A Bristol court case brought by a Somerset holiday park operator could have significant implications for other businesses involved in interest rate hedging product (IRHP) mis-selling claims.
A 30 July judgement from Bristol Mercantile Court – part of a specialist court service handling cases involving commercial transactions and disputes – found that Suremime Limited, which runs Home Farm Holiday Park at Burnham-on-Sea, could add to an existing case a claim that Barclays Bank was negligent in the way it carried out a redress scheme agreed with the Financial Conduct Authority (FCA) for bank customers mis-sold IRHPs, including swaps, caps and collars.
IRHPs were typically sold to businesses taking out a bank loan, to provide protection against potential rises in interest rates but when interest rates fell as a result of the global financial crisis, affected firms – who said they had entered agreements without being fully informed of or understanding the risks – faced challenging costs. Other problems reported include IRHPs longer than the terms of loans and high exit fees.
In 2012, the FCA identified failings in the way that nine banks sold IRHPs. The banks – including Barclays, HSBC, Lloyds and RBS – agreed to review their sales of IRHPs made to certain customers since 2001 and with the reviews now completed, so far £2 billion has been paid to around 12,600 customers.
Suremime’s purchase of a IRHP from Barclays in 2008 was investigated by the bank as part of the FCA scheme but the company has rejected Barclays’ redress offer on the grounds that the bank made an unjustified assumption about the kind of IRHP Suremime would have entered into if the original transaction had met the standards used as the basis of the review.
In the Bristol case, Suremime sought permission to amend its claim for damages from Barclays by introducing new grounds, including that the bank had owed a duty of care to implement the review process properly because it would otherwise be in breach of agreements with the FCA.
Judge Havelock-Allen acknowledged that customers who had not sued for mis-selling in the hope of achieving a satisfactory outcome from an FCA review process – but now alleged that reviews were been up to the FCA standards – risked being beyond the time limit for taking a case to court. He added that while this was not the case with Suremime, it was “a relevant consideration because it is part of the wider landscape in which the court will have to assess whether the banks should owe a duty of care to customers in their conduct of the FCA review.”
He partially allowed the new claims to go forward to trial, including on duty of care grounds, saying there was a “compelling reason” for doing so.
As part of the IRHP review, banks agreed to pay eight per cent interest – or identifiable cost incurred by a customer – on redress payments to reflect lost business opportunities. Businesses that believe their lost opportunity costs are more than eight per cent can submit a consequential loss case and so far more than 4,000 have done so.
Milsted Langdon’s forensic accountancy specialists can provide expert assistance to businesses considering pursuing claims for consequential losses as a result of the way an IRHP was sold. For more information on how we can assist in IRHP-related claims, please contact us.