Successful defence of first full trial relating to IRHP mis-selling claim under section 138D

In Parmar and Another v Barclays Bank Plc [2018] EWHC 1027 (Ch), Andrew Sutcliffe QC, instructed by Dentons UKMEA LLP, has successfully defended claims brought against Barclays Bank Plc (“Barclays”) in relation to two interest rate hedging products (“IRHPs”) entered into by the claimants in 2009.  The claims were brought under section 138D of the Financial Services and Markets Act 2000, alleging numerous breaches by Barclays of the FCA’s Conduct of Business Sourcebook Rules (“COBS”).

This is the first occasion on which a full trial has ensued from an IRHP claim by private persons asserting a breach of statutory duty under section 138D.  The claimants’ claims were wide-ranging, including that Barclays had advised them to enter into the IRHPs, that the IRHPs were unsuitable, that Barclays had failed to conduct an adequate fact-finding exercise to determine the appropriateness of the IRHPs, and that Barclays should have disclosed its internal calculation of its near worst-case credit exposure in case of the claimants’ default (its “credit equivalent exposure” or “CEE”).

The Deputy Judge rejected the claimants’ claims, holding that Barclays had not assumed an advisory role to the claimants but that, even if it had, the IRHPs were suitable for them, that Barclays had obtained sufficient information about the claimants to determine the appropriateness of the IRHPs and that the IRHPs were appropriate for them.  Whilst the judge considered that the information given by Barclays on breakage costs was inaccurate in two minor respects, the claimants had suffered no loss because they fully understood the nature, calculation and possible magnitude of those costs.  Significantly, the judge rejected the claimants’ case that Barclays was required to disclose its CEE, in line with recent case-law on the point.

For a copy of the judgment please click.