A recent mis-selling case* has concerning new developments:
- Kays Hotels Ltd (Kays) was permitted to bring its claim based on a product bought in 2005, outside the normal six-year limitation period; and
- Kays had already received compensation from the Financial Conduct Authorities Review, but in contrast to another recent decision**, was still allowed to pursue a claim against Barclays.
In 2005, Kays took out a loan of £1.34 million with Barclays, repayable over 20 years at an interest rate of 1.5% over Barclays’ base rate.
It is alleged that Barclays representatives told Mr Saeed, one of its directors, that in order to draw down under the loan, he would also need to enter into a complex interest rate hedging product. If the Bank of England base rate rose above 5.5%, Barclays would pay the difference between the base rate and 5.5%; but if the Bank of England base rate fell below 4%, Kays would be required to make additional payments to Barclays.
Kays brought its claim against Barclays in 2012, some seven years after the hedging product was entered into.
Kays argued successfully that the limitation period should be three years from the date on which Kays had the knowledge needed to bring its claim, rather than six years from the date of the contract***.
Kays had needed to make payments under the hedging product before 2009, more than three years before they issued proceedings. Kays, however, argued that simply having to make some payments should not have alerted it to the mis-selling. The claim did not arise just because the hedging product caused Kays to be liable to make some payments under it, but because the product was unsuitable and exposed Kays to excessive risk over its whole lifetime.
Financial Conduct Authorities Review
In June 2012, the FSA announced an agreement with banks (including Barclays) to review the sale of interest rate hedging products to non-sophisticated customers. Kays’ claim was stayed while it applied for compensation under the Past Business Review.
Barclays has already paid approximately £166,000 to Kays, and Kays has an outstanding application for compensation under the Review for consequential losses. However, the stay on its claim expired, and Kays continued proceedings.
Proceedings still ongoing
This decision only concerned a summary application rather than a final judgment. The judge found that Kays had a real (more than a merely fanciful) prospect of success at trial. Whether Kays will ultimately succeed in its claim against Barclays has yet to be determined.
*Kays Hotels Ltd v Barclays Bank plc
**Clark v Focus Asset Management  EWCA Civ 
***Section 14A of the Limitation Act 1980