Barclays is hauled to High Court over rate-fix scandal
Judge orders test case over care home operator's £38m Libor-rigging and swap mis-selling claim but bank says action has 'no merit'. Simon Read reports
Barclays yesterday became the first British bank to face a legal claim for damages arising out of the Libor scandal after a High Court judge ruled that a claim brought against the bank by Guardian Care Homes (GCH) must go to a full trial.
The decision by Mr Justice Julian Flaux is set to lead to a test case for how courts will decide on swap mis-selling and Libor-rigging cases. Gary Hartland, boss of the care homes group, called the decision a "huge milestone" in his £38m battle against the banking giant.
"Mine is a small care home operator, and these products along with the conduct of Barclays throughout this process have had a hugely distressing impact on our staff and residents," Mr Hartland said.
"Today is a huge milestone with a trial now going forward to determine whether these financial products should be declared void. Our claim is not just based on mis-selling but on the effect of senior management at Barclays instructing the aggressive selling of swaps while attempting to rig Libor."
But Barclays said last night that it will fight GCH, owned by Graiseley Properties and Graiseley Investments, all the way. The bank said: "This business had a suite of advisers and a lot of financial experience and skill in-house, and entered into their swaps with sufficient understanding to exercise their own judgement as to whether the products would meet its business objectives. We do not believe the case has merit and will defend it."
The bank also pointed out that GCH owes Barclays £70m, almost twice as much as it is claiming from the bank. The case revolves around loan and finance deals between Barclays and GCH stretching back to 2007 and 2008 when the care homes group took out two multi-million-pound interest-rate hedges, known as swaps.
Thousands of small firms were sold swaps by British banks as a hedge against rising interest rates but fell foul of the deals when rates sank to record lows, forcing interest repayment to soar and leaving businesses unable to escape because of huge penalty charges.
In June, the Financial Services Authority reported "serious failings" in the sale of swaps and ordered Barclays, Royal Bank of Scotland, HSBC and Lloyds to compensate customers. Barclays set aside £450m in its customer compensation pot. Meanwhile, several banks were found guilty of attempting to manipulate Libor, including Barclays which had to pay £290m in fines to British and US authorities in a scandal that led to the departure of Barclays chief executive Bob Diamond
However, the bank's fine related to dollar-libor and euro-libor rates while GCH's swaps were linked to sterling-libor. The bank will argue that its attempted manipulation had no bearing on its arrangement with GCH.
It will also point to Mr Hartland's knowledge and sophistication as "an extremely successful and capable businessman" to suggest the firm knew what it was doing.
GCH's lawyers must now sift through more than a million Barclays emails relating to the attempted Libor-rigging in an effort to find evidence to support their case. It is unlikely to reach court before next summer, angering John Walker, chairman of the Federation of Small Businesses, who said: "This will just extend the time it takes to get redress for small firms and be very costly."
elephant appealThe first 23 lots in our charity auction have now gone. But there are 22 more still up for grabs
musicPolice chief rejects rappers' claims that his work is as dangerous as law enforcement or military service
comedy'Fresh Meat' star sees off stiff competition from Alan Carr, David Mitchell, Graham Norton, Lee Mack and Sarah Millican to win top prize
healthJames Bond's alcohol consumption puts him at 'high risk' of cirrhosis, tremors... and impotence
French café starts charging extra to rude customers
Mystery of Epping Forest 'big cat' is solved
North Korea: First Kim Jong-un orders execution of uncle - now it emerges that victim's wife was involved in decision to execute him
Australia incest case: Deformed children found in remote farming community after generations of inbreeding
Fox News presenter tells viewers it is a 'fact' that both Jesus and Santa Claus are white
- 1 French café starts charging extra to rude customers
- 2 Italian court annuls prison sentence for elderly paedophile after 11-year-old victim tells investigators in Catanzaro that she loves him
- 3 Australia incest case: Deformed children found in remote farming community after generations of inbreeding
- 4 Physicists discover 'clearest evidence yet' that the Universe is a hologram
- 5 Fox News presenter tells viewers it is a 'fact' that both Jesus and Santa Claus are white
- < Previous
- Next >
iJobs Money & Business
£40000 - £50000 per annum + BONUS + BENEFITS: Harrington Starr: A leading prov...
attractive: Citifocus: Leading Asset Management house, wish to identify a temp...
£200 - £240 per day: Harrington Starr: Client Data Management - City - Brokera...
£44999 - £60001 per annum + Benefits: Pro-Recruitment Group: A Top Tier firm i...