An important development in case law was determined in the Bristol Mercantile court 30 July 2015.
An application was made by the Claimant Suremine Limited which is seeking compensation from Barclays for mis-selling a Structured Collar traded on the 11 June 2008.
The Claimant had been through the full FCA review process. Mis-selling had been identified and it had been offered redress of an alternative product. In this case a vanilla swap for 9 years and 10 months at rate of 5.84%. This was rejected by Suremine Ltd who challenged the bank within the review that if any assumption was to be made about an alternative product then it should be that a cap would have been purchased.
These are familiar arguments to IRHP claimants who have had similar results in the review and as in this case the challenge was met with total disregard by the Bank.
Suremine Limited Litigated and the hearing on the 30tH July was to determine whether it could amend their present case to include four alternative heads of claim.
Claim 1. That the Claimant was entitled to enforce the agreement relating the FSA review between the FCA and the Bank (Third party rights claim)
Claim 2. That by participating in the Review a contract was formed between Suremine and the Bank and the bank failed to complete the review in line with that contract.
Claim 3. That in agreeing to provide redress in accordance with the specifications of the review, the Bank owed the Claimant an equivalent duty of care
Claim 4. That the Bank had owed the Claimant a duty to implement the review process properly because any failure to do so would place the Bank in breach of its agreement with the FSA in circumstances where the FSA and FCA review, would suffer loss.
Claim 1 was abandoned as that particular claim is precluded within the contract between the Bank and the FSA.
The Judge determined that the introduction of Claim 2 should be refused as the argument was unsustainable. There was no direct contractual relationship between the Bank and the Customer for FCA review purposes.
However, he determined that Claims 3 and 4 raised different considerations; he stated that the FCA Review was intended to provide a route to fair and reasonable compensation without customers having to sue for mis-selling. Those that failed to sue and trusted in the review process may now be left with no remedy if they did not agree a standstill agreement.
He concluded that the bank may well have a duty of care to the customer when conducting the review as it will be the customer’s loss if the bank did not implement the review in accordance with the FCA’s contract. There was a compelling reason to allow cases of this nature to go forward to trial.
Principal Financial Litigation Lawyer Craig McAdam’s Comments
This is a lifeline to all customers who have had unsatisfactory review results and are time barred from bringing a substantive claim for interest rate mis-selling.
The same principles can also be applied to consequential loss claims which have been refused in the review but have clear legal merits in litigating.
The issue as to whether the banks have breached their duty within the review will be a factual test based on the internal information the bank holds, the information they have been provided by the customer and their representatives and the decisions made in line with the agreement between the FCA and the Bank.
The fact that this head of claim was allowed shows that a High court judge believes there may be a realistic prospect of success. It is not merely a fanciful claim but one with some merit. It is hard to determine what prospect a claimant will have at a substantive hearing, but the banks should be worried that all claims they believed were out of time may still go before the courts if it is believed the bank failed to follow the review process in a proper manner.
We would encourage any review participants who have not been provided with a fair outcome to seek specialised legal advice so that the merits of their particular case can be assessed.
Craig McAdam is a Principal Lawyer within Group Litigation at Slater and Gordon Lawyers in Manchester.
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