In a judgment this week an application by Holmcroft Properties Limited (Holmcroft), a customer of Barclays, failed to successfully challenge the role of KMPG in a redress scheme in respect of the mis-selling of IRHP set up pursuant to an undertaking by Barclays to the Financial Conduct Authority (FCA).
Barclays appointed KPMG, with the approval of the FCA, as independent reviewer (IR) to oversee the implementation and application of the scheme. All offers of redress had to be approved by the IR as appropriate, fair and reasonable.
Barclays offered Holmcroft basic redress but refused to pay further redress for alleged consequential loss. The offer was approved by the IR.
Holmcroft alleged that Barclays had acted unfairly in making that decision and the IR should not have approved it. They contended the IR was in breach of public law principles and its actions were amenable to judicial review.
The Court decided that the IR’s duties did not have sufficient public element to make them amenable to judicial review for the following reasons:
- The redress scheme was essentially a voluntary scheme (established as an alternative to the FCA’s more draconian powers) and the IR’s role in individual cases could not have been imposed on Barclays by the FCA.
- The IR’s powers were conferred under a contract with Barclays. The IR also had no relationship with customers. Given the IR was not appointed by the FCA, the FCA’s approval of their appointment was not sufficient to attract public law duties.
- The authorities show that private law arrangements (i.e. the contract between Barclays and the IR) that are used to secured public objectives (i.e. the oversight of redress for mis-selling of IRHP) do not bring those arrangements sufficiently into the public domain to attract public law principles.
- The FCA had no regulatory obligation to carry out the role that the IR undertook. If no appropriate skilled advisor was available the FCA would have had to use other statutory means of securing redress for customers, reinforcing the voluntary nature of the process.
- The FCA still retained the ability to take an active role in such cases. The court gave the example of a customer who complained to the FCA about both the Bank and the IR.
The Court also made clear that customers of banks still had the availability of civil action or recourse to the Financial Services Ombudsman if they alleged the scheme had not worked as it should.
The case is important for banks seeking to reach conclusions in claims under IRHP redress schemes. It is equally important in providing clarity for administrators and liquidators who often face considerable pressure from directors and shareholders (routinely guarantors of a customer’s debts) to find innovative ways to challenge decisions on redress.
As the six year limitation period for claims arising out of the financial crisis passes a significant number of alternative civil actions will also have become stature barred. At last perhaps both banks and insolvency practitioners will soon be able to draw a line on the IRHP claims era?
For more information on the judgment click the following link: http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWHC/Admin/2016/323.html&query=holmcroft&method=boolean