Royal Bank of Scotland Plc v Highland Financial Partners Lp & Ors

Royal Bank of Scotland Plc v Highland Financial Partners Lp & Ors

RBS breached its contractual and equitable obligations by failing to disclose its intention to retain 36 loans, conducting a sham BWIC process, and not seeking mutual agreement with Highland. The BWIC was not a commercially reasonable method for determining market value. The proper market value for the 36 loans is to be calculated at one point over the RBS 15 October 2008 mark, and for the remaining 52 loans, as the average of the RBS 15 October mark (less WAD) and the Highland 11 November mark. RBS must account to Highland on this basis.

Parties
Claimant: Royal Bank of Scotland PLC; First Defendant: Highland Financial Partners LP; Second Defendant: HFP CDO Construction Corp; Third Defendant: Highland CDO Opportunity Master Fund LP
Jurisdiction
England and Wales
Judgment Date
07 December 2010
Procedural Posture
Commercial / Quantum Assessment Following Summary Judgment on Liability
Outcome
Quantum to be recalculated; RBS to account to Highland on revised market value basis
Legal Topics
Mortgagee's Duties, Collateralised Debt Obligations (cdos), Breach of Equitable Obligations, Market Value Determination, Summary Judgment, Liquidation of Loan Portfolios
Banking and Finance Law Contract Law Equity Mortgagee's Duties Collateralised Debt Obligations (cdos) Breach of Equitable Obligations Market Value Determination Summary Judgment +1 more

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Parties

Royal Bank of Scotland PLC

Claimant

Highland Financial Partners LP

First Defendant

HFP CDO Construction Corp

Second Defendant

Highland CDO Opportunity Master Fund LP

Third Defendant

Procedural Posture

Commercial / Quantum Assessment Following Summary Judgment on Liability

Legal Issues

  1. 1 Whether RBS complied with its contractual and equitable duties as mortgagee in the liquidation of the Highland loan portfolio
  2. 2 Whether the BWIC process used by RBS was commercially reasonable and in good faith
  3. 3 How market value for the loans should be determined for the purpose of accounting to Highland

Ratio Decidendi

RBS breached its contractual and equitable obligations by failing to disclose its intention to retain 36 loans, conducting a sham BWIC process, and not seeking mutual agreement with Highland. The BWIC was not a commercially reasonable method for determining market value. The proper market value for the 36 loans is to be calculated at one point over the RBS 15 October 2008 mark, and for the remaining 52 loans, as the average of the RBS 15 October mark (less WAD) and the Highland 11 November mark. RBS must account to Highland on this basis.

Court Disposition

Quantum to be recalculated; RBS to account to Highland on revised market value basis

Orders

  • The parties are to recalculate the sums due by applying the court's directions for valuing the 36 and 52 loans.
  • All other figures being agreed, the final sum due is to be determined accordingly.