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Divisional Court finds “not without some hesitation” that IRHP redress reviewers not subject to judicial review


A Divisional Court (Lord Justice Elias and Mr Justice Mitting) has today delivered judgment in R (Holmcroft Properties Ltd) v KPMG, Barclays Bank PLC and the Financial Conduct Authority, a judicial review challenge to the process followed by KPMG, an “independent reviewer” appointed to oversee the exercise of a redress scheme operated by Barclays Bank and overseen by the Financial Conduct Authority in respect of mis-sold Interest Rate Hedging Products (‘IRHPs’).

The background to these proceedings was the discovery of serious and widespread failings in the sales of IRHPs by a number of large United Kingdom banks, following which the Financial Conduct Authority reached an agreement with the banks to provide appropriate redress where mis-selling had occurred.

Pursuant to the agreement, each of the banks agreed to establish a redress scheme under the oversight of an ”independent reviewer” approved by the FCA as a “skilled person” pursuant to section 166 of the Financial Services and Markets Act 2000.

The issue for the Divisional Court was whether an “independent reviewer” appointed in this way is amenable to judicial review in the exercise of its functions in the redress scheme.

In its judgment, the Divisional Court reaffirmed the principle that if a body is exercising public functions, even though the mechanism for carrying out those functions is contract, it may be subject to judicial review. The question of whether a body is amenable to judicial review, therefore, requires a careful analysis of the function in issue. The Divisional Court observed that it did not find the question of whether KPMG was amenable to judicial review in respect of its role in relation to the redress scheme easy to resolve, and noted that there were a number of “powerful pointers in favour of amenability”, but that it had “finally concluded, not without some hesitation, that the public element is not sufficiently strong” to render the independent reviewer amenable to judicial review. 

The Court also made a number of observations which will be of interest to customers who are dissatisfied with the way reviews were conducted in their cases. First, the Court noted that the FCA itself was not disqualified by the arrangements from taking a more active role in particular case, and that if a claimant alleged that they were being treated unfairly by both the bank and the independent reviewer, the FCA would need to explore that complaint to satisfy itself that there was no obvious failure in the operation of the arrangements which they had set up to provide redress. The Court further observed that the FCA would potentially be subject to judicial review if it failed to regulate in an appropriate manner.

Additionally, the Court repeated an observation raised by Mr Justice Mitting during the course of argument that there may be a contractual right for a customer to sue a bank in contract if an offer made is not fair and reasonable, on the basis that a customer could, by accepting a standard offer to be subject to the scheme, create a contract with the bank under which the bank were obliged to make a fair and reasonable offer (or at least that any offer it did make would be fair and reasonable.)  The Court did not express a view on the strength of this argument. 

The judgment is here.

Richard Gordon QC and Malcolm Birdling acted for the Claimant, instructed by Mishcon de Reya