MAB and 3VB offer first defence in Barclays test case

Lawyers for Barclays have filed the first defence against claims of mis-selling complex derivatives.

The big four banks have so far avoided litigation over the alleged interest-rate product mis-selling and Libor fixing. But in a case brought by Cooke Young & Keidan partner Philip Young with Tim Lord QC of Brick Court Chambers as counsel (7 August 2012), Barclays has filed a 30-page defence denying misrepresentation, negligence and breach of contract in relation to an agreement with Guardian Care Homes.

The defence statement was compiled by 3VB’s Adrian Beltrami QC, instructed by Matthew Arnold & Baldwin partner Clare Stothard, for Barclays.

The care home group accused the bank of selling it derivative products that were highly unlikely of offering protection against rising interest rates in what is expected to be a test case for other businesses making claims against the banks.

The defence states: “It is denied that any act or omission on the part of Barclays has caused either GIL or GPL [Guardian Care Homes’ parent companies] to suffer any recoverable loss.”

The defence statement claims that Guardian Care Homes is no worse off after investing in the products and that it was “sophisticated” enough to understand the terms of the agreement.

It continued: “It is denied that anything said by representatives of Barclays, in writing or orally, amounted in law to advice or recommendations to purchase the collar [derivative].

“The decisions to enter into the GPL credit agreement and the collar were the independent decisions of GPL, acting through Mr [Gary] Hartland [Guardian Care Homes CEO], in the exercise of its own independent judgment, and with the benefit of independent advice […]”

In a statement issued today, Hartland accused Barclays of “evasive stalling” and said: “When Barclays aren’t using clever tactics to avoid addressing the accusations against them, they are flat-out denying that they could have conceivably mis-sold the swaps to me.

“I find it odd that they would take such a stance when only last month they agreed with the Financial Services Authority [FSA] that a sufficient number of these products have been mis-sold so as to prompt a business review and redress scheme.

“It doesn’t bode well for the small companies who might have no choice but to use that scheme to seek compensation.”

At a hearing last week at Birmingham Mercantile Court, Judge Simon Brown QC said it would be “wholly wrong” for the case to be transferred to the FSA redress scheme after Barclays had applied for the case to be deferred.

Cooke Young & Keidan is one of a number of firms instructed by businesses taking action against banks (30 July 2012).