Roskilde Bank A/S, a Danish bank (now insolvent and known as Selskabet AF1) issued subordinated notes (notes). The notes were originally issued to one party and were subsequently marketed to prospective investors, including Deutsche Bank. Taberna, an Irish investment vehicle, bought notes from Deutsche Bank in the secondary market.

Roskilde suffered severe financial difficulties and defaulted under the notes. Taberna sued Roskilde for damages under section 2(1) of the Misrepresentation Act 1967 (1967 Act) for misrepresentations in various documents, including an investor presentation (the presentation).

The High Court held that market standard disclaimer wording in the presentation did not protect Roskilde. Taberna successfully argued that there had been misrepresentations made to it as to the size of Roskilde’s non-performing loans. Even though Taberna had not been one of the original investors marketed to as part of the initial roadshow, and notwithstanding the presentation had been produced solely for use by investors who were met during the roadshow, the High Court held that the presentation had been directed at investors in the secondary market as Roskilde had intended to make it available for use by them. Indeed, Taberna had been specifically directed to the presentation on Roskilde’s website by a third party with Roskilde’s encouragement.

Roskilde was not protected by standard market disclaimer wording (see box “Investor presentation disclaimers”). In respect of disclaimers B and E, the High Court held that Roskilde could not rely on the disclaimer wording because it was in the presentation, as opposed to a contract between the parties.

The court agreed with the High Court that Roskilde had extended the presentation to the secondary market by placing the presentation on its website with the intention that it would be generally available for use by investors. There was also evidence of more specific interactions between Roskilde and Taberna. In particular, Roskilde had encouraged another bank to direct Taberna to the presentation.

As such, any disclaimer in the presentation to the effect that it was only for roadshow investors had to be disregarded. However, the court made clear that in order for a representation in a document to be actionable there needed to be a connection between the issuer and end investor so that it is clear that the issuer was intending the investor to rely on the document. In an age where much material is available electronically, simply having material accessible on the internet is insufficient, but where an investor is specifically directed to the material, the issuer cannot complain if the investor seeks to rely on it, subject of course to any disclaimers within the material.

However, the court overturned the first instance decision in relation to disclaimers B, C, D and E, and so allowed Roskilde a defence against Taberna’s action.

The court noted that section 3 of the 1967 Act (section 3) applies where a contract contains a term which excludes or restricts liability for any misrepresentation a party may have made before the contract was entered into. The court held that an attempt to exclude liability after the misrepresentation has been made would need to be by agreement; for example, through contractual estoppel or by a conventional exclusion clause, and so would need to be part of a contract between the parties.

Duty-negating clauses. The same reasoning did not, however, apply to a non-contractual notice, such as the one contained in the presentation. It is possible to limit the scope of a representation or exclude it altogether by making clear that no representation is in fact being made on which there could be any reliance (IFE Fund SA v Goldman Sachs International [2007] EWCA Civ 811). Therefore, the court found that disclaimers B and E were not exclusion clauses to which section 3 applied, or which needed to be incorporated within the terms of a contract, rather they were clauses which qualified the nature of the statements in the presentation. The court referred to these clauses as duty-negating clauses but they are also often referred to as basis clauses because they are seen as setting out the basis on which the parties are dealing.

Liability-negating clauses. The presentation also contained more traditional exclusion clauses, or what the court referred to as liability-negating clauses. The court took the view that a document such as the presentation, even though it was not a contract, should be able to specify that information was being provided on the basis that the issuer was not taking responsibility for it, provided that this was reasonable. The starting point was not to invoke the contra proferentem rule and resolve any ambiguity in favour of Taberna, but rather to recognise that commercial parties are entitled to make their own bargains and have the court interpret the relevant clauses accordingly. The court found that there was in fact no ambiguity in exclusion clauses C and D and it was quite clear that no responsibility was being accepted for the information in the presentation.

This is a significant decision which makes clear the importance of setting out the basis on which information is shared before entering into a transaction. It is helpful that the court has confirmed that it is possible to share information pre-investment while also limiting the ability of an investor to rely on it and the responsibility an issuer has for it. It should be noted, however, that the parties were both sophisticated and great care will be needed when dealing with less sophisticated parties.

It remains to be seen whether it will be possible for investors, most likely retail, to run the argument successfully that such clauses fall foul of the Unfair Contract Terms Act 1977 (UCTA) on the basis that they should be regarded as excluding or restricting the scope of a duty and so be treated as exclusion clauses under section 13 of UCTA. While, for sophisticated counterparties, making these distinctions may well continue to prove problematic, all parties should take care in how they draft non-reliance clauses and disclaimers. It may be wise to make clear that the purpose is to set out the basis on which the parties are dealing and sharing information, rather than being an attempt to limit or negate the existence of a duty that would otherwise arise.

This decision is also a useful reminder that, even if a document makes it clear who is entitled to rely on it, if there is any interaction between the issuer and the end investor, including through third parties, or any reference to the material, it will be very hard for the issuer to argue successfully that it did not direct those investors to that material, even if they were not the original intended recipients. Much will depend on the precise facts of a particular case and it is of course possible that disclaimers can be used to guard against any formal reliance, as they were in this case.