Interest Rate Swaps – Guardian Care Homes v Barclays

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Posted in:Banking and Finance|October 31, 2012 | Join the mailing list

Guardian Care Homes is in fact a collection of 15 separate but related companies suing Barclays Bank Plc for "mis-selling" a hedge that was subject to LIBOR. There are two strands to the claim, one is the mis-selling of the specific hedge
and the second is general LIBOR "fixing".

Why is this case important?

The mis-selling aspect of the claim is a routine claim with nothing particularly distinguishing about it. However, it is the first major case brought before the UK courts and acts as a key guide. Although it should be noted there are already
a few in the US.

A hearing took place at the High Court in London on 29th October 2012. Barclays had previously requested that the case be adjourned indefinitely to enable Barclays to carry out its review under the FSA led review process; however, the Court
ruled that it was not for Barclays to decide whether or not a case should go before the Courts; that power remained with the Courts. At Monday’s hearing Barclays repeated its request that the case be adjourned – a request that was not granted. Various media
outlets have categorised the decision by the presiding judge, Lord Justice Flaux’s, as "damning" and "scathing" as it went almost entirely against Barclays on every point they raised.

This case is more significant because it appears as though the LIBOR "rigging" aspect of the case will be determined by the Court, and will therefore set a precedent for future cases. If found against Barclays it will mean that Barclays will
be more likely to settle a LIBOR rigging claim brought against it before trial. Equally, if it goes in favour of Barclays then they are more likely to resist LIBOR claims.

What Issues Were Raised?

The main issue at the hearing was disclosure. Barclays has defended the case upon the basis that it may have been fined for LIBOR rigging but it is not guilty of rigging LIBOR in the manner that is suggested by the Guardian Care Home claim.
Flaux LJ’s response was to say that Barclays’ objections to the Libor-rigging claims brought against it by Guardian Care Homes were "wholly without merit" and accused the bank of "misleading" customers, confirming that in his view the defence on LIBOR rigging
was "doomed to failure."

Over a day-long hearing, Lord Justice Flaux repeatedly struck down Barclays’ objections and said the bank would be forced to disclose potentially embarrassing details, such as the identities of staff implicated in LIBOR manipulation.

"[It] just seems perfectly obvious… that the people responsible for giving those instructions [manipulate LIBOR] must have known customers were being misled," he said.

Justice Flaux also stated that senior executives at Barclays, including disgraced former chief exec Bob Diamond, should be brought before the Court to explain what was known and by whom about LIBOR fixing. He ordered that Barclays should
disclose the names of employees implicated in LIBOR rigging in addition to documents, including damning emails. These must be sent to Guardian Care Homes’ legal team. At this point it is important to note that Barclays received a similar order for disclosure
n a Singapore case.

The outcome is that Barclays are likely to try and settle the case. The case could be disastrous for Barclays and subsequently all Banks if they allow it to go to a full trial of the issues. It must be remembered though that this case is
not without its own difficulties as according to the Defence filed by Barclays, and reviewed by Berg, Guardian Care Homes came to a settlement with Barclays some years ago. The settlement stated it was in "full and final settlement of all claims arising out
of the sale of the [hedging products]", which would in the normal course of events, stop any claim being successful. However, Guardian Care Homes have issued their case based upon LIBOR fixing, about a scandal unknown at the time of the settlement.

Accordingly, the Guardian Care Homes case will be a fundamental case if it goes to a full trial next year (anticipated to be the end of October 2013).

In the back-ground to this, Barclays and Lloyds have been subpoenaed by the Attorneys General of New York and Connecticut, and Barclays is now being investigated by French prosecutors, for rigging LIBOR, Euribor (the European equivalent)
in addition to the US version of LIBOR. It appears that there is much more to be uncovered by the various investigations into Barclays. Barclays also confirmed on 21st October 2012 that it is being investigated by the FSA over two other regulatory issues.
It has not been the best year for Barclays.

What Does This Mean For You?

In a nutshell, if your case involves LIBOR it is essential that you get quality legal advice from solicitors experienced in hedges and, specifically, financial regulation. This cannot be competently dealt with by those whose experience lies
in PPI claims as they lack the breadth of knowledge and experience that firms such as Berg has. To advise properly on these cases, and especially LIBOR cases, a proper understanding of banking regulation is needed.

If you have a LIBOR case your case should be viewed not only on its merits, but also the merits of the current legal position regarding LIBOR. It is essential that you not only be given advice as to whether you have a claim, but provide advice
as to the exact nature of the regulatory breaches, and how you may rely upon them.

Call Berg today for a no obligations discussion about interest rate swaps. We can advise no matter how your swap has been categorised be it a collar, structured collar, fixed rate swap, Bermuda swap, "roller coaster" swap, knock-in-floor
and the list seems to continue.

Call us today on 0161 833 9211 and find out more on our website at

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