Customers of banks who consider they have been mis-sold
an interest rate hedging product (IRH P/Swap) have
explored various avenues for remedies. A recent judgment
discourages them from pursuing public law claims.
In February 2016 the Divisional Court (Elias LJ and Mitting J)
dismissed an application for judicial review in R (on the
application of Holmcroft Properties Limited) v KPMG LLP 
EWHC 323. The customer (Holmcroft) had submitted a
swap mis-selling complaint to Barclays Bank PLC (Barclays).
This had progressed through Barclays’ past business review
and redress scheme (Review Scheme). Holmcroft was
disappointed to be offered no compensation for
consequential loss. It was time-barred from bringing a private
law claim against Barclays. Instead, Holmcroft attempted to
overturn the Review Scheme outcome by bringing a public
law claim against KPMG LLP (KPMG), the skilled person and
independent reviewer appointed by Barclays for its Review
Scheme. Why did the court reject Holmcroft’s claim?
Review Scheme framework
Public law claims are typically brought against public
bodies. KPMG is a private body. To establish that KPMG
should be subject to public law duties, it was necessary for
Holmcroft to satisfy the court that KPMG’s Review
Scheme role had a sufficient 'public law' flavour.
Briefly, the Review Scheme was set up pursuant to:
- an undertaking given by Barclays to the financial
services regulator (FCA)
- a subsequent FCA requirement notice (issued under
section 66 of the Financial Services and Markets
Act 2000) requiring Barclays to provide a report
prepared by a skilled person, appointed or approved
by the FCA, and
- a letter of engagement (a contract) between Barclays
and KPMG, entered into pursuant to the undertaking
and in anticipation of the requirement notice.
KPMG reviewed Barclays’ Review Scheme outcomes and
offers before they were communicated to customers.
Following such review, Barclays’ redress offer in
response to Holmcroft’s complaint was confirmed by
KPMG to be appropriate, fair and reasonable.
Holmcroft’s public law (judicial review) claim sought to
overturn KPMG’s confirmation of the Review
Key elements of the judgment
In dismissing Holmcroft’s claim, the court adopted a
1. Question 1: Is KPMG amenable to judicial review?
(Did KPMG owe Holmcroft any public law duties?)
Decision 1: No. KPMG’s Review Scheme role, as
independent reviewer and skilled person, is not
amenable to judicial review.
2. Question 2: If the answer to Question 1 had
Reasons – Amenability/no public law duties
- Question 2(a): What public law duties would have
been owed? Decision 2(a): Narrow procedural
fairness duties only.
- Question 2(b): Could there have been any
breach? Decision 2(b): No. Barclays’ review and
redress arrangements had operated in a way that
was fair to Holmcroft. (Holmcroft claimed, in
particular, that Barclays should have disclosed its
full records for Holmcroft to allow it to make
properly informed representations on
consequential loss. The court disagreed.)
Holmcroft had been given sufficient information in
the Barclays’ review letters, communicating the
redress offer and reasons for it, to enable
Holmcroft to made representations contesting that
offer. The review steps taken by Barclays meant
that there could be no material breach by KPMG of
any public law duty of procedural fairness.
Why was the court satisfied that KPMG did not owe a
customer such as Holmcroft any public law duties?
The court identified some aspects suggesting KPMG might
be amenable to judicial review (concluding, for example,
that "KPMG was 'woven into' the regulatory function").
These aspects are outweighed, however, by the numerous
reasons provided for the court’s decision that KPMG is
not so amenable and owes Holmcroft no public law duties.
- The Review Scheme is essentially voluntary. The FCA
could not have compelled Barclays to engage KPMG
in its Review Scheme role. As vital as KPMG’s role is
in individual cases, it could not have been imposed on
Barclays by the FCA in the exercise of its
- The source of KPMG’s powers is contractual. (Such
contracts are matters of private law.) Whilst not
determinative, this is important. Barclays, not the
FCA, appointed KPMG. The FCA only approved that
appointment, and KPMG has no relationship with
customers 'at all'.
- In reviewing offers, KPMG is assisting in
achievement of public law objectives. That is not
enough to subject KPMG to judicial review.
- There are limits to the FCA’s regulatory role. Had
there been no willing skilled person, the FCA has no
regulatory obligation to carry out KPMG’s role.
("Indeed, it is highly unlikely that [the FCA] would have
had the resources to act in that way…")
- Barclays’ Review Scheme arrangements did not
prevent the FCA from taking a more active role in
individual cases. (The judgment alludes to the
possibility of the FCA itself being liable to judicial
review but observes, "we do not underestimate the
difficulty of establishing a breach in any particular case.")
Futility and alternatives
The often limited nature of any judicial review remedy
also seems to have influenced the court. Any public law 'victory' may readily prove fruitless. Generally, even if
successful, a judicial review claim will only result in the
challenged decision being set aside. A customer may
remain disappointed by any further decision made to
replace it. (The court stated, "There would be no damages
against KPMG absent a civil cause of action. The only relief
would be to set aside the approval of the unfair offer and
Barclays would have to consider again.")
Related to this, the court speculated on the availability of
alternative remedies through private law rights of action.
The court stated that, if these existed, "they would
certainly be more appropriate remedies to pursue".
Adequacy of disclosure – information and reasons
Why was the court satisfied that, in any event,
Holmcroft had been given sufficient information in
Barclays’ decision letters?
Even had KPMG been under a public law duty, on the
issue of procedural fairness, the court decided that it
was enough that Barclays had given Holmcroft the gist
of its reasons for the offer made and the material on
which it was based.
The court stated, "We do not accept that there is any
obligation to provide the full records available to the bank, or
even those records on which the bank has relied. It is enough
that the bank fairly summarises the reasons why it
reached the decision in circumstances where the customer
has had reasonable opportunity, and is sufficiently informed,
to be able to respond to, and if appropriate take issue with,
those reasons."(emphasis added)
Holmcroft’s application was dismissed and permission to
appeal was refused. Holmcroft has since renewed its
application for permission to appeal to the Court of
Appeal. Notwithstanding that renewed application, the
current position remains that the court has rejected this
public law challenge to the Review Scheme outcome. The
judgment must make sobering reading for Holmcroft and
other customers who had sought to follow Holmcroft’s
lead in bringing public law claims.
Customers who may have harboured doubts about the
banks’ review scheme arrangements may have noted one
conclusion in particular. Following a detailed review of
the way in which the Review Scheme arrangements
worked for Holmcroft, the court stated that: "The
redress exercise appears to have been conducted in a
conspicuously scrupulous way."