Dexia Crediop SPA v Comune Di Prato, Court of Appeal - Commercial Court, November 10, 2016, [2016] EWHC 2824 (Comm)

Resolution Date:November 10, 2016
Issuing Organization:Commercial Court
Actores:Dexia Crediop SPA v Comune Di Prato

Case No: CL-2010-000481

Neutral Citation Number: [2016] EWHC 2824 (Comm)




Rolls Building

Fetter Lane

London EC4A 1NL

Date: 10/11/2016

Before :

Mr Justice Walker

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Between :

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Richard Handyside QC & Rupert Allen (instructed by Allen & Overy) for the Claimant

Jonathan Davies Jones QC & Christopher Burdin (instructed by Seddons) for the Defendant

Hearing date, in addition to dates listed in the main claim judgment: 23 October 2015

Subsequent written submissions were received during the period

16 to 24 November 2015 and 18 to 21 July 2016.

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JudgmentThe Hon Mr Justice Walker:

[Table of Contents]

A. Introduction 3

B. Dexia's alternative claims 5

B1. Dexia's alternative claims: introduction 5

B2. Restitution claim: proper law 5

B2.1 Restitution claim - proper law: introduction 5

B2.2 Restitution claim: the Italian law objection 6

B2.3 Validity of the reasoning in the Italian law objection 13

B3. Restitution claim: time bar 14

B3.1 Restitution claim - time bar: introduction 14

B3.2 Restitution claim - time bar: accrual of the cause of action 15

B3.3 Restitution claim - time bar: relief from mistake 16

B4. Restitution claim: change of position 19

B4.1 Restitution claim - change of position: introduction 19

B4.2 Restitution claim - change of position: analysis 20

C. Other financial services & civil law defences 23

C1. Italian financial services & civil law: introduction 23

C2. Did art 32 TUF apply, engaging art 30.6 and 30.7? 25

C3. Article 23.1 TUF & article 30 CR 27

C4. CC provisions dealing with ``causa'' and ``oggetto'' 32

C5. ``Causa'': did the swaps meet Italian law requirements? 33

C5.1 ``Causa'': introduction 33

C5.2 ``Causa'': breaches of Italian law 34

C5.3 ``Causa'': non-disclosure of MTM 35

C5.4 ``Causa'': speculative contracts 41

C5.5 ``Causa'': conclusions 42

C6. ``Oggetto'': did the swaps meet Italian law requirements? 42

C7. ``Causa'' & ``oggetto'': Article 3 non-derogable rules? 43

D. Prato's remaining defences 43

E. Prato's restitution counterclaim 44

E1. Prato's restitution counterclaim: introduction 44

E2. Restitution counterclaim: proper law 44

E3. Restitution counterclaim: change of position 48

F. Regulatory counterclaim 48

F1. Regulatory counterclaim: introduction 48

F1.1 The regulatory assertions 48

F1.2 Structure of this section & overlap with section G 49

F1.3 Regulatory counterclaim: legislative provisions 49

F1.4 Regulatory counterclaim: common ground 53

F1.5 Prato's Hidden Costs explanation 55

F1.6 Significance of initial MTM: Prato's propositions 57

F1.7 Other aspects of MTM urged by the parties 67

F2. Regulatory counterclaim: non-disclosure assertions 70

F2.1 Non-disclosure: introduction 70

F2.2 Non-disclosure: significance of 2009 changes 71

F2.3 Non-disclosure - art 28.2 CR: agreed propositions of law 73

F2.4 Non-disclosure - art 28.2 CR: Prato's cases 75

F2.5 Non-disclosure - art 28.2 CR: Dexia's cases 85

F2.6 Non-disclosure - art 28.2 CR: analysis 90

F2.7 Non-disclosure: articles 32.5, 36 and 61.1 g) CR 92

F2.8 Non-disclosure assertions: conclusion 95

F3. Regulatory counterclaim: structuring assertions 95

F4. Regulatory counterclaim: unsuitability assertions 98

F5. Regulatory counterclaim: right to withdraw assertions 98

F6. Regulatory counterclaim: conflict assertions 98

F7. Regulatory counterclaim: causation and damages 102

G. Advisory & misrepresentation counterclaims 105

G1. Advisory counterclaim 105

G1.1 Advisory counterclaim: introduction 105

G1.2 Advisory counterclaim: what does it add? 107

G1.3 Advisory counterclaim: other matters 110

G2. The misrepresentation counterclaim & defence 110

H. Concluding matters 111

Annex 1: abbreviations and short forms 112

Annex 2A: Dr Faro's evidence 132

Annex 2B: what would Prato have done? 142

Annex 3: extracts from Annex 3, CR 149

A. Introduction

1. My judgment dated 25 June 2015 dealt with local government law defences and financial services law defences to the main claim in these proceedings. I shall refer to it as ``the main claim judgment'' or ``MCJ''. The present judgment is concerned with issues not dealt with in the main claim judgment. Where convenient, I shall refer to the present judgment as ``the judgment on remaining issues'' or ``JORI''.

2. In the present judgment I adopt the short forms used in the main claim judgment. There is one exception. In the main claim judgment I used ``Consob 11522/1998'' to refer to regulation 11522 made by Consob on 1 July 1998. In the present judgment I use a shorter abbreviation: ``CR''. For ease of reference, Annex 1 to the present judgment sets out abbreviations and short forms used in the main claim judgment, and those used in the present judgment, along with the corresponding long form and notes.

3. An overview of the case will be found in section A1 of the main claim judgment. As to the structure of that judgment:

(1) sections A2, A3 and A4 of the main claim judgment describe the written evidence relied on by the parties, the course of the trial, market concepts concerning types of interest rate swap, the use of the expression ``mark to market'' or ``MTM'', and the use of terms ``hidden'' or ``implicit'' costs;

(2) section B describes key features of the background and history, and section C describes some general aspects of Italian law along with English law's approach to Italian law;

(3) in section D defences asserting contravention of Italian local government law are examined, and reasons are given for concluding that none of the defences in this category succeeds;

(4) in section E certain aspects of defences asserting contravention of Italian financial services and civil law are examined, and reasons are given for concluding that one such defence, relying on article 30 TUF, succeeds;

(5) section F notes that Prato, for the reasons given in section E, has succeeded in defending the main claim; it adds that while it is unnecessary to consider other defences advanced by Prato, other defences will, to the extent appropriate, be considered in a further judgment;

(6) section G explained why my conclusion in section E gave rise to a need for further submissions in relation to Prato's counterclaim and Dexia's alternative claims;

(7) section H explained that I would hear oral submissions on the directions to be given in order to take the matter forward.

4. The directions contemplated in section H of the main claim judgment were given after hearing oral submissions on 25 June 2015. They resulted in written submissions in July 2015 and a hearing on 23 October 2015. There were further written submissions in November 2015 and July 2016.

5. The matters dealt with in the present judgment (and the outcome) are these. Section B below deals with Dexia's alternative claims. (I find that the alternative claim for restitution succeeds.) Turning to Prato's other defences, section C discusses those which rely on Italian financial services law (which succeed) and Italian concepts of causa and oggetto (which do not succeed). Section D makes some observations on Prato's other defences. Turning to Prato's counterclaims, section E deals with the restitution counterclaim (which succeeds). Section F deals with the regulatory counterclaim. (I find that allegations of breach are, save in one instance, not established. The one instance concerns an established breach of article 30.6 TUF, but I conclude that this breach caused Prato no loss. Accordingly no damages are awarded to Prato.) The advisory counterclaim and the misrepresentation counterclaim are discussed in section G. (Neither of those counterclaims succeeds.) Section H deals with concluding matters, including the set-off defence. (The set-off defence succeeds: it appears likely that the amount payable by Dexia to Prato under the restitution counterclaim will be greater than the amount payable by Prato to Dexia under the restitution claim, and after set-off a net sum only will be payable by Dexia to Prato.)

B. Dexia's alternative claims

B1. Dexia's alternative claims: introduction

6. Two alternative claims were advanced by Dexia. The first alternative claim was briefly described in paragraph 14 of the main claim judgment. It was that, if swap 6 were invalid or unenforceable, then there should be declaration that Prato is bound by the terms of swaps 3, 4 and 5, because in such circumstances they would not have been terminated pursuant to swap 6. Dexia now recognises that the main claim judgment has the consequence that there is no scope for this first alternative claim. The reasoning in the main claim judgment concerning article 30 TUF is just as much applicable to the earlier swaps as it is to swap 6. Applying that reasoning, Prato has by its defence validly invoked article 30.7 TUF in relation to all the earlier swaps. It follows that Dexia cannot rely on swaps 3, 4 and 5 in the way which is envisaged in the first alternative claim.

7. Dexia advances a second alternative claim. I shall call it ``the restitution claim''. As noted in paragraph 254 of the main claim judgment, it arises in relation to swap 1, swap 2, swap 4 and swap 5: if those swaps are invalid, Dexia seeks to recover the net differentials paid to Prato under those swaps. The total of these net differentials is €1,252,784.

8. In the remainder of this section I analyse the arguments advanced on the restitution claim. I begin in section B2 with what I shall refer to as ``the Italian law objection''. The Italian law objection is a submission by Prato urging that the court should hold the proper law of the restitution claim to be Italian law, with drastic alleged consequences for Dexia. Section B3, in the event that Prato does not succeed on the submissions discussed in section B2, examines an English law time bar defence advanced by Prato. Section B4 examines...

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