R (Holmcroft Properties Ltd) v KPMG LLP

This appeal concerned whether an independent reviewer (a "skilled person"/Independent Reviewer appointed pursuant to arrangements connected to the FSA's enforcement of the misselling of interest rate hedging products) was amenable to judicial review and, if so, whether the reviewer had acted unfairly by denying the claimant access to the bank's internal records. The Court of Appeal agreed with the Divisional Court that the Independent Reviewer (KPMG) was not amenable to judicial review because, overall, its role did not have a sufficient public law flavour despite being "woven into" the regulatory scheme and despite the FSA's approval role under section 166 of the Financial Services and Markets Act 2000. Key factors were the essentially contractual origin of the reviewer's powers, the voluntary nature of the redress settlement, the private-law character of individual compensation negotiations, and the availability of private remedies against the bank. Because amenability failed, the fairness challenge to KPMG's conduct was not reached as a live issue in public law.

Background and facts:

• The Financial Services Authority (now the FCA) identified systemic misselling of interest rate hedging products and reached voluntary settlement arrangements with banks, including Barclays, under which banks agreed to provide compensation to affected customers. Barclays undertook to appoint a skilled person to review the operation of its redress arrangements pursuant to the FSA's section 166 powers, and agreed that the skilled person would provide an "AFR assessment" (an opinion as to whether an offer was appropriate, fair and reasonable) as Independent Reviewer in each case where a redress offer was made.
• Holmcroft was a customer to whom Barclays made offers of compensation which did not include the consequential losses Holmcroft claimed. KPMG, appointed as Independent Reviewer, confirmed the offers were appropriate, fair and reasonable. Holmcroft brought judicial review proceedings seeking to challenge KPMG's AFR assessment on public law grounds, alleging unfairness, including alleged denial of access to Barclays' internal (Zeus) records.

Procedural posture:

• Divisional Court (Elias LJ & Mitting J) dismissed Holmcroft's challenge on two grounds: (1) the decision of the skilled person was not amenable to judicial review; and (2) alternatively, the AFR assessment was not unlawful. Holmcroft appealed to the Court of Appeal.

Issues framed:

1. Whether KPMG, as Independent Reviewer, was amenable to judicial review given its role within the FSA/bank redress arrangements and the FSA's use of section 166 powers.
2. If amenable, whether KPMG had breached public law duties of fairness in relation to disclosure of Barclays' internal records and in permitting effective representations.

Court of Appeal reasoning and outcome:

• The Court of Appeal accepted that KPMG was "woven into" the regulatory framework and that its role was important, but held that the test for amenability required a broader assessment of the nature and character of the function. The court considered authorities including Datafin, Aegon Life, YL and Beer and analysed the regulatory context, the contractual source of KPMG's powers, and the private-law nature of individual compensation negotiations.
• The court concluded that the Independent Reviewer's AFR assessments derived from contractual engagement within an essentially voluntary redress settlement; the FSA's statutory powers under section 166 related principally to approval and reporting; customers' legal rights and remedies remained private law claims; and regulatory sanctions were a separate possibility not sufficient to convert KPMG's functions into public law decision-making. Accordingly KPMG was not amenable to judicial review and the fairness issue was not determined on its merits by the court.

Wider context:

• The court acknowledged the gap in public law remedies that this conclusion produces for individual customers but considered that private remedies, the Ombudsman and the possibility of regulatory action preserved other routes to redress.

Appeal dismissed. The Court of Appeal agreed with the Divisional Court that the Independent Reviewer (KPMG) was not amenable to judicial review because, despite being integrated into the FSA/Barclays redress arrangements and having an important role, its powers derived from a contractual engagement within an essentially voluntary settlement and the individual compensation process remained primarily private-law in character; consequently the fairness challenge to KPMG was not determined as a public law claim.

Appeal from the Divisional Court (Elias LJ & Mitting J) Administrative Court judgment [2016] EWHC 323 (Admin); appeal heard in the Court of Appeal, judgment reported [2018] EWCA Civ 2093 (this judgment).