Court Of Appeal Dismisses Customers Appeals In Interest Rate Hedging Product Mis-Selling Claims

In a judgment handed down on 24 July 2017, the Court of Appeal dismissed the appeals of three customers against three different banks on whether they were owed a duty of care when conducting an interest rate hedging product mis-selling review ordered by the FCA.

Background

In June 2012, the FSA (as it was then) announced the outcome of a review of IRHP sales stating it had found shortcomings in over 90% of sales. To avoid enforcement action by the FSA, most banks entered into agreements with the FSA and gave written undertakings. The banks agreed to (amongst other things) appoint a 'skilled person' under Section 166 of the Financial Services and Markets Act 2000 (FSMA). The skilled person, accountancy firm KPMG LLP, was required to review IRHP sales within its scope, approve all communications from the banks and report weekly to the FSA and, from 1 April 2013, the newly formed Financial Conduct Authority (FCA) on progress (collectively the Review). In these three linked appeals, the Court of Appeal considered whether the Review conducted under the agreement between the banks and their statutory regulator gave rise to any duty of care by the banks to those businesses to carry out those reviews with reasonable skill and care. Facts

CGL Group Limited v Royal Bank of Scotland plc

CGL Group Limited (CGL) bought a collar (in July 2006) and a swap (in April 2007) from the Royal Bank of Scotland plc (RBS) and National Westminster Bank plc (NatWest). In 2013, RBS told CGL it fell within the Review and it qualified for redress for the collar but not for the swap. In January 2015, CGL issued proceedings against RBS claiming both products had been mis-sold. RBS applied to strike out the claim and for summary judgment saying the claims were out of time. CGL then applied to amend its particulars of claim to include a claim for (amongst other things) a breach of a duty of care by RBS to conduct the Review in accordance with the undertakings given to the FSA. RBS argued all these allegations were statute-barred under the Limitation Act 1980 because they were over six years old. RBS submitted CGL had been fully aware of the facts by November 2009 (before the publication of the Review). CGL conceded the limitation period had expired, but instead relied on the 'date of knowledge' provisions in section 14A of the Limitation Act 1980 and argued it did not acquire the relevant knowledge until June 2012 (when the media published reports of the Review). On 12 January 2016, His Honour Judge Bird refused CGL's application for permission to...