A ruling of Mr Justice Parker in the High Court on Friday 24 April relating to interest rate mis-selling compensation held that KPMG could be judicially reviewed in the same way as a public body.
The application by Holmcroft Properties arose out of the findings of the Financial Conduct Authority that nine banks, including Barclays, were routinely mis-selling interest rate swap products. The nine banks were ordered by the FCA to set up compensation schemes for those who had purchased such products, with banks set to pay out £1.8bn. The FCA also ordered the nine banks to nominate independent reviewers, with KPMG being nominated by Barclays.
Holmcroft was originally awarded £500,0000 under Barclays' compensation scheme, but argued that it was entitled to other consequential losses. Holmcroft argued that since Barclays established the compensation scheme and nominated KPMG at the behest of the FCA, the firm had a public law duty "woven into the fabric" of its task.
Despite KPMG, Barclays and the FCA arguing that the relationship between the bank and KPMG was purely a matter of private contract law with no wider public law element, Mr Justice Parker held that KPMG could be judicially reviewed in the same way as a public body.
This case is a helpful reminder that companies who are deemed to perform a public function will be expected to do so in accordance with public law principles and that they cannot fall back on their private and contractual relationships to resist public law review. It will be of particular interest to consultancy and accountancy firms, and bodies who are asked to perform investigations, enquiries or other functions on behalf of regulatory bodies and public authorities.