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Money (That's what I want)

And so it is that the most closely watched case in the financial services sector is settled out of Court in the month scheduled for the trial.


It has been reported that Guardian Care Homes (owned by Graiseley Properties) and others have “restructured the £70m” debt owed to Barclays under the interest rate swaps which were at the subject of the litigation. 


The claim by Graiseley related to a claim by them and others in the sum of around £40m in respect of two hedging products purchased as a requirement of the provision of loan facilities by Barclays.  The heads of claim included allegations of mis-selling, negligence, breach of contract, breach of statutory duty and later (following closely scrutinised applications and appeals) mis-representations relating to LIBOR.


The case management of this claim has made for interesting reading, not least because of the high profile nature of the LIBOR scandal, and the test case nature of the outcome of these proceedings in the context of private claims against banks for their involvement in the manipulation of LIBOR, but also due to the implications for Barclays following their failure to secure an order that the identity of their employees involved in the matter be kept confidential.


Notwithstanding the potential merit of Barclays' defence to the claims and the precedent that might be seen to be set, the prospect of cross examination of witnesses including the former chief executive Bob Diamond, and the two former co-heads of Barclays’ investment banking division no doubt provided a real incentive to Barlcays to reach an out of court settlement to prevent this matter going to trial. It's a brave lawyer who tells a witness that he will definitely come out of a cross examination unscathed and, given the attention this claim has had, Mr Diamond and others have no doubt been spared a few sleepless nights.


As you would expect, the settlement is confidential, and so we may never learn what really happened.  The information in the press is clearly an agreed release designed to protect Barclays from looking like it has made any real concession, “face-saving” in the spirit of maintaining an ongoing commercial relationship with its valued customer.  Whilst there is always litigation risk for all parties in any action, in a high profile case like this, our money is on Barclays having made an offer that Graiseley simply couldn’t afford to refuse.


It has also been reported that Barclays has also settled a second claim brought in the English Courts by a Portuguese construction and property company, Da Silva Teixeira, which had claimed £11.1m from the bank in relation to its claim for mis-selling and which also included allegations relating to the manipulation of LIBOR.


By February, Barclays had apparently already paid £480m of compensation as part of the FCA Independent Review Process in relation to mis-selling claims in respect of hedging products. 


Confidentiality always gives rise to speculation, but a reasonable assumption is that Barclays (in spite of its confidence and “vigorous” defence) simply did not want to take the risk of publicly setting a legal precedent which might have had damning implications for it, and its employees and former employees, and for the banking industry in general.  This can only be good news for those customers who have not yet instigated a legal process against the banks, or indeed those who are part way through the FCA Independent Review Process and/or are unhappy with the compensation that has been proposed.  The banks are keen to underline that legal advice and/or financial analysis of the proposals is not necessary for this process, but then they would wouldn’t they?


A word of warning though, for those who have not commenced litigation. Due to the historic nature of many of these hedging products, even if you are already in the Review Process, if litigation has not been commenced, and you are dissatisfied with the proposed redress, without a standstill agreement or issue of a protective claim form during the Review Process, you may find you are time barred from instigating litigation at the end of that process.  If in doubt, give us a call…

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