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Interest Rate Swap Litigation Update June 2013

Interest Rate Swap Litigation Update June 2013

Interest Rate Swap Litigation Update

I like to think that my firm, Josiah Hincks, is at the forefront of the Interest Rate Hedging Product (IHRP) litigation. I’ve got a dozen or so cases on at the minute, varying in size, banks, and progress. Some have not issued Court proceedings, some have and some I actually have Judgment on (because of the Banks’ default in responding).

I thought it would be helpful to give my view on current progress, as I am seeing some commonality between the cases.

First and foremost, the Banks are fighting. I mean fighting. They are dealing with the litigation as I would expect them to any litigation. The fact that the FSA/FCA announcements were made does not bring about a different approach to the litigation. I am faced with interim applications for strike out/summary judgment (more on this below), setting aside Judgment and correspondence which simply winds my clients up for being overly aggressive.

I am now frequently seeing requests for a stay in the proceedings on the basis that the FCA is now proceeding. My response to such requests will tend to be to agree if:

  • The swap payments are suspended
  • The review is expedited
  • We receive confirmation of inclusion in the review and approach from the independent reviewer for a fact find meeting.

However, without such certainty my advice to my clients (and, of course, you should seek your own advice on any of the issues raised) would be to continue pressing with the litigation.

I am finding that the Banks’ lawyers are referring to the FCA process as akin to ADR (Alternative Dispute Resolution) and stating that failing to agree to stay will incur unnecessary costs and they will raise our conduct to the Courts attention! Mostly bluster, in my opinion, particularly given the comments of Simon Browne QC in Birmingham when Barclays requested a stay – an “impossible argument” he said.

Limitation

I’ve several clients who are, the Banks say, time barred from bringing a claim. The Limitation Act states that claims for breaches of contract should be brought within 6 years of the date of contract. Many IRHPs were sold around 2005-2008, and so are falling out of time.

One of my clients is currently facing an application by the Bank, which we are contesting. They say we are out of time. The argument which I’m employing, and which will be tested in Court in London at the end of July, is that in fact it should be the client’s date of knowledge of a cause of action that is the relevant deciding factor. We say that no one realised there was a claim to be brought, probably until the expose by the Daily Telegraph in March 2012 – certainly all my clients came after that date.

I believe that the argument we’re forwarding in that case is new and untried previously, and so it could well set a precedent on the point.

Fact Finds

I’ve also now had the pleasure of being involved in a couple of fact find meetings. 3 hours of questioning aimed solely, it seemed, at helping the bank to prove that the client either understood what was going on or if they didn’t that they would have taken the product or an alternative if it was explained to them. (“So if a fixed rate product was offered to then, would that have been something that you would have been interested in?”).

I have a list of questions which have been extracted from the reviewers questions. If you want these, you can email me at smather@josiahhincks.co.uk and I will provide them for free.

The FCA’s guidelines (after obvious lobbying by the Banks) is that lawyers are not required for the Review process. In my genuine honest opinion, there is little chance any “unsophisticated” customer will be able to conduct the process without legal advice. I strongly recommend you to seek professional advice on it.

The review process, despite the Banks’ lawyers’ suggestions that it is ADR is not, of course, held “without prejudice”. I’m yet to see any offers of redress through the FCA review system, so do not know whether such offers will be without prejudice or not. I do not see how they can be, but in cases where proceedings have been issued, I suspect that the lawyers will insist on the redress offers being without prejudice and subject to confidentiality. Some independent, transparent review!

It’s my belief that the Banks will not seek genuinely to compensate business properly, particularly in respect of so called consequential losses. These are the costs incurred over and over the swap payments, which would not have been incurred if the IRHP had not been missold. These might include, for instance, additional interest, penalties, charges, special situations business support, audits, legal costs. The list goes on. To the contrary, I suspect that the Banks’ will be looking at offering different products (eg you could have had a capped loan, with a premium of £40k…).

Offers/Redress

As a consequence of the pressure placed upon the Banks, a couple of my client’s have received offers of redress. I strongly believe that these offers have only come about because my client’s are represented and feel that the Banks would probably push unrepresented clients to accepting different offers.

I’m delighted to be at the forefront of this round of banking litigation claims. I find it fascinating and challenging but more importantly, I am passionate about getting justice for my clients. I hope that the FCA review will produce good settlements, but if it does not, its hi-ho hi-ho, off to Court we go.

 

About the Author

Steven Mather is a Partner of Josiah Hincks Solicitors in Leicester. Steven is a commercial litigation specialist and has developed a niche in banking and financial services litigation. His experience in the field is unrivalled both for his age and geographical location. Josiah Hincks Solicitors have been in practice for 85 years and is a trusted, experienced provider of legal services in Leicestershire, the Midlands and Nationwide. For more details, please contact smather@josiahhincks.co.uk or 01530 835 041 or visit www.josiahhincks.co.uk

 

Disclaimer

This article is for information only and should not be taken as legal advice or relied upon to any extent. Every case is different and should be considered on its own facts and merit. You should seek independent legal advice.



Author: Steven Mather
Steven is a Partner of Josiah Hincks and specialises in commercial litigation