Barclays applied to strike out a customer's claim for mis-selling of an interest rate swap, on the grounds that the claim had been released by a settlement agreement between the Bank and the customer. The customer alleged that the Bank had known of a regulatory investigation into interest rate hedging products during the negotiation of the settlement agreement, which it had failed to disclose, and which eventually led to a scheme for customer redress.

Key issues

The two key points in the case are that the wording of the release clause was wide enough to cover even fraud claims, and that the court held that the settlement agreement should not be set aside, even assuming that the Bank did fail to disclose the existence of the investigation.

Facts

The Bank and the customer entered into a settlement agreement which basically allowed the customer to exit the loan and swap he had with the Bank in return for a lump sum payment. He was fully aware that he had a potential claim against the Bank for mis-selling at the time. In the settlement agreement, the customer agreed to settle all claims "whether direct or indirect, foreseen or unforeseen, contingent or actual, present or future, and which arise, or may arise, out of or are in any way connected with this matter." Subsequently, the FSA (as it then was) announced the outcome of its investigation into the sale of interest rate hedging products to SMEs, and the Bank (among others) agreed to implement a review exercise based on rules devised by the FSA. 

A review of the sale of the customer's swap was carried out, but he was not offered any redress as the sale met the relevant standards applied in the review. The customer then sued the Bank for mis-selling the swap, and alleged in the proceedings that the review had not been properly carried out,and that the Bank had deceived him about the swap.

Decision on strike out application

The court held that the release clause covered all the claims asserted by the customer, including the deceit claim. 

The customer also argued that the Bank had an obligation to disclose its knowledge of the FSA investigation and proposed redress process, and that its failure to do so meant the settlement agreement should be set aside. The court rejected this argument, on two grounds. First, the customer had not been prejudiced by the non-disclosure, because he had been aware of his right to seek relief for mis-selling of the swap through a complaint or through litigation, which the court reasoned was equivalent to the opportunity for eligible customers to have sales of hedging products reviewed in the FSA scheme. Second, the Bank had not sought to rely upon the settlement agreement to prevent the customer from participating in the redress scheme. On the contrary, the sale of his swap had been reviewed. There could therefore be no case for setting aside the settlement agreement in its totality.

The court went on to say that the redress process created no enforceable contractual rights between the customer and the Bank. There was no contract, due to lack of consideration. The same decision on contract has been reached by a different court in a subsequent case (Suremime), however the court went on to say in that case that it was arguable that the Bank owed the customer a duty of care at common law. The court was troubled by the possibility that certain customers might have no recourse if a review were to be carried out which did not adhere to the rules devised by the FCA: if a customer had no statutory right of action under section 138D of FSMA, and if there was no right to seek judicial review of the reviewer's decision, and if a civil claim for the original mis-selling had become statute-barred while the review process was ongoing, then there was an arguable case for the imposition of a common law duty.

Comment

The decision will be of particular interest to banks that have entered into settlement agreements with customers while the bank was also involved in regulatory investigations, the findings or outcomes of which have since entered the public domain. The case also contributes to the evolving body of law on whether customers have a private right of action in connection with the independent review of SME interest rate swap mis-selling. The customer is currently seeking to appeal the decision: the Court of Appeal has not yet decided whether permission should be granted.

Marshall v Barclays Bank Plc [2015] EWHC 2000 (QB)