UBS AG (London Branch) & Anor v Kommunale Wasserwerke Leipzig GmbH

UBS AG (London Branch) & Anor v Kommunale Wasserwerke Leipzig GmbH

UBS was not strictly liable for the bribe as principal, but its dishonest assistance in Value Partners' breach of fiduciary duty rendered its conscience affected, making it unconscionable for UBS to enforce the STCDOs. KWL was entitled to rescind the STCDOs due to UBS's dishonest assistance and knowledge of Value Partners' conflict of interest. The knowledge of KWL's corrupt director was not attributable to KWL. Rescission was not unfair or disproportionate, and KWL was not barred by lack of clean hands. UBS's deceit claim failed for lack of causation. UBS GAM was liable for negligent management of the portfolios.

Parties
Appellant/claimant: UBS AG (London Branch); Appellant/claimant: UBS Global Asset Management (UK) Ltd; Respondent/defendant: Kommunale Wasserwerke Leipzig GmbH (KWL); Claimant/third Party: UBS Limited; Defendant/third Party: Depfa Bank plc; Defendant/third Party: Landesbank Baden-Württemberg (LBBW)
Jurisdiction
England and Wales
Judgment Date
16 October 2017
Procedural Posture
Civil Appeal (commercial/financial) / Court of Appeal Judgment
Outcome
UBS's appeal on agency (Issue 1) allowed; all other appeals and cross-appeals dismissed. KWL entitled to rescind the STCDOs, subject to restitution and conditions. UBS GAM liable for negligent management.
Legal Topics
Bribery and Corruption, Agency, Conflict of Interest, Rescission, Fraudulent Misrepresentation, Dishonest Assistance, Portfolio Management Negligence
Commercial Law Equity and Trusts Banking and Finance Bribery and Corruption Agency Conflict of Interest Rescission Fraudulent Misrepresentation +2 more

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Parties

UBS AG (London Branch)

Appellant/claimant

UBS Global Asset Management (UK) Ltd

Appellant/claimant

Kommunale Wasserwerke Leipzig GmbH (KWL)

Respondent/defendant

UBS Limited

Claimant/third Party

Depfa Bank plc

Defendant/third Party

Landesbank Baden-Württemberg (LBBW)

Defendant/third Party

Procedural Posture

Civil Appeal (commercial/financial) / Court of Appeal Judgment

Legal Issues

  1. 1 Whether Value Partners acted as agent for UBS in paying a bribe to KWL's director
  2. 2 Whether the STCDOs should be rendered unenforceable due to bribery/conflict of interest
  3. 3 Whether KWL was entitled to rescind the STCDOs

Ratio Decidendi

UBS was not strictly liable for the bribe as principal, but its dishonest assistance in Value Partners' breach of fiduciary duty rendered its conscience affected, making it unconscionable for UBS to enforce the STCDOs. KWL was entitled to rescind the STCDOs due to UBS's dishonest assistance and knowledge of Value Partners' conflict of interest. The knowledge of KWL's corrupt director was not attributable to KWL. Rescission was not unfair or disproportionate, and KWL was not barred by lack of clean hands. UBS's deceit claim failed for lack of causation. UBS GAM was liable for negligent management of the portfolios.

Court Disposition

UBS's appeal on agency (Issue 1) allowed; all other appeals and cross-appeals dismissed. KWL entitled to rescind the STCDOs, subject to restitution and conditions. UBS GAM liable for negligent management.

Orders

  • KWL entitled to rescind the Balaba STCDO and related swaps, subject to repayment of premiums siphoned by Value Partners and return of CDS sums.
  • UBS's deceit claim dismissed.