The Court of Appeal has recently upheld a High Court decision that KPMG should not be subject to public law challenge in relation to its role in a Barclays compensation scheme. The judgment provides important guidance on when private organisations may be susceptible to public law challenge.

R (Holmcroft) v KPMG [2018] EWCA Civ 2093 concerned a voluntary scheme set up by Barclays Bank, in agreement with the Financial Services Authority (FSA), to compensate customers affected by the bank’s misselling of Interest Rate Hedging Products (IRHPs). As part of the scheme, KPMG was appointed as a “skilled person” to report to the FSA, and also as an “independent reviewer” to assess whether compensation offers to customers were appropriate, fair and reasonable.

The claimant – Holmcroft - was a customer of Barclays which had been offered compensation under the scheme. The offer had been approved by KPMG. Following a hearing in 2016 the High Court found that KPMG’s function could not be challenged by way of judicial review, because the Barclays scheme was “essentially voluntary”, the arrangement between Barclays and KPMG was contractual in nature, the FSA did not have an obligation to carry out KPMG’s independent reviewer function and it was not enough that the arrangement promoted the FSA’s public law objectives. It had no bearing that other sanctions by the FSA against Barclays might have been amenable to judicial review.

Holmcroft appealed the High Court’s decision. However, on 28 September 2018 the Court of Appeal dismissed Holmcroft’s appeal. The Court of Appeal had slightly different reasons for finding that KPMG’s function was not subject to public law review.

In the Court of Appeal’s view, the source of KPMG’s function (a contract with Barclays) was not the only factor to be taken into account. Indeed, a body whose powers were derived from a contract could - in the right circumstances - be susceptible to public law challenge if that body were “woven into the fabric of public regulation”, “integrated into a system of statutory regulation”, if it were a “surrogate organ of government”, or if - but for the body’s existence - a governmental body would assume control of the function.

The Court of Appeal found that KPMG’s independent reviewer function related to an activity of agreeing compensation between Barclays and its individual customers, in which the FSA did not seek to be involved. This constituted the pursuit of private law rights. The fact that the FSA imposed an obligation to grant redress and required Barclays to appoint a skilled person did not affect the private nature of the scheme. The FSA did not stipulate that there should be a process for dealing with customer complaints, and it did not appear to intend that there should be a challenge on public law grounds. Therefore, KPMG’s independent reviewer function was not part of the regulatory exercise of the FSA and should not be subject to public law review.

This case is an important reminder that public law is not just the preserve of public bodies. Private organisations who are embedded in public regulation or who fulfil governmental functions may also find themselves amenable to judicial review. If you are uncertain whether any of your functions could be susceptible to public law challenge you should consider seeking advice.

Please contact Melanie Carter for more information.


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Melanie Carter

Partner and Head of Public & Regulatory

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+44(0)20 7551 7615

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Posted on 08/10/2018 in Legal Updates

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