On 12 January 2016, Judge Bird, sitting in the High Court, upheld an application by RBS and NatWest (the "bank") to strike out a claim by CGL Group Limited ("CGL") for mis-selling "in the light of failure to provide advice and information" on grounds that it was time-barred. The case also determined that the bank owed no duty of care to customers during the conduct of its FCA review which followed the FCA's report in March 2013 identifying systematic mis-selling of interest rate hedging products (IRHP).
In this case, CGL had purchased a base rate collar trade from the bank in July 2006 and an amortising base rate swap from the bank in July 2007. It was alleged that the products had been mis-sold, though the Judge in this case dealt only with the issue of limitation, which formed the basis of the bank's application to strike out the claim (as well as a separate application by CGL to amend its particulars of claim).
How long does a claimant have to bring a claim for mis-selling?
Under Section 2 of the Limitation Act 1980 (LA), a claimant has six years to bring an action founded on tort (such as negligence or misrepresentation) from the date on which the cause of action has accrued, being the date damage is suffered. However, Section 14A LA may provide an extension to the six year rule where the claimant has acquired "both the knowledge required for bringing an action for damages in respect of the damage and a right to bring such action" at a later date. If this is the case, the claimant may be permitted to bring an action for damages for negligence within three years of acquiring the relevant knowledge.
When is the requisite "knowledge" acquired?
Media reports of the FCA's IRHP review were first published in June 2012. CGL argued that the knowledge to bring a claim was acquired when it became aware of the media publications subsequently and issued its claim on 5 January 2015. Unfortunately for CGL, the Judge agreed with the bank's argument that correspondence between the bank and CGL in July and November 2009, in which CGL (through its director) complained specifically of mis-selling, was evidence that the requisite knowledge was obtained by this earlier time. Thus, the three year limitation period would have expired in 2012; the claim was out of time.
No duty of care to customers in conduct of review
CGL also alleged that the bank owed a duty of care to customers in the carrying out of the FCA review but this argument was rejected. The settlement agreement between the FCA and the bank, in which it was agreed that the review would take place, expressly excluded the right of third parties to enforce any terms of the agreement under the Contract (Rights of Third Parties) Act 1999. Further, due consideration was given to the common sense submission that, by imposing a duty of care to the customer, contractual arrangements between the bank and the FCA would be subverted and permit claims "by the back door".
What to do if you think financial products have been mis-sold?
This case illustrates the need for customers to take swift action if they reasonably believe that financial products have been mis-sold and the importance to banks of keeping proper records and having access to them at an early stage of a dispute.