The High Court has dismissed a judicial review application over KPMG’s role in compensating a company that was mis-sold interest rate products by Barclays.
Holmcroft Properties, a nursing home operator, said it was made an offer of compensation that was inadequatee.
In a case which could have opened the floodgates for others unhappy with their compensation offer from banks, Holmcroft questioned KPMG’s role as an independent reviewer in the compensation process of mis-selling of interest rate swap products.
The Financial Conduct Authority reached an agreement with Barclays to set up a scheme to provide redress to certain customers who had been wrongly sold these products.
The bank agreed that KPMG should oversee the scheme.
Today the judges ruled in favour of KPMG, claiming the company had no public law duty and threw out the judicial review application.
The High Court judgement stated: “There is clear evidence that they [KPMG] did carry out the task which they were required to do pursuant to the undertaking.
“Each of the September letters to Holmcroft stated in terms that KPMG had considered and confirmed the offer of redress.
“KPMG also expressly reviewed the offer again following the further letter from Holmcroft dated 19 September.
“There is no basis for saying that they were in breach of any public law duty, even assuming that they were subject to such duties.”
In June 2012, the Financial Services Authority announced it had found serious failings in the sale of interest rate hedging products, following which nine banking groups agreed to conduct an initial review.
Barclays agreed with the Financial Conduct Authority that it would set up a scheme to provide redress to certain customers who had been wrongly sold these products and agreed KPMG should oversee the scheme.
In April last year a judge granted a judicial review application but this has now been overturned.
James Oldnall, the lawyer at Mishcon de Reya who led the case for Holmcroft, said: “We always knew that it was a bold move to make an application for judicial review, and the fact that the hearing was granted at all was unexpected to many.
“Today’s (24 February) judgement makes it clear that this point is not clear cut. We believe it offers very credible grounds for appeal and will be making an application to do so.
“The second encouraging part of the judgement is that it quite explicitly indicates that there is value in pursuing an alternative legal route to securing compensation for affected businesses, focusing on the issue of breach of duty.
“This bodes very well for the group litigation action that we have commenced in this regard, which is generating significant interest that today’s clarification on Holmcroft will only increase.”
According to the FCA around 13,500 customers have accepted a redress offer and £2bn is being paid out, including more than £460m to cover consequential losses
Guto Bebb, MP for Aberconwy and chairman of the All-Party Parliamentary Group on Interest Rate Swap Mis-Selling, said: “This decision further illustrates the failures of the FCA’s review into the behaviour of the banks.
“Some 18,000 rate swap products were mis-sold, to unsophisticated customers who remain unable to claim appropriate compensation for their losses.
“There is a real risk that if this case is concluded here, the banks will take it as permission to return to the unsavoury practices that caused so much damage to so many small businesses.
“This decision must be appealed so that banks remain under the scrutiny of the law, and businesses are able to continue their fight for justice.”
A KPMG spokesman said: “We welcome the decision of the court which confirms the quality of the work we have carried out as an independent reviewer. We have taken our role to scrutinise the redress offers proposed by Barclays very seriously.
“We’re particularly pleased that the court acknowledged that the redress process had been ‘conducted in a conspicuously scrupulous way’ and we welcome the decision of the court that KPMG is not subject to judicial review in our role as independent reviewer.”
