Davis v Lloyds Bank

In 2012, the bank reached an agreement with the FCA whereby it agreed to set up a process for reviewing the sale of certain interest rate hedging products. In accordance with the terms of that review process, the bank invited Mr Davis to participate and he accepted. However, Mr Davis was unhappy with the review outcome and the amount of redress offered.

Since Mr Davis was not party to the agreement between the FCA and the bank, he could not bring a claim under that agreement. Also, in Elite Properties v Barclays and CGL v RBS the Court of Appeal had held that banks did not owe to their customers a duty to comply with the review process, in contract or in common law.

Instead, Mr Davis framed his claim as a breach of statutory duty. In particular, he argued, first, that he had made a “complaint” (within the meaning of the DISP Chapter of the FCA’s Handbook) and, secondly, that the bank owed him a statutory duty to consider the “complaint” in accordance with the terms of the review as agreed between the bank and the FCA. In particular, Mr Davis relied on DISP 1.4.1R of the FCA’s Handbook (assessing complaints fairly, consistently and promptly) to argue that the bank was obliged to comply with the terms of the review process agreed with the FCA and that failure to comply was actionable as a breach of statutory duty.

At first instance, the Judge rejected both arguments and, as result, dismissed Mr Davis’ claim. Mr Davis appealed and on 16 April 2010, the Court of Appeal handed down a unanimous judgment dismissing the appeal.

The Court of Appeal held that the Judge was right to dismiss the claim because Mr Davis had not made a complaint (and thus did not need to address the Judge’s rejection of his second argument). Lewison LJ first explained that Mr Davis’ acceptance of an invitation to participate in the review and his subsequent conduct of the review could not, without more, be treated as a complaint for the purposes of DISP. In relation to the particular communications relied upon by Mr Davis, Lewison LJ emphasised the importance of seeing them in their proper context (a review invitation) and said that Mr Davis’ argument failed to give due regard to the meaning that they would have conveyed to a reasonable recipient.

The Judgment will be of some significance for banks and financial services providers in relation to attempts to by-pass conventional mis-selling claims (or FOS complaints) and use the DISP Rules to render actionable claims that might otherwise be out of time or out of scope.

Javan Herberg QC and Simon Pritchard acted for Lloyds Bank.

The full judgment can be found here.