The Holmcroft Case
Holmcroft Properties was sold an interest rate hedging product (IRHP) by Barclays and its case was included in the review process which the FCA agreed with Barclays (and other banks) the banks should undertake to provide redress to customers who had been missold IRHPs, including interest rate swaps, collars and caps. The banks themselves would undertake the “past business review” of the relevant customer files, and obtain evidence and information from customers who wanted to provide it, but to make sure that the process was properly and fairly handled (given that the fox who had raided the chicken coop was being put in charge of fixing it), the FCA required the relevant banks to appoint a suitably qualified independent third party to act as an “independent reviewer” and check that the bank was providing fair and reasonable redress in accordance with their agreement with the FCA.
Holmcroft received redress by way of compensation for overpayments it had made as result of the misselling of the IRHP and then made a consequential loss claim under the scheme against Barclays for further losses it claimed were a consequence of the misselling. The claim failed. Holmcroft was concerned that the “independent reviewer”, KMPG, appeared to have little or no involvement or engagement with Holmcroft and did not appear to have properly fulfilled the role required by the FCA in the review process.
Judicial Review Application
Holmcroft therefore made a judicial review application to court asking the Court to find that KPMG was engaged to carry out a public function and that it had failed to comply with the standards applicable to public bodies in fulfilling such public functions in its review of Barclays' response to Holmcroft’s consequential loss claim.
The Court has so far decided at a preliminary hearing that Holmcroft’s case is reasonably arguable and so it has permission to take the matter to a full hearing. At that hearing the Court will hear all the evidence and arguments and decide whether KPMG was engaged in a public function and, if so, whether it met the required standards (and what those standards should be).
The Court was not swayed by Barclays’ suggestion that the case should be refused permission for a substantive hearing, because the appropriate remedy for Holmcroft was instead to make a claim for breach of contract against Barclays for misselling and suggested that because Holmcroft had failed to do so in time, it could not use judicial review as a device to try to get around that oversight.
The Judge considered all the points Holmcroft made to be reasonably arguable, and noted in particular that there was a significant public interest in having the points fully explored.
What should claimants refused redress in the review process do?
We recommend Claimants take legal advice on their position as soon as possible after receiving a disappointing outcome from the IRHP/Swaps Review process to ensure that they do not lose any potential claims or remedies available, which may include a judicial review application similar to that made by Holmcroft or other court proceedings. The first thing to note is that whether a judicial review is likely to succeed in each case will depend on the specific facts, and what role the independent reviewer had. Whilst it may be tempting for Claimants to await the outcome of the Holmcroft case before deciding whether to make their own application this is very risky because the time period available for a judicial review application is only 3 months from the decision complained of i.e. 3 months from the independent reviewer's endorsement of the bank's determination as to the redress payable (or not) for swap payments or consequential losses.
It may be possible to apply for a stay of any application made pending the outcome of the Holmcroft case, but again this would be subject to examining the circumstances of each case. The process of putting together an application for judicial review takes some time and so it is imperative that Claimants move quickly to protect their position by taking legal advice urgently.