Swap contracts in the present case (even if it is a wagering contract) does not fall within the Gambling Act: section 10. But it does fall within FSMA 2000 and the Regulations made thereunder. If it was gambling within the Gambling Act that would not prevent its enforcement: section 335; and section 335 (2) would not preserve any rule of law relating specifically to gambling which prevented the enforcement of the contract on the ground of unlawfulness. The supposed rule falls into that category. In those circumstances it does not seem to me realistic to say that a contract which is not gambling under the Gambling Act 2005 may be regarded as void or unenforceable as contra bonos mores or public policy under a common law rule which was applicable to what was gambling before 1845 but which is not applicable to gambling under the Act. In effect the legislation has produced two forms of regulation of wagers – either under the Gambling Act 2005 or under the FSMA 2000 Regulations. There is no room for some common law regulation.
68. Any doubt that I might have had on that score is removed by the provisions of the Interpretation Act 1978, section 16 which provides:

"(1) Without prejudice to section 15, where an Act repeals

an enactment, the repeal does not, unless the contrary

intention appears,—

(a) revive anything not in force or existing at the time at

which the repeal takes effect;"

When the repeal of the Gambling Act 1845 took effect there was no rule in force that wagers where the parties had unequal knowledge were void or unenforceable (even if there had been one in 1844) because at that stage all wagers were null and void and unenforceable. The repeal did not revive the rule. This conclusion does not conflict with the presumption that statute should not, without clear words, be construed so as to make alterations to the common law: A-G v Brotherton [1992] 1 AER 230,249; Black-Clawson International Ltd v Papierwerke Waldhof-Aschffenburg AG [1975] AC 591,614. The 1845 Act clearly altered the common law and, by force of Statute, its repeal did not revive it.

The Libor claim

69. This claim relates to the LIBOR Swap. It is said to have been an implied term of the Swap that NatWest had not previously and would not in future seek to manipulate any LIBOR index in any currency alternatively any GBP Libor index. Alternatively, it is said to have been an implied representation that NatWest would not manipulate any LIBOR index. It is then pleaded that NatWest had prior to the conclusion of the Swap contract manipulated LIBOR indices and continued to do so for its own advantage after that contract had been concluded: para15. The claim made is for rescission of "the agreement" and for damages as particularised under paragraph 18, which appear to consist of (a) WW's entire net payments under the LIBOR Swap, it being said that WW had to pay higher fixings than would otherwise have been the case [para 18.1] and (b) losses arising from the burden on WW's credit line arising from substantial contingent liabilities in respect of the hedging contracts because of a mismatch between the termination provisions for the hedging products and the underlying financial obligations, leading to an inability to maintain stable financing, leading to repeated restructuring which caused WW to incur fees and lose value in its business.
70. The judge regarded the allegation pleaded as "repetitive, vague, couched in highly generalised terms and …unclear, opaque or difficult to comprehend to say the least". It was unclear to him whether what was being alleged was a representation as to past fact or present intention and the allegations were hopelessly wide, the only relevant LIBOR being one-month GBP LIBOR. The allegation was of manipulation of "LIBOR indices", which were undefined. It was not clear what was the reason why rescission was claimed; no reliance was alleged; and the summary of the claim did not include rescission. He accepted the submission that the case was incoherent.
71. I would regard it as arguable that it was an implied term of the swap that NatWest would not manipulate the GBP Libor rates used to calculate obligations under it i.e. one month GBP Libor; but not that it would not do so in relation to some rate that had nothing to do with the obligations under the Swap or that it had not done so in the past in relation to any LIBOR rates. I also regard as arguable in the light of Graiseley Properties Limited v Barclays Bank PLC [2013] EWCA Civ 1372 Deutsche Bank v Unitech that there was an implied representation that NatWest had not in the past and did not intend in the future to manipulate any LIBOR rates.
72. The pleading is, however, obscure. As to any implied term, although there is an allegation that in breach of the implied term NatWest had manipulated LIBOR indices prior to the conclusion of the LIBOR Swap and continued to do so after the Swap was concluded there is, in fact, as Mr Roberts accepted, no allegation that NatWest manipulated the relevant (or any) GBP Libor rates at the time when the Swap was operative or that it had done so in the past. The pleading refers to the fact that RBS, said to be Natwest's agent, had been fined by the FSA for manipulating Yen, Swiss franc and Dollar LIBOR indices. Nor is it apparent how WW could be entitled to recover as damages for breach of an implied term the entire net payment made to NatWest under the Swap, let alone the consequential loss.
73. Paragraph 19.1 appears to claim rescission for breach of the implied term although such rescission is not referred to in the summary of claims. Rescission is not, however, a remedy for breach of contract.
74. As to the claim in misrepresentation there is no allegation that at the time of the Swap contract NatWest had any intention to manipulate any rates, although there is a claim that NatWest had been manipulating and continued to manipulate LIBOR indices, which might be taken to imply such an intention. Nor is there any pleading of reliance on any such misrepresentation, as opposed to a plea that if WW had been aware of NatWest's breaches of duty i.e. its breach of the implied terms it would not have suffered the losses relied on. Since the only viable implied term is that NatWest would not manipulate the relevant GBP Libor rates and there is no allegation of breach of that term the allegation goes nowhere.
75. Any claim to rescission would depend on misrepresentation. It seems to me plain, as it did to the judge, that WW has affirmed the contract by (i) making payments under the Swap until January 2013; (ii) participating in the IRHPR and pursuing the IRHPR claim in these proceedings; and (iii) by claiming in these proceedings for repayment of all net outward cash flows under the LIBOR Swap and consequential damages to be assessed.
76. In short, in my judgment, the judge was right to find that the LIBOR Claim as pleaded had no real prospect of success.

The IRHPR claim

77. WW sought by amendment to introduce a claim, in paragraph 13.1, that NatWest assumed a duty of care towards WW to carry out the Review diligently, and to take proper account of all the evidence affecting WW's entitlement to redress as provided for by the terms of the Review, taking account of NatWest's compliance with the Sales Standards i.e. what it should do when it sold a hedging product. A number of specific breaches are pleaded at paragraph 16. These asserted a failure on the part of NatWest to consider adequately or at all evidence as to its own breaches of its Sale Standards. The losses alleged to follow are set out in para 18 and include all payments under the Swap plus substantial consequential losses.
78. There is in my view a reasonable prospect of establishing that NatWest owed WW a duty of care of the type relied on and this court has recently given permission to appeal against the contrary decision of Judge Bird in CGL Group Ltd v Royal Bank of Scotland [2016] EWHC 281.
79. The judge records that in argument before him Mr Roberts advanced a wholly different case from that sought to be made by amendment, namely a case based on material on the FCA website suggesting that NatWest had not complied with the requirements of the scheme in assessing the redress (which was awarded in respect of the Collars) nor had any explanation been given as to how the figures were worked out.
80. The judge recorded that, when Mr Andrew Mitchell QC objected to this new approach, Mr Roberts accepted that his draft would need further thought and amendment on this point. He refused a yet further attempt by Mr Roberts to put his house in order. He recorded that "this aspect of the case" (by which I take the judge to have meant the case relating to the carrying out of the assessment of loss under the Review) was wholly incomprehensible as pleaded, and had nothing to do with a so-called breach of duty in carrying out the IRHPR. He regarded the amendment as currently pleaded as having no real prospect of success. The amendment did not seem to be the case that Mr Roberts wished to advance and was almost impossible to plead to. Accordingly he refused re permission to amend.
81. The way in which the argument developed in the court below seems to me to have become a source of confusion. I am quite satisfied that the judge was entitled to hold that there was no properly pleaded case in respect of the Collars. There is, in the proposed amended pleading, a general averment in paragraph 3.6  that a failure to provide redress for consequential losses is the direct result of WW's breach of duty  to determine appropriate redress on the basis of what is fair and reasonable in the circumstances. The breach alleged is wholly unparticularised. Further, no relevant averments in this respect are contained in the specific paragraphs dealing with breach and loss (paragraphs 16 and 20). Moreover paragraph 17.2 pleads that the Defendant has not yet completed its review of losses consequent upon the Collars.
82. But there is a pleading of a failure to carry out the review properly in respect of the Swap (where no redress was awarded). That may be found in paragraphs 13.1 (Duty of care in relation to the IRHP Review); 16.1 (Breach of duty in failing to consider evidence as to its own breaches of the Sales Standards and in particular the failure to give information to WW when the products were sold); and 20.1 (Loss and damage arising from negligent performance of duties under the Review in relation to the assessment of redress in respect of the LIBOR Swap). I do not agree that those matters pleaded can have nothing to do with the IRHP Review. That Review extended to considering what redress should be offered to non-sophisticated customers and included assessing the sales process' compliance with regulatory requirements.
83. In those circumstances, whilst I sympathise with the learned judge, I have found the pleadings in this respect not wholly incomprehensible. It seems to me that WW has a reasonable chance of persuading the full court that the judge wrongly refused to permit him to amend the Points of Claim insofar (and only insofar) as he declined permission to amend so as to include the following (amended) paragraphs: 13.1-6; 16.1-5; 17.2 ; 20.1 and 21.1 and 21.3 -5.
84. I would, accordingly, if my brother agrees, grant WW permission to appeal in respect of the judge's refusal to permit the amendments contained in those paragraphs as well as the amendments deleting the paragraphs on pages 23-26 of the amended pleading and the inconsequential amendments on pages 4-6. I would not grant permission to appeal in relation to the compromise issue because, as it seems to me, the judge was entitled to refuse the amendment sought. It is inappropriate for the Court of Appeal to determine whether a claim has been compromised in circumstances where the claimant has justifiably been refused permission to amend to put it forward. That may mean that if a properly formulated claim is put forward the issue of compromise will have to be revisited; but that is not a good reason for determining what, in the light of the justifiable refusal of permission to amend, is presently an academic question.
85. I am conscious that this judgment is unusually long for a permission application. The reasons for that are these. The application was adjourned to be heard by the two of us by Moore-Bick LJ because of the number of times in which the same point has been sought to be argued and in the hope that this judgment, although not formally binding, might give guidance which would be of assistance in relation to future attempts to raise the same points. We have received a great deal of material from Mr Roberts and have heard his oral submissions for longer than is usual in these cases. I would give permission for this judgment to be cited.
86. Consideration should be given to listing this appeal to be heard with CGL Group Ltd v Royal Bank of Scotland [2016] EWHC 281.

Lord Justice Briggs

87. I agree.
88. This court heard (and read) submissions on the wager issue of at least the length which would ordinarily have been permitted on the hearing of a full appeal, albeit only from one side. It is to be hoped that the reporting of this judgment dismissing those arguments as giving rise to no real prospect of success will finally lay to rest this ingenious but misguided heresy, so that no further time or money will be wasted on it.