The process for compensating victims of mis-sold interest rate hedging products is under attack at the High Court, by a property company that claims the redress offered by Barclays Bank falls well short of its losses.
Holmcroft Properties was offered more than £400,000 by Barclays after it admitted liability for mis-selling two IRHPs, but the company’s full £5m-plus compensation claim was rejected by the bank.
Now Holmcroft says that an independent review of its case by auditor KPMG was procedurally unfair, because the full extent of its losses arising from mis-sold IRHPs was not taken into account. It is seeking judicial review of that assessment, in a case which raises the question whether that is even legally possible.
KPMG, appointed as independent reviewer by the Financial Conduct Authority, took the view that Barclays’ offer of redress, in which the claim for consequential losses was rejected, was “appropriate, fair and reasonable”.
But Isle of Man-based Holmcroft insists the assessment was unlawful and irrational.
Barclays conducted a review of IRHPs sold to Holmcroft, and accepted liability in respect of two. It offered £440,824, but Holmcroft claims it suffered considerable consequential losses due to a material degradation to its cash-flow position as a result of the mis-selling. It sought compensation of more than £5m.
KPMG argues that the “appropriate, fair and reasonable” assessment it made cannot be challenged by way of judicial review, as in its capacity as an independent reviewer, it was not exercising any statutory or other public law power. Rather, it says, it was discharging contractual obligations to Barclays under a voluntary redress scheme.
The separately represented FCA agrees that the review is not amenable to judicial review and lawyers for Barclays also say the claim is without merit.
The redress scheme was introduced after the discovery of serious and widespread failings by banks, including Barclays, in the sale of IRHPs. Following negotiations with the FCA, the banks agreed to oversight by an independent reviewer.
Lord Justice Elias and Mr Justice Mitting are hearing the challenge over three days, and will give judgment at a later date.