HSF and Blackstone triumph for KPMG on unprecedented judicial review

Herbert Smith Freehills and Blackstone Chambers have successfully defended KPMG against an unprecedented judicial review claim in the High Court.

The application for judicial review, brought by nursing home operator Holmcroft Properties,  questioned the accountancy firm’s role as independent reviewer in the compensation process of mis-selling of interest rate swap products.

The company, which instructed Mishcon de Reya, was awarded £500,000 under Barclays’ compensation scheme, but was not paid for other consequential losses that contributed to the loss of properties after the cost of paying its swap obligations ballooned.

In a judgment handed down this morning (24 February), Lord Justice Elias and Mr Justice Mitting dismissed Holmcroft’s case. The company originally secured permission to bring its claim in April 2015.

The FCA entered as an interested party in the case last year, instructing Baker & McKenzie and ditching its plans to manage its role in the dispute in-house.

The judgment said there was no material breach by KPMG of any public law duty to secure fair process and that“there is clear evidence that they [KPMG] did carry out the task which they were required to do pursuant to the undertaking”.

Mishcon dispute resolution partner James Oldnall, who led the case for Holmcroft Properties, said that while his clients are disappointed with today’s decision, this was “by no means the end of the road”.

“We always knew that it was a bold move to make an application for judicial review, and the fact that the hearing was granted at all was unexpected to many,” Oldnall said. “We believe it offers very credible grounds for appeal and will be making an application to do so.

“There is value in pursuing an alternative legal route to securing compensation for affected businesses, focusing on the issue of breach of duty.”

The legal lineup:

For the claimant, Holmcroft Properties

Brick Court’s Richard Gordon QC and Malcolm Birdling, instructed by Mishcon de Reya partner James Oldnall

For the defendant, KPMG

Blackstone Chambers’ Javan Herberg QC and Hanif Mussa, instructed by Herbert Smith Freehills partner Andrew Lidbetter

For the first interested party, FCA

Blackstone Chambers’ Monica Carss-Frisk QC, Daniel Burgess and Kerenza Davis, instructed by Baker & McKenzie head of financial services Arun Srivastava

For the second interested party, Barclays

Blackstone Chambers’ Dinah Rose QC and Ben Jaffey, instructed by Linklaters partner Alison Wilson