DO YOU OR DON’T YOU?

Professional Negligence Solicitor, Emma Slade, examines a unanimous Court of Appeal decision which confirms that once a decision by the Financial Ombudsman is accepted, the complainant cannot sue for any shortfall in the courts

The Financial Ombudsman Service (“FOS”) was set up by the Financial Services and Markets Act (“FSMA”) 2000 as a dispute resolution service between consumers and providers of regulated financial services.  The purpose was to provide a swift and simple service, free at the point of contact to the consumer, whereby the Ombudsman would determine the complaint “by reference to what is, in the opinion of the ombudsman, fair and reasonable in all the circumstances of the case.”  He can therefore ignore the technicalities of the law (although if the decision is considered “perverse” or “irrational” a court can overturn it) and even order compensation over and above that which would be allowed by the law.  Currently, there is a maximum compensation limit of £150,000 but the FOS can make recommendations that a further payment over and above that amount be paid (although that additional sum is not enforceable).

The procedure for considering a complaint is that the Financial Ombudsman will invite each party to put their case in writing to the Ombudsman for consideration.  Although oral evidence can be provided, it is very rare and even then, there is no opportunity for formal cross examination or, as in the case of litigation, disclosure of documents between the parties.  At the conclusion of his investigation, the Ombudsman will make a decision and the complainant is invited to accept the decision.  If the complainant accepts the decision, for the purposes of the FSMA, it is considered “final”.  However, for a long while, it has been accepted that it is only “final” in terms of the FOS procedure.  There is nothing in the FSMA which expressly addresses whether or not the decision precludes legal proceedings.

This has been considered at great length by the courts over the past few years.  The view the High Court took in the Clark case was that the FOS was merely dealing with complaints and that it was simply “a scheme for the summary and informal resolution of disputes”, certainly not a court or a tribunal.  Indeed, the Court went so far as to say that:

“It seems to me that for a Complainant to use an award of £100,000 to finance the legal costs of bringing court proceedings for a greater amount is not inconsistent with the statutory aims.”

IFAM appealed the decision, its legal team citing the legal doctrine of res judicata, a Latin term which basically means that if a ‘cause of action’ has already been adjudicated upon by a judicial tribunal, then it precludes a party from bringing another set of proceedings.  It took the view that as the Financial Ombudsman had made an award which had been accepted by the Clarks, they were prevented from seeking further compensation.  The Court of Appeal therefore had to decide whether:

The FOS is a judicial tribunal
Whether a complaint to the FOS is a ‘cause of action’
Whether there is anything in the FSMA which would allow or prevent subsequent litigation proceedings

The issue of whether the FOS is a judicial tribunal was easily dealt with.  Consideration of the procedure – especially the fact that both parties could put forward their case, the fact the decision was determinative and that the FOS had jurisdiction over both parties, meant the Court of Appeal was certain that the FOS is a judicial tribunal for the purposes of res judicata.

But is the FOS considering the same ‘cause of action’?  What is a ‘cause of action’?  Quite frankly, it is a high- fallutin’ legal term for describing “the various categories of factual situations which entitle[s] one person to obtain from the court a remedy against another”.  In short, it is simply a set of facts presented for determination.  And the Court of Appeal considered that in many instances, even if the actual complaint itself does not constitute a cause of action, the underlying details that the FOS has to consider may indeed be a cause of action.

So in short, the Court of Appeal came to the conclusion that, if a complainant accepts an FOS decision but then brings proceedings against the respondent on the same set of facts, res judicata will apply and the case will have to be struck out as an abuse of process.

Was there anything in the FSMA which prevented this?  As I have said above, no.  It is entirely silent on the point of whether further legal proceedings are precluded.  In those circumstances, as statute is quiet, we must fall back on the common law.  As common law does not allow “two bites at the same cherry”, subsequent litigation proceedings following an accepted FOS decision will not be allowed.

What did it mean in this instance?  In this case, Mr & Mrs Clark had invested a significant sum of money in endowment policies upon the recommendation of IFAM.  They lost a sum in excess of £300,000.  The FOS agreed the advice had been poor and gave them the maximum award which at that time was £100,000, with the further recommendation that IFAM make further compensation which IFAM ignored.  The Clarks legal team sought advice from the FOS whether, if the award was accepted, it would prevent additional proceedings but the FOS response was that they simply did not know.  The Clarks accepted the offer but on the proviso that it was without prejudice to their right to seek additional recompense via the courts.  Would this work?  No.  Davis LJ dealt with this in the final judgment in this case stating that “purported reservation of the right to sue cannot operate to create such a right when, on acceptance of the award, such a right was never there.”

Conclusion

This is going to be a bitter pill to swallow.  It has to be accepted that the litigation animal is not a particularly swift one and invariably, the complaint arises as the complainant has been deprived of much needed funds.  The prospect of a swifter and much cheaper resolution through the Ombudsman service is therefore extremely attractive particularly as it is non-litigious in nature and does not involve the stress and strains that litigation may have.  However, its remedy for large value claims is limited to only £150,000 which, given the FOS has admitted it has approximately 87 claims per year over this value, means there should be a serious pause taken before engaging the FOS.  Even more importantly, it is unclear whether the FOS are going to be altering their website and media publications to make it clear that once the complainant signs on the dotted line, there is no secondary recourse for compensation.  In short, whilst the Financial Ombudsman is a useful vehicle for smaller claims to be considered, for larger claims, you should always take independent legal advice to ensure the best procedure is adopted in your case.

For a free assessment of your professional negligence claim give us a call or drop us an email.

Charles Cooper, Barrister at Magdalen Chambers, reviews the recent Solicitors negligence case of Feltham v. Bouskell on the negligent assessment of mental capacity and delay in preparing a Will.

It is an obvious requirement for a new Will to be valid that the testator, whose Will it is, should not lack mental capacity. The decision in Feltham v. Bouskell [2013] EWHC 1952 (Ch) may give hope to beneficiaries disappointed by a Will found invalid for such lack of capacity, where a Solicitor was instructed in relation to that Will.

The testatrix in that case, Hazel Charlton, was 90 years old and suffering from dementia when her step-granddaughter contacted her Solicitor to give instructions for a new Will. The changes Hazel apparently wished to make were substantial, her longstanding partner (and one of the three principle beneficiaries under her existing Will) having died 10 days before. The Solicitor explained that he would need to obtain a medical opinion in relation to her capacity, and agreed to instruct her GP to prepare a report.

The report, which concluded that she had the requisite mental capacity, arrived over a month later and the Solicitor chose not to take any further action unless Hazel raised the issue with him again because he had formed the view that she did not really want to change her Will.

Almost 2 months after the initial instructions had been given, the step-granddaughter prepared a new Will for Hazel using a Wills website and her husband arranged for two people to witness Hazel’s signature. The new Will left just £50,000 to each of the principle beneficiaries under her previous Will, and the substantial residue exclusively to her step-granddaughter.

Hazel died a month later, and the principle beneficiaries under her previous Will successfully challenged the new Will on the ground that she did not know and approve the contents of the new Will before she signed it. The step-granddaughter then brought a claim against the Solicitor for the loss she had incurred.

The Court held that on receipt of the instructions the Solicitor should have either refused to act and made his position clear to the client, or have taken steps to satisfy himself as to his client’s mental capacity and carried out the client’s instructions promptly, and in failing to do so was negligent.

In particular, the Court found that:

1. the Solicitor’s letter to the client, on receipt of the instructions, in effect accepted those instructions subject to satisfying himself on the capacity issue;
2. by agreeing to instruct the GP to prepare a report, the Solicitor took on the responsibility of satisfying himself as to the client’s capacity and doing so with reasonable expedition;
3. the 5 week period between giving instructions and receiving the report was too long in the circumstances, the Solicitor should have chased the report after 10 days and if the GP was unable to prepare the report expeditiously then the Solicitor should have arranged for another doctor to be instructed;
4. on receiving the report, the Solicitor should have arranged to visit the client to discuss the proposed changes to her Will and to satisfy himself that they were in accordance with her wishes.

While the finding of negligence in this case was fact-specific, a number of Solicitors have expressed surprise at the decision which may reflect a wider-spread problem in the assessment of testamentary capacity.

Many a professional negligence lawyer has had enquiries about whether legal liability arises for irresponsible bank lending.  Picture the case: a young 18 year old in his first job wanting a £5,000 loan but, once the credit scoring goes through, the bank says he can have a £15,000 loan if he wants to.  If he opts for the larger loan is the bank then liable when the young lad gets into financial difficulty?  When his credit scoring hits rock bottom, should the bank set aside the agreement?

This is a very difficult question to answer.

Much depends on the conversation that took place between the bank and its customer.  What did the bank say?  If the conversation relayed above is as simple as it suggests – “I want £5,000”. “You can have £15,000 if you want” – then there is no liability.  It has long been established in law that the bank does not act in an advisory capacity and so it owes no duty of care to the customer to establish whether or not they can afford the loan.  To use the old adage ‘caveat emptor’ – let the buyer beware.

But what if the conversation goes beyond that?  What if the bank starts giving advice?  And I don’t mean the kind of chat that gives the customer different options about available loans. I mean something that goes beyond that which amounts to specific advice to the customer?  It is only in that instance, as established in the 1959 case of Woods –v- Martins Bank Ltd, that the bank then owes a duty of care to give reasonable advice to the customer.

This seems very stark given the times that we live in, especially given the bevy of Personal Protection Insurance and Interest Rate Swap cases that are being fought over.  Is it really a case of caveat emptor when the customer agrees to take PPI out to protect himself against the possibility of unforeseeable redundancy or inability to pay?  Or to take out a hedge fund to protect himself against potential interest rate rises?

The Office of Fair Trading has taken the view since March 2010 in its ‘Irresponsible Lending – OFT Guidance for Creditors’ that a bank should:
“make a reasonable assessment of whether a borrower can afford to meet the repayments in a sustainable manner”
and that:
“borrowers should not be targeted with credit products that are clearly unsuitable for them”.

But in those cases, the only sanction – if the offence is great enough – is for the OFT to remove the bank’s licence to give credit and/or a fine of up to £50,000.  There is no remedy for the individual customer.  In particular, the OFT does not have the power to revoke the credit agreement.

The Financial Ombudsman Service (FOS) does have that power, but its power is entirely discretionary.  By law, the bank needs to establish the customer’s financial position before making a loan, but it is only under FSA guidelines that they need to assess the customer’s ability to meet their potential repayments.  So long as the product is not grossly ludicrous for the customer’s needs and the bank can show that no advice was given and the credit scoring assessment was undertaken, the FOS is unlikely to make a finding against the bank.

Take for example, the illustration on the FOS website of a 20 year old university student who obtained a £2,500 loan to purchase a motorbike, even though the bank was aware he was off for a gap year before going back to university and would not be able to keep up repayments.  “Ill-judged and irresponsible” lending?  The FOS did not think so, but it did uphold the complaint of a young, single man with learning difficulties who took out a £4,000 loan to start up his own business as a handyman and fell into difficulties when his business failed.

As a brief aside, Parliament has been looking at the possibility of enacting a statute to make it a legal requirement for lenders to lend responsibly although, despite various Committee discussions, nothing has yet come of it.

So ultimately, it will be difficult to overturn a credit arrangement in law unless it can be shown that the situation was misrepresented or it was an unfair contract.  If it was an irresponsible loan, the law will not look too kindly on a claim but the FOS may, subject to the circumstances, provide some sort of redress.

But don’t hold your breath!

Emma Slade is a solicitor specialising in professional negligence claims, especially those of a financial nature, and can often work on a No Win, No Fee basis. If you think you may have a valid professional negligence claim for irresponsible bank lending or any other financial claim, and would like a free initial legal assessment, contact Emma on 0333 888 0403 or email us at [email protected] .

A brief look at how the desire of bankers to increase their bonuses has contributed to the Interest Rate Swap problem

This article was going to be entitled “Why did the banks do it?” but the answer seemed so obvious, the question barely needs to be asked.

The banks have been bonus-driven for years, but it is only now that the true extent of what has happened is coming to the fore.  For the last few years, the banks have been ridden with claims for PPI mis-selling and the LIBOR-fixing debacle but, in the last year, the Interest Rate Swap (IRS) scam has hit the headlines.

It starts off fairly simply: borrower seeks loan, bank offers loan.  But invariably, the bank encourages or, more often than not, requires the borrower to enter into an interest rate swap, or Interest Rate Hedging Product (IRHP) as the FSA is calling it.  The Bank explains it to the borrower as a fixed rate loan rather than the usual variable rate loan, giving the borrower certainty against a future with potential rising interest rates and a better ability to budget.

What actually happens is that the bank buys a hedging product on the inter-bank market at, say, 5% then, adding a profit margin of, say, 1%, then sells the IRHP to the customer for an apparent fixed rate of 6% per annum.  Regardless of whether the interest rate increases or decreases, this is the fixed sum that the borrower pays and throughout all this, the bank makes a 1% profit on the arrangement.  But the big benefit for the banks is that they take all the profit up front – which means the bonuses to the bankers get paid in the first year.

So, what can the bankers do to maximise their bonus?

For starters, bankers can sell more expensive IRHP’s, increasing the margin to say 1.5% or higher.  Better yet, buy a hedging product on the inter-bank market for a longer period of time than is actually needed (so the purchase rate is lower) or even for a greater amount than the amount of the loan actually needed.  Customers can easily be persuaded to ‘over-hedge’ their Swaps if it appears the interest rate they pay will be lower and in this way it increases the banks profit and the banker’s bonus yet further.

These behind-the-scenes calculations aren’t seen by the customer.  All they know is that they have a potential guarantee against a potentially rising market:  That is, until the base rates drop to an all time low of ½%, lending rates fall below the IRHP fixed rate and the customer tries to get out of the arrangement.  It is at that stage the borrower realises they are required to pay ‘breakage costs’ which reflects the loss of the bank’s profit over the remainder of the term of the loan – made even greater if the loan has been over-hedged.  The FSA has recorded some instances where the breakage costs have been as much as 40% of the original loan.

For those reading the news, they will be aware that the FSA has released two reports so far on their investigations into the IRS Scandal, confirming that in over 90% of 173 cases they investigated, customers were found to have been mis-sold their loans.  The FSA has ordered that there be a review of any Swaps that have been sold.  Those customers who have been sold a structured collar will be contacted by their bank (if they bought it with one of the ten banks affected), who will then undertake an automatic review.  As to the other types of Swaps, it will depend on what type of IRHP you were sold and whether you are considered to be a sophisticated or unsophisticated customer.

If you would like a free consultation with a specialist interest rate swap solicitor, then please do not hesitate to call us on 0333 888 0403.

Professional negligence lawyer, Emma Slade, reviews the latest case law relating to negligent property overvaluation by valuers and surveyors

Readers may be aware of the stinging result for professional negligence Claimants in the 2011 Court of Appeal decision of Scullion –v- Bank of Scotland.  This is the case in which Mr Scullion purchased a buy-to-let property, relying on a valuation obtained for mortgage purposes and addressed to the Bank of Scotland.  It was found that the property had been negligently overvalued but in a unanimous decision in the Court of Appeal, it was decided that as the valuation had been commissioned for commercial purposes, Mr Scullion could not rely on it.  Permission has been granted to appeal the matter to the Supreme Court.  It now looks as if it will be heard in April 2013.

This is not the only case which seems to have let negligent valuers off the hook.  The recent case of Paratus AMC Ltd –v- Countrywide Surveyors Ltd also appears to be siding with valuers. In this case, Mr S wished to remortgage a property with the First Claimant (C1).  His was a self-certified mortgage application, providing information as to his income and liabilities.  He was also requesting a 90% mortgage plus expenses – a not inconsiderable Loan To Value (LTV) application.

C1 instructed the Defendants (D) to prepare a valuation which they duly did, reporting back to C1 that the property was worth £185,000.  The mortgage application was approved and the monies released.

One of the complicating factors is that C1 then sold the beneficial interest in the mortgage to the Second Claimant (C2), although C1 retained the legal interest.

A couple of years later, Mr S defaulted on the loan, the property was repossessed and sold at a price of £123,500.  C1 & C2 therefore brought proceedings against Countrywide (D) for negligent overvaluation of the property.  D defended the claim arguing, amongst other things, that the assignment was not valid and that C1 had contributed to the loss by accepting Mr S’ application on face value.

The main issue that the Court dealt with was the valuation itself.  It was critical of the expert valuation which had tried to value the property based on a value per square metre.  The Court preferred the evidence of D’s expert which had made comparisons with local properties with the Land Registry and concluded that a better valuation would have been £175,000.  Considering a ‘margin of error’, the court concluded that the original valuation of £185,000 was reasonable and so there was no professional negligence by Countrywide.

However, the Court also dealt with the other two issues, raising a third point which has proved of interest.

(1) Did the assignment prevent C1 & C2 from suing D?
D argued that, by reason of the assignment, C1 had not suffered a loss but rather C2 had and as the report had been done for C1, it did not owe a duty of care to C2.  As it happens, the Court found that the assignment was invalid and that C1 would have suffered a loss if D had been found negligent.  Interestingly, the Court also said that D was trying to exploit the law on a strict interpretation of the rules and “it would be a sorry state of affairs if… losses for which a negligent valuer would otherwise have been liable became irrecoverable”

(2) Did C1 contribute to the loss?
D argued that C1 contributed to the situation by failing to investigate Mr S’ financial situation.  A closer look at the application for mortgage showed that Mr S’ claims of income and liabilities were dubious at best.  Given this was a high LTV application, the Court felt that C1 should have made further enquiries, would have concluded the application was dishonest and not made the loan.  Had D therefore been negligent, the Court would have said C1 had contributed to the loss by 60%.

(3) Was the scope of the duty of care diminished by the cost of the retainer?
Yes.  This has certainly been implicit in a number of cases but in this case, the Court was unequivocal on the point, saying that where the surveyor is paid a low fee then “the fee sets some parameters to what is reasonably to be expected.”

This case has not been heard by the higher courts and is only a first instance decision but despite that, it is nevertheless important as it collates a lot of important judicial thinking into one decision.  Probably the most interesting points arising from it are the second two issues – the role that the mortgagee failed to play in determining whether or not to provide the loan (they tried to argue that it was only the mortgagor’s ability to pay that was their sole concern – a point soundly rejected) and also the firm confirmation that the fee paid also determines the level of service provided.

It will be interesting to see whether any of these points are taken up by their Lordships in Scullion particularly the latter point given that the cost of the valuation in that case was only £35!

We specialise in negligent property overvaluation cases. If you think you may have a valuers negligence claim or wish to make a compensation claim against a surveyor on a No Win, No Fee basis then contact us now for a free case assessment.

Interest Rate Swap lawyer, Emma Slade, looks at the reserves that the banks have put aside to meet interest rate swap compensation claims and asks ‘is it enough?’

Concerns are being raised as to whether there is enough money in the proverbial pot to compensate victims of the Interest Rate Swap scandal; not just to repay any breakage costs that have been incurred, but also any additional costs and interest that they have paid.

So far, the Big Four banks have set aside a total of nearly £740m, with Barclays setting aside the most in a staggering sum of £450m.  But already, there are calls suggesting that this figure is one of mere ‘wishful thinking’.  It is rumoured that Barclays is preparing to set aside another £1.1 billion and the likes of  lobby group, Bully Banks, which represents over 1,000 small businesses, has suggested that the final cost may be closer to a whopping £10 billion.

This is an alarming figure, particularly given the state of the economy at the moment. The picture for victims is not made any better by reports that the FSA is “coming under sustained pressure from the banks and the Government to soften or delay paying any compensation”.  Clearly, delay in paying out such huge sums by way of compensation will help not only the bank’s bottom line profit figures but also, in theory, the Treasury in its goal to encourage banks to lend more to small businesses.

What it will not help are the small businesses that have been badly affected by the huge costs that have been inflicted on them. At the same time, further delay may lead to such affected companies missing critical litigation limitation periods which will prejudice their options for recovery.

If you have been affected by interest rate swap mis-selling, it is recommended that you seek specialist legal advice at the very earliest opportunity.  Whilst the FSA-led reviews are being considered, delay could be critical to your claim for recompense.

For a chat and some initial guidance, without charge or obligation, give us a call on 0808 1391595 or email [email protected]

We look at whether victims of Interest Rate Swap mis-selling will need a lawyer to assist them with obtaining redress

An article in THE INDEPENDENT published, just five days after the FSA Interest Rate Swap announcement, commented:

‘within half an hour [of the announcement by the FSA], six “claims management” firms had got in touch offering their view on mis-selling and, naturally, their services to small businesses that might be due compensation. The words “claims management” are in quotation marks because these companies are little more than ambulance chasers. Having heard that the final bill for the banks may be as high as £10bn, these parasites are already working out how to get a slice of the cake, just as they have so ruthlessly done with payment protection insurance mis-selling.’

A harsh comment to be sure but the journalist is correct in that many so called ‘claims management companies’ are getting on the band wagon and trying to cash in on what they see as a lucrative new area of work. Hard time were predicted for these claims farmers following reforms to the personal injury claims referral market and many such companies are likely to see IRS as a ready made replacement.

Before dealing with the issue of the unqualified claims companies, the first issue to be addressed if whether people need independent legal advice at all.

Do victims of mis-selling actually need legal assistance?

The FSA report on Interest Rate Hedging Products (‘IRHP’) stated that

‘the pilot confirmed our view that independent reviewers play a vital role in this [review] exercise. The independent assessors reviewed each case in the pilot (as they will do for the full review). We saw evidence of the independent assessors challenging the bank’s views on both whether the sales met [the FSA] regulatory requirements and on redress, and the views of the independent reviewers prevailed.’

These are heartening words, particularly given that the report goes on to state that the Big Four banks (Lloyds Group, Barclays, HSBC and RBS) have all agreed to adopt the full review process – which presumably includes the adoption of the role of the independent reviewer. In those circumstances, it would seem that dependent legal assistance is not required.

However, we would hesitate to endorse such a bald statement. The review system is limited in scope. It will depend on the type of Interest Rate Swap product you have been sold as to whether you automatically fall within the review scheme. There are four such categories:

1. If you are a non-sophisticated customer who was sold a structured collar, then you will automatically fall within the review scheme. In these circumstances, you probably will not need any independent professional legal assistance. The banks will review your claim automatically and have assured the FSA that they will provide reasonable redress. If however, you are dissatisfied with the outcome, at that stage, you may wish to review whether or not you need legal assistance.

2. If you are a non-sophisticated customer who was sold an IHRP (other than a cap or structured collar), then there will be a review but not necessarily an automatic review. You may need ad-hoc professional assistance here for although there is not an automatic review, you will need to lodge a claim. You may want some assistance in dealing with such determinations as to whether you fall in the category of ‘non-sophisticated’ customer and details of your losses, particularly ‘consequential losses’. Once you have started your claim though, legal assistance may not be required any further – unless the redress is less than you believe you are due.

3. If you are a non-sophisticated customer who was sold a cap, then your matter will be reviewed only if you make a complaint. You are starting to get into the realms of complexity at this stage as it will start dealing with legal notions. You may want to seek professional legal assistance to ensure that your interests are being best served.

4. If you are a sophisticated customer, an SPV or the value of your IHRP is greater than £10m, then you will not fall within the review programme and you will need to bring a claim through the courts. In these circumstances, you are likely to need legal assistance.

Where should mis-selling victims go for professional advice?

So having decided that you required independent, professional legal advice, who should you turn to?

Essentially you have two choices

• A firm of solicitors
• A claims management company

Should I use a claims company?

Claims Management companies are usually staffed by non-legally trained personnel, overseen by one or two legally qualified staff. Claims tend to be processed along a specified route of standardised actions and correspondence. These processes might be adequate for simple claims, like a road accident – though even that is debatable – but when a case becomes more complicated and therefore falls outside the systemised procedure, the Claims Management companies begin to struggle. The unqualified claims handlers’ do not have an adequate grasp of legal concepts and the risk of bad advice arises. Unlike solicitors, these companies are not obliged to carry insurance, so if things go wrong consumers could be left without redress,

If you require assistance for simple matters (such as the automatic reviews), a claims management company may suit your needs but their charges are generally in line with what a solicitor would charge (and often higher) so there isn’t much to be gained from opting for an inferior service. We would not recommend them for claims outside the automatic review scheme. .

Whilst solicitors are very strictly regulated and under a duty to ensure that their advice is tailored to what is in the best interests of the client, that isnt the case with the claims companies. As with the PPI scandal, we fear that people will be encouraged to seek legal assistance in situations where it is not strictly necessary. The FSA have made it very clear that for the simple claims that we have mentioned, the system they have set up is designed to ensure that the matter can be dealt with swiftly and simply without the intervention of an adviser.

You also need to give careful consideration as to how the Claims Management companies are going to fund your claim: usually it is by receiving a percentage of your damages. For such a simple claim, many people might prefer to keep the money themselves.

Should I use a solicitor?

For the claims that will come under the automatic review, we would recommend that people think very carefully about whether they need independent advice at all. As solicitors, its our duty to consider what is in your best interests, so if we think that you don’t actually need independent legal advice we will tell you so and you wont incur any legal fees. As we have said, the FSA have set the system up to provide redress to those who have been sold structured collars and so at this satge we think its reasonable to believe that these claims can be dealt with without any professional assistance.

Of course, many people feel more comfortable having a lawyer look after their affairs. They might not have the time to deal with matters themselves or struggle with the paperwork. If you fall into that category we will be delighted to help, but in the first instance we will always review whether and to what extent you actually need to retain a solicitor.. .

For the non-sophisticated customer who was sold an IHRP (but not a cap or a structured collar), then, as hinted above, you may want to get some professional legal assistance at the outset with preparing your complaint and possibly even to review the final outcome. You can use a Claims Management company but you will probably be better served by using a qualified solicitor specialising in commercial litigation who has a proper understanding of the legal concepts and more experience in negotiating settlements. Solicitors also have the added advantage of being properly regulated and adequately insured.

As for the other third category, we would definitely urge you to take advice from a solicitor. It may be that the solicitor will simply give you advice on how to conduct your claim, assisting you with drafting the complaint etc. and then you deal with the day to day management of the claim. Alternatively, the solicitor may deal with the claim in its entirety. But either way, I would recommend you get assistance from a qualified legal representative.

For all other claims, you will need a solicitor. Claims Management companies do not have the necessary expertise or qualifications or indeed the right to represent you in court proceedings.

Can Slee Blackwell help?

We can help you with all four categories of claim here even if, in the first type of claim, it is simply to recommend leaving the matter in the hands of the bank. We are also able to give you ad-hoc advice as and when you need it so that you can progress your claim in the full knowledge that you have legal advice and assistance at the end of the phone. Alternatively, we can take your claim on for you. We have a team of fully qualified solicitors, experienced in dealing with claims like this on a no win- no fee basis, as well as the assistance of barristers who have run IHRP claims and qualified accountants who specialise in quantifying losses.

In any of these situations, we will use our best endeavours to find the most suitable level of service and assistance that you need and you will have the peace of mind of knowing that your team is fully qualified and have the necessary experience to deal with a case of this nature.

For FREE initial advice on where you stand and the options open to you give us a call on 0333 888 0403 or email solicitor Emma Slade at [email protected]

We take a look at the FSA report on the Interest Rate Swap scandal and the criticisms that have been levelled at it

The FSA has announced that 90% of the Interest Rate Swap cases it investigated in its initial 173 case-filed review had been mis-sold. Consequently, the banks will now be required to carry out full reviews and to compensate customers. RBS, one of the Big Four, immediately put out an announcement saying “RBS is committed to treating its customers fairly and to delivering on its obligations under its Undertaking to the FSA.”

Can’t get fairer than that. Or so it seems – until you look at the fine print of the Scheme.

Because what was studiously avoided in the FSA press statement was that interest rate swaps valued at more than £10m will be excluded from review.

The FSA had said that in order for a business to come within the ambit of the review, it must be considered a ‘small business’. Using the definition of a small business from the Companies Act, any business with a turnover of less than £6.5m, a balance sheet of less than £3.26m and less than 50 employees will be considered a small company. However, this could easily exclude many farms who may employ more than 50 people in any one year on a seasonal basis and, given the amount of land holdings many farms have, the balance sheet could be in excess of the balance sheet limit. Yet in many instances, the farm is, for all practical purposes, a small business.

As a result, the FSA has abandoned these tests and simply set a £10m cap on the value of the IRS. A spokesman for the FSA said that this cap had been set to take into account the likes of farms and small care homes that would then fall outside the review.

But if that was the case, why was this new cap so carefully hidden amongst the fine detail, where the devil so often lurks? And why was it not made public in the press statement?

Rich Eldridge, Head of Finance at Manches, has been quoted in The Independent as stating

“Many people suspected the potential exposure of the banks was too large for taxpayer-owned banks. It seems the FSA has bowed to the pressure from the banks by agreeing to exclude the largest claims. I have lost all faith in the process. A process in which the FSA bows to the strength of the banks will not deliver a fair result for borrowers. It is particularly concerning that the FSA has not been upfront about changing the review to exclude the larger claims.”

Has the FSA bowed to pressure? Will this impact on others who will fall into the review scheme? Does the criticism that the review system leaves the FSA in the position of being ‘judge and jury’ have some foundation?

Worrying as this announcement may seem, it should be pointed out that this cap only excludes cases from the FSA-led review. It does not stop someone who has lost out from bringing a civil claim in the courts for the mis-selling of the policy.

If you are considering court action and would like a FREE assessment of your potential claim then contact us now.

The eagerly awaited SRA report on Interest Rate Swap mis-selling is published

At seven o’clock this morning (30 January 2013) – a day earlier than anticipated – the FSA released a statement following its investigation into interest rate swaps.

For small businesses who have been affected by this scandal, the statement looks hopeful but gives worrying statistics as to how big this scandal actually is. Accusing lenders of selling businesses “absurdly complex products”, the FSA statement confirms that of the 173 IRS sales to SMEs that they investigated, more than 90% were found to have been mis-sold.

Despite the bad news in December 2012 with the decision of Green & Rowley –v- RBS which seemed to ring the death knell for a positive outcome for SMEs, the FSA roundly dismissed that case as being too fact specific, a point that we made in a previous article.

As a result of this finding, the Big Four banks (Barclays, Lloyds TSB, HSBC & RBS) have now been given the go-ahead to review their mis-selling – Allied Irish, Bank of Ireland, Clydesdale/Yorkshire Co-operative and Santander will hear in the next couple of weeks whether they will be obliged to carry out the reviews.

At this moment in time though, it is unclear whether this relates to all IRS sales (including vanilla hedges) or, as previously suggested, is limited to purely structured IRS Sales.

Further, clarification has not been given as to what type of SME is subject to the review: previously the FSA had stipulated that only those businesses with less than 50 employees, turnover of no more than £6.5m and a balance sheet total of less than £3.26m would be subject to the review. It appears that these restrictions currently still stand despite criticism by many lobby groups who suggest that these restrictions are artificial and fail to take into account the realities of the situation.

Further good news appears to come from the FSA statement though in its confirmation that these reviews will provide “fair and reasonable redress” to those affected. This does appear positive but, bearing in mind the recent reports of bank pressure on the FSA to water down the levels of compensation, it is unsurprising that lobby groups such as Bully Banks consider this a ‘Polo’ settlement: “it has a fundamental hole in the middle with no definition of what is ‘fair and reasonable’, what actual redress businesses will receive nor any deadline for resolution”.

So whilst the statement appears positive in that the Big Four banks are going to have to review their selling of IRS, it is still far from clear as to who will come within the remit of those reviews and how much compensation will actually be provided. In addition, this is very much ‘early days’ for this latest scandal to hit the banks and so whilst this ‘Polo’ report seems initially positive, there will undoubtedly be a number of humps in the road before a totally successful outcome.

Professional Negligence Solicitor, Lee Dawkins anticipates the publication of the FSA’s report on the interest rate swap debacle

The FSA is due to release a report this week on its investigations into the Interest Rate Swap scandal.

Last year, the FSA ordered Barclays Bank, RBS, Lloyds TSB and HSBC to commence a review of their procedures into the selling of Interest Rate Swaps, such investigations then being extended to an additional seven banks.

Those procedures have now been reviewed by the FSA to determine whether the complaint handling is, in its view, adequate. If it is, then the FSA is likely to order a full review of what it considers to be ‘non-sophisticated customers’, a case review which could mean an examination of anything up to 40,000 cases.

If the FSA finds that the measures are insufficient, it could mean the banks are sent back to the drawing board to review their methods which could mean further delays for the smaller customer. This is particularly worrying given that many small customers could be facing their litigation limitation period of six years; if they exceed this limitation period, they will not be able to obtain redress through the courts.

It would appear though that the main cause for concern for the banks is the definition of ‘non-sophisticated customer’. At the moment, the FSA has defined a NSC as a firm “with fewer than 50 employees, less than £3m in assets and less than £6.3m in annual turnover”. This will sweep up many small firms that have been affected by the IRS scandal. However, what the banks are concerned about is that “this could open the floodgates to claims from subsidiaries of listed companies and ‘special purpose vehicles’”, ie small companies that have been set up to hive off the loans from their larger parent companies in order to protect it. If this is the case, then the banks will be inundated with claims causing further delay for the genuine small businesses that have been affected by the scandal.

We will update you on developments and let you know when the awaited FSA report has been published. In the meantime anyone wishing to make an interest rate swap claim should call us on 0333 888 0403 or email us for FREE initial guidance.