The Royal Bank of Scotland Plc v Highland Financial Partners LP & Ors [2012] EWHC 1278 (Comm) (25 May 2012)

The Royal Bank of Scotland Plc v Highland Financial Partners LP & Ors [2012] EWHC 1278 (Comm) (25 May 2012)

RBS breached its contractual and equitable duties by conducting a sham BWIC process, failing to disclose its pre-determined intention to retain 36 loans, and misleading both Highland and the market. This conduct was not commercially reasonable and constituted a breach of good faith. However, the court found that, even if the process had been properly disclosed, the outcome regarding the purchase of the 36 loans would have been substantially the same, and the quantum judgment should stand with adjustments to the valuation methodology. The anti-suit injunction was granted to restrain the Texas proceedings as they sought to re-litigate matters already determined by the English court.

Citation
[2012] EWHC 1278 (Comm)
Parties
Claimant: The Royal Bank of Scotland PLC; Defendant: Highland Financial Partners LP; Defendant: HFP CDO Construction Corp; Defendant: Highland CDO Opportunity Master Fund LP; Defendant: Highland Capital Management Europe Ltd; Defendant: Scott Law LLC; Defendant: Highlander Euro CDO V B. V.
Jurisdiction
England and Wales
Judgment Date
25 May 2012
Procedural Posture
Commercial Court Claim (summary Judgment and Quantum Assessment) / Post Judgment Applications to Set Aside Liability and Quantum Judgments; Anti Suit Injunction Hearing
Outcome
Application to set aside liability and quantum judgments dismissed; anti-suit injunction granted.
Legal Topics
Collateralised Debt Obligations (cdos), Summary Judgment, Breach of Contract, Mortgagee's Duties, Equitable Obligations, Anti Suit Injunctions, Disclosure and Good Faith, Remedies for Breach
Banking and Finance Contract Law Equity Civil Procedure Collateralised Debt Obligations (cdos) Summary Judgment Breach of Contract Mortgagee's Duties +4 more

Case Brief

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Parties

The Royal Bank of Scotland PLC

Claimant

Highland Financial Partners LP

Defendant

HFP CDO Construction Corp

Defendant

Highland CDO Opportunity Master Fund LP

Defendant

Highland Capital Management Europe Ltd

Defendant

Scott Law LLC

Defendant

Highlander Euro CDO V B. V.

Defendant

Procedural Posture

Commercial Court Claim (summary Judgment and Quantum Assessment) / Post Judgment Applications to Set Aside Liability and Quantum Judgments; Anti Suit Injunction Hearing

Legal Issues

  1. 1 Whether RBS breached contractual and equitable duties in the liquidation of CDO collateral loans
  2. 2 Whether the BWIC process was commercially reasonable and transparent
  3. 3 Whether RBS's conduct constituted unclean hands or strong reasons to set aside previous judgments

Ratio Decidendi

RBS breached its contractual and equitable duties by conducting a sham BWIC process, failing to disclose its pre-determined intention to retain 36 loans, and misleading both Highland and the market. This conduct was not commercially reasonable and constituted a breach of good faith. However, the court found that, even if the process had been properly disclosed, the outcome regarding the purchase of the 36 loans would have been substantially the same, and the quantum judgment should stand with adjustments to the valuation methodology. The anti-suit injunction was granted to restrain the Texas proceedings as they sought to re-litigate matters already determined by the English court.

Court Disposition

Application to set aside liability and quantum judgments dismissed; anti-suit injunction granted.

Orders

  • The liability and quantum judgments in favour of RBS stand, subject to adjustments as per the court's valuation findings.
  • An anti-suit injunction is granted restraining the defendants and Scott Law from pursuing the Texas proceedings in respect of claims determined by the English court.