Where there is more than one bank involved in a workout, banks will often share relevant information but the case of National Westminster Bank plc –v- Rabobank Nederland [2007] EWHC 1056 (Comm) confirms that there is no general legal obligation to do so.

The background to the proceedings was the financial collapse of Yorkshire Food Group plc (“YFG”) which ultimately went into administrative receivership in 1997. Both banks had significant exposure to YFG and had been discussing the options open to them. Rabobank proposed a complicated plan but by the time the proposal was put forward YFG was in serious financial trouble and Natwest declined to pursue the plan. Rabobank bought Natwest's debt at a discount in order to proceed with the plan.

The plan was not successful in limiting Rabobank’s losses to the extent envisaged and it subsequently transpired that Natwest was privy to information regarding the conduct of, and personal financial circumstances of, directors of YFG and had not disclosed that information to Rabobank.

Rabobank argued that this was material misrepresentation and fraud. Litigation was commenced in the US (Rabobank’s New York office was involved) but the case was ultimately heard before the Commercial Court.

The judgment is over 100 pages long but a number of points emerge:

		Whilst it was considered good practice in the London banking market in the 1990s for banks to share material information in a workout situation, there is was no obligation to do so;
		There was an express contractual term obliging Natwest and Rabobank to negotiate in good faith in relation to Rabobank purchasing the Natwest debt but this was held to be unenforceable (confirming the principle that an agreement to agree or an agreement to negotiate in good faith is unenforceable);
		The agreement under which the debt was acquired by Rabobank contained a provision that Rabobank would not sue Natwest in respect of any actions taken by it. When Rabobank commenced proceedings it was in breach of that clause giving Natwest a cause of action for damages in breach of contract

This case is consistent with other English cases suggesting that the English Courts will generally take the view that financial institutions must look after their own interests, must conduct their own due diligence and stand or fall by the decisions that they make.