Barclays Successfully Defends First Swap Mis-Selling Claim Involving A Claim By Individuals For Breach Of Statutory Duty

Barclays successfully defends first swap mis-selling claim involving a claim by individuals for breach of statutory duty - Ramesh Jadavji Parmar and Rama Ramesh Parmar v. Barclays Bank PLC [2018] EWHC 1027 (Ch)

In a comprehensive judgment, Mr Hochhauser QC, sitting as a Deputy Judge of the Chancery Division (the judge), has today dismissed claims for alleged breaches of statutory duty in relation to two interest rate hedging products (IRHPs) entered into by the claimants in April 2009. This is the latest in a long line of authorities in the swap mis-selling arena which have been decided in the banks' favour. The judgment is of particular note as it is the first IRHP claim to reach a full trial involving an s.138D Financial Services and Markets Act 2000 (FSMA) claim by a private person for alleged breaches of the FCA's Conduct of Business Sourcebook Rules (COBS). The claim also raised allegations regarding an alleged failure by Barclays to disclose its internal calculation of the maximum credit risk that it faced in the event of a default by the claimants on the IRHP (referred to as CEE (credit equivalent exposure)). Similar allegations have of course been considered and dismissed by the Court of Appeal in Property Alliance Group Limited v. The Royal Bank of Scotland PLC [2018] EWCA Civ 3551 (PAG).

The judge found entirely in Barclays' favour, save for some minor technical breaches of COBS (in relation to which no loss flowed), and held, in particular, that the sale was not advised (but that even if it was the IRHPs were suitable), that the IRHPs were appropriate and that, on the facts of the case, there was no obligation to disclose the existence of the CEE limit to the claimants.

The parties and factual background

The claimants are the owners and directors of a limited company, which imports and sells latex gloves to the medical profession. They owned the commercial premises from which their company traded and in addition to this a portfolio of residential investment properties. Mr Parmar was the primary contact and, whilst he was an experienced businessman, unlike in many of the claims to date, he had no prior experience of IRHPs.

The judgment contains a detailed explanation of the factual background leading up to the sale of the IRHPs in April 2009, which we do not repeat here, save to note that:

the claimants entered into two fixed rate swaps at a rate of 3.48 per cent, after the Bank of England base rate had already fallen to its (then) low of 0.5 per cent; by the time the claimants entered into the swaps, they had been provided with six different presentations explaining a range of different IRHPs, including a cap, over a three-year period; the content of those presentations was discussed and explained in telephone calls and two meetings with Mr Parmar prior to trading; the presentations contained warnings regarding the potential for break costs to be incurred, including worked scenarios; whilst hedging was not a condition of the claimants' lending, Mr Parmar wished to achieve a fixed rate of interest and did not wish to pay a premium. At that time, Barclays was not offering fixed...