Firm wins pounds 10m case against Barclays: Success could encourage other failed companies to act

BARCLAYS BANK faces damages of up to pounds 10m after losing a court case yesterday brought by a South Wales manufacturer forced into administration in 1990.

The counsel for the administrators of Crimpfil, which employed more than 150 people before its collapse, described Barclays' approach to the case as 'truly shocking'.

The action brought in the High Court in London by Crimpfil, a maker of car seat covers, could spark similar claims from companies that have been shut down by the banks, according to insolvency specialists.

The case centred on a letter sent by Barclays on 17 July 1989 to the company confirming an overdraft facility of pounds 2m lasting 12 months. The bank later changed the terms of the collateral needed for the overdraft, and when Crimpfil failed to comply Barclays called in the overdraft - six months early.

But the letter did not say that the bank's normal lending conditions applied to the overdraft, or that it was repayable on demand.

Mr Justice Hordern based his decision on the letter alone. He said that Barclays had broken a contract, that it had been instrumental in the failure of the company, and that it was liable for damages.

A Barclays spokesman said last night that no decision had been made on whether to appeal against the decision: 'We have to assess what was said yesterday in court before we decide what to do next. We are certain this is a one-off incident.'

The spokesman said letters from the bank agreeing to overdrafts normally contain a clause saying that they are repayable on demand.

The question of how much Barclays will have to pay in damages would normally be decided by a further trial. But Leonard Curtis, the adminstrators of Crimpfil, plan to apply to the same judge next week for an interim payment. Estimates for their claim vary between pounds 7m and pounds 10m. Interim payments are normally a portion of the final award.

Company rescue specialists observing the case think there is a threat that directors of companies that have collapsed in similar circumstances may now go back to the letters they received from their banks and lodge similar claims.

'I think this is very serious from Barclays' point of view. It could be the tip of the iceberg,' one specialist said.

(Photograph omitted)