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	England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Bartels & Anor v Barclays Bank Plc [2016] EWHC 1360 (QB) (19 May 2016) URL: http://www.bailii.org/ew/cases/EWHC/QB/2016/1360.html Cite as: [2016] EWHC 1360 (QB)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
LONDON MERCANTILE COURT

		19th May 2016

JUDGE WAKSMAN:

INTRODUCTION

1. I have before me applications by the Defendant to strike out or to summarily dismiss the claim on the one hand and by the Claimants to amend it and add an additional party on the other which arise in the following circumstances.
2. The two present Claimants in this action, Mr. and Mrs. Bartels, are the former directors of and shareholders in a Company called Gwenllian Court Hotel Limited (the "Company"). As the name suggests, it was the owner of the Gwenllian Court Hotel (the "Hotel") where Mr. and Mrs. Bartels had previously been employed as managers. They acquired the Hotel in 2006 having first obtained a variable rate 25 year mortgage from the defendant, Barclays Bank PLC (the "Bank"), for £680,000 on 29th June 2006 (the "Loan"). At the time the Company had financial advisors called Credit Commercial Finance Limited ("CCF") which approached, and thereafter dealt with, the Bank on the Company's behalf although there were communications with Mr. and Mrs. Bartels also.
3. One of the conditions of the Loan was that the Company should obtain interest rate protection on the full amount for a minimum of five years. It is common ground that to this end the Company entered into an interest rate Swap for a notional amount of £700,000 amortised over seven years with a notional rate of5.5 per cent (the "Swap"). The relevant rate Swap confirmation was later signed by the Bank on 27th September 2006 and by Mr. Bartels on behalf of the Company on 2nd January 2007 (the "Confirmation"). I will record at this point that Mr. and Mrs. Bartels say at that stage that they did not even realise a Swap had been entered into, such was the paucity of the information given to them by the Bank, although the Bank contests this.
4. Unfortunately, the Hotel business did not prosper and on 9th March 2010 the Company went into administration. As a result, the Bank served a formal demand on the Company claiming a little over £882,000 in respect of the amount due under the loan. It also terminated the Swap giving rise to great costs payable of just under £78,000. Ultimately the Hotel was sold by the administrators for just £278,000.
5. As at March 2012 the debt to the Bank had reduced to nearly £723,000 but there were other creditors as well, such that there were total liabilities of around £1.4 million. The Company was struck off the register and dissolved on 16th October 2012.
6. As is now well known, in July 2012 the Bank, in common with a number of other Banks, entered into an agreement with the Financial Services Authority (the "FSA" as it was then known) whereby it agreed to review its sale and interest rate hedging products going back to 1st December 2001 and to provide redress to customers who did not meet the specific customer criteria where mis-selling had occurred. It was common ground that the Company was not a "sophisticated customer".
7. The Bank conducted the review on the sale of the Swap in this case commencing in late 2012 by a letter sent to Mr. and Mrs. Bartels on 6th March 2014. The Bank accepted there had been mis-selling and by a further letter dated 12th August 2014 it made a total offer of redress of £110,142.46. The letter was sent to Mr. and Mrs. Bartels as well as the former administrators. As this letter had assumed some significance I shall refer to the salient parts now. It stated on the first page, notwithstanding the figure that I have referred to, that the redress offer would, in fact, be zero pounds. That is because the Company was in administration prior to dissolution and the Bank would applying all of the redress figure in reduction of the Company's outstanding indebtedness as a result of the application of insolvency set-off. The letter then states how the offer has been calculated.
8. At p.2 the author of the letter, which is the customer review director, Mr. Duncan Ponikwer, said that the Bank had not met the necessary standard and principles at the point of sale of the Swap and the decision was to replace the Company's original Swap with an alternative product that the Bank considered would have been most likely entered into if the sales process had met the relevant regulatory standards and principles. This was to replace the Swap with an interest rate cap.
9. The next heading says "Consequential losses" and said that the offer was to compensate the Company for interest paid and compensate the Company for the fact that it had lost the opportunity of using the money (the "Opportunity Costs") and for any loss of profits. On 4th September the FCA had published guidance about consequential losses. Three options were set out as to how the Company could proceed in respect of consequential losses. It could, first of all, accept the formal redress offer which included compensatory interest (option 1). Secondly, it could accept that offer and submit a claim for consequential losses other than that in respect of the Opportunity Costs (option 2) and, thirdly, it could reject the formal redress offer and submit a specific claim for any consequential loss including the Opportunity Costs (option 3). The essential difference between options 2 and 3 is that in option 3 effectively the Company would be submitting a claim for the totality of its losses.
10. It goes on to say that in order for the Company to receive any assets to which it might be entitled to it may be required to be restored to the Companies Register. On the next page of the letter is the heading "Insolvency set-off". As the Company was insolvent the Bank was applying insolvency set-off in respect of the redress due so that all of the redress offer is in reduction of the outstanding indebtedness.
11. In the "next steps" they set out again those options in more detail. All of the options required the Company to be restored to the Register. Under Option 3, it said that if the Company wished to submit a claim for consequential losses including borrowing costs and lost profits or opportunities, then "please tick option 3 under the heading 'Response' and complete the relevant sections of the enclosed consequential loss questionnaire". That had to be done within 40 days from the date of that letter. There is then a "Details" section dealing with the options set out in more detail and the calculation of the redress offer.
12. By a letter of 18th September Mr. and Mrs. Bartels wrote to the Bank. This had followed a meeting which took place on 28th August saying that that meeting had not been resolved because the Swap redress scheme was investigating only the sale of the Swap for which they had admitted liability. The Company needed to be restored to the Register for £8,000 which they did not have. With regard to the consequential loss claim, they did not have the knowledge or understanding to prepare it or the finance to pay specialists. Finally, they said, "It was difficult to take the above route as you have advised that our situation was 75% Bank, 25% Swap and they could only deal with the Swap matters".
13. They say that having met with the MP the case had been referred back to the pro bono unit to allow them to prepare their case for litigation as time was marching on. Mr. and Mrs. Bartels concluded;

"We feel very strongly that due to the failed investigation of both Barclays and the restraints on the review process, we have no option but to take the litigation route to expose Barclays for what it is. The review offer letter states a response time of forty days. Due to timings within the pro bono unit we ask you keep our review file open while we examine the legal routes and options open to us to bring our case to a satisfactory result."

14. That, in turn, elicited this response from the Bank, again, from Mr. Ponikwer. It is dated 3rd October and it says this:

"During the meeting on 28th August you stated you did not see the benefit of submitting a claim for consequential losses in accordance with the process of the redress offer on the basis that due to the Bank's application of insolvency set-off you would need to recover approximately £800,000 under any such scheme before you and other unsecured creditors of the Company would receive any distribution. As such you advised that litigation would be the likely route as well as submitting a written complaint about the Bank. As stated in the redress offer letter, if you wish to submit a claim for any category of consequential loss you are required to do so within forty days. Since you have failed to submit all the necessary information of consequential losses within the forty-day timeframe the Bank's offer of redress which we provided you and the other interested parties in the letter is now final."

15. What that means, quite clearly, is that the specific offer of redress limited to£110,000 I had mentioned in option 1 now became fixed. The letter goes on:

"As we have completed the Company's review and provided you with a final redress offer in accordance with the guidelines, the Company's case has now been classified as closed. Should you wish to take the necessary steps to allow the Company to accept the final redress offer prior to the conclusion of the review please call the Bank."

16. It says at the end of the letter:

"Finally, with regard to the additional timeframe you have requested, please note the Bank is only able to approve extensions in exceptional circumstances. As your circumstances cannot be considered exceptional, and given my understanding as to your intended approach to consequential loss discussed above, I am unable to approve a further extension."

17. On 17th November 2014, notwithstanding that, Mr. and Mrs. Bartels asked again for an extension but that was not forthcoming. The Company, through Mr. and Mrs. Bartels, did not accept any of the offers of redress or submit a claim for consequential loss as per options 2 or 3.
18. On 24th July 2015 the Bank wrote to Mr. and Mrs. Bartels to see if they wished to accept the redress offer which had now become fixed as per option 1, and said if they did not the Bank would apply the redress amount in reduction of the Company's indebtedness.
19. The offer was not accepted and on 20th September 2015 Mr. Welsby of Finance Assist, a company representing the Company and/or Mr. and Mrs. Bartels, wrote to the Bank as follows, "Company to advise that the former directors are seeking to bring a conclusion to the review" and he perused the offer letter of 12th August and the reply of 3rd October. He said:

"Insolvency Assist was formed specifically to deal with IRHP mis-selling and insolvency. Having spoken with Mrs. Bartels she now regrets not adhering to the Bank's timescales and responding to the review offer by way of selecting option 3 and submitting losses into the scheme from the Bank in s.166 appointed reviewer's consideration.

I note from your letter and draw on my knowledge of the scheme to ask you to consider the claim again in the light of new evidence we wish to submit into the review as consequential losses we believe will meet your legal tests and be recognised as reasonably foreseeable and not remote reflecting the scope of the review to allow closure as detailed by the FCA. Mrs. Bartels recognises the Bank's indebtedness and the Company's position as dissolved and wishes to proceed in accordance with your verbal exchange and progress in the light of new evidence now available."

20. That met with a response on 29th October 2015 referring back to the letters of 12th August 2014 and 3rd October 2014 in relation to the review noting the comments about customer's regret but it said:

"As the review is now closed consequential claims can no longer be submitted. You were aware that opportunities were presented during the review to present a consequential loss claim. The particular claim is well known to Barclays. We have considered all aspects of the Company's complaint and lengthy discussions and communications previously and do not propose to correspond further."

21. On 16th April 2015 the Company had been restored to the Register upon an application by Mr. and Mrs. Bartels for the specific purpose of bringing a mis-selling claim against the Bank in court. To that end they instructed Mr. Hatt of counsel on a direct access basis who pleaded the Particulars of Claim, when later served, and who has appeared on behalf of them and the Company at this hearing.

THESE PROCEEDINGS

22. However, while the intention was to issue proceedings in the name of the Company, as one might expect, matters took a different turn. As Mr. and Mrs. Bartels have explained frankly, when they discovered the issue fee for a substantial claim of this kind, in which consequential losses of over £1 million would be claimed by the Company, was £10,000, they were unable to pay it. However, they ascertained that as individual Claimants, they would be eligible for fee remission because of their now parlous financial circumstances. Therefore, on 23rd June 2015 they issued a claim form and served Particulars of Claim in their own names and not in the name of the Company, without having to pay a fee. They asserted that the reason why they or the Company could not raise £10,000 was due to the Company's insolvency which was itself due to the cash-flow impact of the Swap when it was in place, a fact which the Bank, in turn, denies.
23. I will refer to certain parts of the Particulars of Claim in detail below but at this stage I mention the following:

(1) Mr. and Mrs. Bartels have claimed damages against the Bank:

(a) for breach of statutory duty in that it fails to comply with the FSA handbook's Conduct of Business ("COB") rules when selling the Swap (the "Breach of Statutory Duty Claim");

(b) for misrepresentation under s.2(1) of the Misrepresentation Act 1967 ("the Misrepresentation Claim"); and

(c) for negligence of common law to include, for the purpose of the present argument, negligent misstatement as well.

(2) Paragraph 8 of the Particulars of Claim pleads that if necessary Mr. and Mrs. Bartels will contend that the Company's present inability to bring proceedings against the Bank because of the cost of the issue fee was due to the conduct of the Bank and as shareholders they were entitled to bring the claim in their own right.

(3) On the Breach of Statutory Duty Claim they allege that the COB rule duties were owed to them as well as the Company.

(4) On the Misrepresentation Claim they allege that various representations were made in the course of the sale of the Swap and were untrue.

(5) On the negligence claim they allege the Bank owed a duty of care in relation to the giving advice or providing information about the Swap to them as well as to the Company (see para.26). Paragraph 27 states that in circumstances where the Bank was aware the purchase of the Hotel was also the purchase of the claimant's family home and funded by borrowing of their family members, Mr. and Mrs. Bartels claim that the Bank owed common law duties to them directly as well as to the Company.

(6) The claim for loss of damages is set out at para.71. Subparagraphs (1) and (2) are the direct losses on the Swap incurred by the Company, subparagraph (3) is the consequential loss claim put on the footing that without the Swap the Company would have continued and would have held assets worth £1 million, namely the Hotel, on a going concern basis. The remaining items are losses which were said to be sustained by Mr. and Mrs. Bartels personally. In particular, the loss of the family home for £250,000, the loss of personal effects at £50,000 and payment on mortgage of the parents' home of £84,000. In addition, Mr. and Mrs. Bartels allege that the Bank owe them and the Company a duty of care in relation to its conduct of the review and that it acted in breach of that duty. As a result, Mr. and Mrs. Bartels claim the losses referred to above under that head also.

24. I shall deal with the claims relating to the review separately, later in this judgment, not least because no question of limitation there arises. Indeed, it is common ground that the Breach of Statutory Duty and the Misrepresentation Claim were statute barred at the date of issue and that the only way in which Mr. and Mrs. Bartels could surmount that obstacle, even if they otherwise had viable claims, would be by way of an argument based on waiver. I deal with that below.
25. As to the negligence claim, it is common ground that the primary limitation period had also expired but it is said that Mr. and Mrs. Bartels can rely upon not only waiver here but, in any event, on s.14A of the Limitation Act 1980 based on an allegation that the relevant knowledge was acquired no earlier than 29th June 2012 by reason of the involvement of the BBC, this being just under three years before the date of the issue.
26. On 27th October 2015 Mr. and Mrs. Bartels and the Company made an application to amend the Particulars of Claim principally to add the Company as a third Claimant so that it could advance these claims against the Bank. It is common ground that as at 27th October the limitation period for all the claims had now expired because by then any three-year extension in respect of the negligence claim had expired.
27. More recently that application has been expanded to add a further element to the claim in relation to the review based on contract.
28. Not only did the Bank resist those applications to amend but on 18th December 2015 it applied to strike out the Particulars of Claim or obtain summary judgment to dismiss it on the basis that none of the claims had a real prospect of success. Its key points were that within the context of a Swap taken up by the Company, the Bartels could not possibly have been owed any duties personally and, in any event, it has a cast iron limitation defence to all the claims.

THE ISSUES ON THE APPLICATION

Introduction

29. In respect of each of the existing and proposed claims, whether by Mr. and Mrs. Bartels or the Company, the Bank contends that they have no real prospect of success so that the existing claim should be struck out and the proposed claim should not be added by way of amendments because it would be pointless.
30. The relevant legal principles are well known and I need do no more than summarise them. "Real" in this sense and for the purpose of CPR Part 24 means "real" as opposed to "fanciful", and while the court does not have to take at face value every assertion made by the party whose claim is challenged nor should it conduct what amounts to a mini trial. While it can, in appropriate case, take into account evidence not present now but which might reasonably be expected to be available at trial, it is not enough for the party whose claim is challenged to engage in speculation on the basis that something will "turn up" at trial.
31. In addition, of course, for the Part 24 application to succeed there must also be no other compelling reason for a trial. While Mr. Hatt has argued that my approach to the applications should take into account that the various issues surrounding Swaps and the Bank's review of them have been ventilated in the public domain, he has not positively contended that even if there was no real prospect of success the claim should still go to trial for some other compelling reason. Even if he had I would have rejected it. The fact that interest rate Swaps have, as it were, "hit the headlines" in the past and attracted the attention of the FCA leading to the review process, it is not a reason for allowing an otherwise unmeritorious Swap mis-selling claim to go to trial.
32. Because of the expiry of the limitation period, the Company's application to be joined is governed by CPR 19.5 and I deal with that below.

The existing personal claims: Misrepresentation and Breach of Statutory Duty

33. At the hearing Mr. Hatt accepted that Mr. and Mrs. Bartels could not bring these claims in their own right; that concession was clearly correct. The COB rules are directed to the treatment of the party buying the product which here was the Company not Mr. and Mrs. Bartels. A claim under the Misrepresentation Act only lies at the instance of the party who enters into the contract set to result from the misrepresentations; again, the Company and not Mr. and Mrs. Bartels. Accordingly, these claims must be struck out.

Negligence

34. In my judgment it is clear that the Bank owe no duty of care to Mr. and Mrs. Bartels personally in connection with the sale of the Swap to the Company. The fact that they were its shareholders is irrelevant, so is the facts pleaded in para.27 that the Hotel also constituted the family home and was funded in part by borrowings on behalf of family members. Of course the Bank dealt with Mr. and Mrs. Bartels in relation to the Swap but in their capacity as directors of the Company and, therefore, as representatives. The Bank could not have dealt with anyone else on behalf of the Company other than the appointed agent, CCF. Mr. Hatt did not cite any case which could begin to support the existence of a duty of care here whether through the assumption of responsibility or the three stage Caparo test, and he argued the point only faintly at the hearing.
35. Various references were made to where a party could claim what is described a reflective loss, that is, for example, where a shareholders claim included losses which are merely reflective of the Company losses, but that rule and the exceptions thereto apply to the quantum of that party's claim and thus are inconsistent with what is said in para.8 of the Particulars of Claim. It was not open to Mr. and Mrs. Bartels to bring a claim in their own names because of the alleged misconduct of the Bank towards the Company. At best they could have been permitted to include within their losses, as they have attempted, some reflective losses on the part of the Company. However, first, they have to have a viable cause of action in their own right which they do not have for the reasons given above. Compare in this regard Giles v Rhind [2002] EWCA 1428 where the claimant shareholders did have a claim in their own right based on a breach of a shareholders' agreement. Accordingly, the negligence claim must be struck out also. Subject to the review claim dealt with below, this means that the existing claims must be struck out.

Adding the Company to make the existing claims

Introduction

36. Here the proposed amended Particulars of Claim seek to make the Company a claimant to the already pleaded claims of a breach of statutory duty, misrepresentation and negligence and the review claims, the latter being dealt with later. As for the claims made personally, all of these are time-barred as at the date of issue. The Company has two answers to this. First, the Bank waived its right to rely upon any limitation argument and/or is estopped from doing so. Second, and in relation to negligence only, even if there was no viable waiver argument, the Company had a real prospect of establishing at trial a s.14A extension which was still valid, just, at the date of issue.

Waiver

37. I deal first with the law and in this respect I do not consider that it matters much whether the principle invoked is waiver or estoppel and no real distinction was drawn in argument before me. There are usually said to be two elements to any operative waiver, first, a clear and unequivocal representation not to rely on a particular right which the representor is aware he has. Second, the representee must rely upon the representation such that it would be inequitable to permit the representor to resile from it. I am conscious that sometimes the second principle is said to be satisfied if either there is reliance or it would be inequitable to allow the representor to resile from the representation (see, for example, paras.25 to 26 of the judgment of Ward LJ in Seechurn v ACE Insurance SA [2002] 2 Lloyds LR 390). Although more recently those matters have been treated as cumulative (see, for example, the judgment of Gloster J, as she then was, in Fortis Bank v Trenwick [2005] Lloyds 465, para.30(v), followed in para.77 of the judgment of Sarah Cockerel QC sitting as a High Court judge in Qadir & Anor. v Barclays Bank PLC [2016] EWHC 1092).
38. However, for the reasons given below, it does not matter here how that second element is expressed to operate. I also accept that the representation can be implied from conduct or otherwise but it must still be clear and unambiguous.
39. Mr. Hatt says that by entertaining Mr. and Mrs. Bartels' claim for mis-selling within the context of the review, the Bank was impliedly representing that should any litigation ensue thereafter it would not take a limitation point. It is conceded that the Bank made no such express representation. In particular, Mr. Clive Gallagher, a director of the Bank, spent many months in 2013 dealing with the Swap, and it matters not whether this was part of an internal investigation or part of the review. At no point was it said that if litigation followed the Bank would not take a limitation point, nor did he otherwise reserve the Bank's rights.
40. Moreover, he was clearly not taking a limitation point in relation to the current examination of the Company's case by the Bank even though the primary limitation period had expired in June 2012. In fact, the Bank granted a £15,000 overdraft to Mr. and Mrs. Bartels while the review was going on.
41. Later, on 12th September 2013 Mr. Gallagher rejected a complaint made by Mr. and Mrs. Bartels about the Bank's general conduct of the Company's account and lending. The letter noted that the allegation of mis-selling of the Swap would be dealt with separately in the review. It concluded by saying that as a goodwill gesture they would release them from the personal guarantees and write off the £15,000. This, it said, constituted the change in the legal relations between the Bank and Mr. and Mrs. Bartels or the Company which itself was a requirement of the estoppel. It is then said that Mr. and Mrs. Bartels relied on the representation by not, for example, responding within to the 40 day limit for the redress offer set out in the 12th August 2014 letter in respect of consequential loss.
42. I am afraid to say that I regard the waiver argument as entirely hopeless for the following reasons. The fact that a Bank is prepared to deal with a customer over a complaint or an issue with their account or conduct a review, which by its very terms is not to be constrained by limitation arguments, can in no sense amount to a clear and unequivocal representation that if these attempts of settlement failed then it would not take a limitation point in any subsequent litigation, and that is so whether the customer is legally represented or not at the time. I am fortified in this conclusion by the Fortis Bank decision where it was held that the fact than an insurer negotiated with an insured did not amount to a representation that limitation would not later be relied upon.
43. It is true that in that case there was a general reservation of rights but that is not vital in my view. That is borne out by the case of Qadir, another interest rate Swap case, where one argument was that there was a waiver on limitation by the Bank because of statements made in the course of the review which set out how the review would be conducted, and that if the customers were not satisfied they could go to the Financial Ombudsman Service or make a claim in the courts. The judge, like me, could not see how such words could amount to an unequivocal representation as to the limitation in litigation. No reservation of rights was required in that case for the court to conclude that there was no arguable waiver.
44. Furthermore, there is a real paucity of evidence to support reliance in this case. There is no real evidence from Mr. and Mrs. Bartels as to what they understood the Bank was representing about limitation, if anything, or that they relied upon any representation, and in particular what they could or would have done if they had been told that the limitation point would be taken in any later litigation.
45. Moreover, since the primary limitation period had expired in June 2012, by the time the representation was made it was all too late and they could not have saved the situation, for example by issuing proceedings immediately, because they were already time barred. Mr. Hatt at one stage suggested that this did not matter that the time bar had expired and referred me to The Ion [1980] 2 Lloyd's Rep 245. It is correct that the one-year time bar in that case provided for by the Hague Rules had expired by the time the representation was made, but in that case there was the possibility of then applying for an extension which the representee did not do because he thought there was no point being taken on limitation. That, of course, is entirely different.
46. That the expiry of the limitation period prior to the representation would prevent the waiver from being affected because the claim was already doomed was noted by Ward LJ in para.59 of his judgment in Seechurn. Even if reliance was not strictly necessary, and it would be enough if it could be shown that it would be inequitable to allow the representor to resile from his representation, the outcome must be the same since in reality, the Company could not have done anything and, therefore, there is no difference between the treatment of the second elements here.
47. For the sake of completeness, I add that the decision in MIOM 1 Limited & Ors. v Sea Echo E.N.E [2011] EWHC 2715 does not assist the court. In that case one party to litigation did not take a limitation point in relation to the other's effective counter-claim for which there was a two-year time limit at all during the litigation including at trial. Afterwards in the context of a costs dispute it sought to argue that there was no proper counter-claim because it had been time barred. Unsurprisingly the court held that in the context of the CPR it was by then far too late to take the point. The court also said that it was estopped because its silence amounted to a representation. In the context of litigation any time point should be raised at the CMC after which a party is entitled to assume that a limitation point which had not been pleaded would not be taken. That case is very different from the present case.
48. Accordingly, for all of those reasons there is no real prospect of a successful waiver argument and as a result I refuse permission to join the Company to make misrepresentation and breach of statutory duty claims. Had Mr. and Mrs. Bartels had viable claims of their own in these respects, which they do not, such claims would be bound to fail also because of limitation and the lack of any operable waiver.
49. The failure of the waiver point also affects the intended claim in negligence by the Company. However, that would not prevent it from being a viable claim and then being joined if (a) there was a viable s.14A extension of limitation current at the date of issue and (b) the Company could satisfy the requirements of CPR 19.5. I take the latter issue first.

CPR 19.5

50. At this stage and for this purpose, I proceed upon the basis that there is at least a real prospect of the Company establishing that by reason of s.14A, limitation did not expire at the date of issue. It would, however, have expired shortly thereafter so that on any view by the date of the application to join the Company, limitation had fully expired. That being so, this brings into play, as is common ground, CPR 19.5 which reads as follows:

(1) This rule applies to a change of parties after the end of a period of limitation under –

(a) …

(2) The court may add or substitute a party only if –

(a) the relevant limitation claim was current when the proceedings were started; and

(b) the additional substitution is necessary.

(3) The addition or substitution of a party is necessary only if the court is satisfied that –

(a) …

(b) the claim cannot properly be carried on by or against the original party unless the new party is added or substituted as claimant or defendant..."

51. On the assumption that that limitation had not expired at the date of issue, there are two issues, (a) is the joinder "necessary" in the required sense and (b) as a matter of discretion should the amendment be allowed? As for necessity Mr. Hatt's submission is that in relation to the negligence claim contained in the existing Particulars of Claim, the addition or substitution of the Company is necessary because the original claim cannot be carried on without it.
52. He relies upon a number of cases which I should consider in some detail. In Parkinson v Swan [2009] EWCA Civ 1366 the liquidator of a company previously in administration brought a claim in the name of the company against the former administrators for negligence in the performance of their duties. The claim was obviously made on behalf of the company; the liquidator had no personal claim and it was not suggested he did. It was in all respects the company's claim with any damages going to the Company or its creditors. However, the administrators had been released and so they had a good defence to that claim. The liquidator then applied to join himself as a claimant and make a statutory claim for compensation on that basis but which would not be affected by the administrator's release. As before, the claim was for the benefit of the company or its creditors. By the time the liquidator sought to be joined the limitation had expired and so 19.5 was in play. At para.13 Lloyd LJ said:

"There is no doubt that the claim which the liquidator seeks to assert under section 212 is identical to that which he put forward in the name of the company by the original proceedings. The proposed amendments include no change to the allegations of duty, breach or loss. References to the company are substituted for the word 'Claimant', and reference to section 212 is added to the text as regards relief. Otherwise there is no change."

53. At para.28:

"…this is a case in which the substitution is necessary in terms of section 35(5)(b) as well as of CPR rule 19.5(3)(b). The original action, asserting the company's claim against the former administrators, cannot be determined without the substitution of the liquidator whereas if brought by the liquidator under section 212 it can [that is, the company's claim]. Without that substitution it could only, and would be bound to be, determined in favour of the defendants because of the section 20 defence. The claim would be struck out… and it could not be decided on its merits… In terms of the rule, it cannot properly be carried on by the original party, the company, whereas it can be maintained and carried on if the liquidator is substituted… It is the same claim, in every respect, despite the fact that it is asserted by the liquidator on behalf of the company, rather than in the name of the company itself."

54. On that basis he held the test was satisfied. It is important to note that at all times it was the company's claim sought to be made, whether by the company itself or by a representative (for these purposes the liquidator).
55. In Irwin v Lynch [2011] 1 WLR 1364 the administrator of a company brought a claim against its directors for breach of trust. It caused the company to enter into a contract at an under value. The director sought to strike out on the basis that s.212 of the 1986 Act prevented such a claim. The administrator sought to add or substitute the company after the limitation period expired. It was argued there was no necessity here because, unlike Parkinson, this was a case where there was never an original claim because the administrator had no right to bring it at all. Lloyd LJ rejected that distinction. At para.24 he said:

"…substitution is necessary for the determination of the original claim because the particular claim cannot be maintained unless the company is substituted as claimant. The original claim is a claim that the respondents were in breach of duty in causing the company to enter into the contract, thereby causing the company loss. The claim, as amended with the substituted claimant, is identical. The original claim cannot be maintained successfully; the new claim can be maintained successfully... If it is so asserted, it is the identical claim but with a substituted and correct claimant."

56. At para.26 he said:

"…the original claim was liable to be struck out, as it has indeed been, because of lack of standing, but I see no good reason to regard the reason for the striking out as being a critical distinction… I would also reject the contention that the cause of action is not the same because of the identity of the claimant. Sometimes the identity of the party might be, indeed often it might be, a vital distinction, but here Mr. Irwin plainly asserted the Company's cause of action and asserted it on behalf of the Company, just as the substituted liquidator did Parkinson Engineering. So the cause of action is identical; it is already pursued for the benefit of the Company, but it is doomed to failure because of the lack on Mr. Irwin's part of the necessary locus standi. It seems to me that it is possible and appropriate for the court to exercise its discretion under rule 19.5 to allow the joinder..."

57. It is clear that the underlying claim was identical; a breach of duty towards the company causing the company loss.
58. I should also refer to another paragraph because some reference was made to it in argument. At para.23 it was said:

"Mr. Irwin is not, of course, a complete stranger. His task is to collect in the assets of the Company for the benefit of it and its creditors, and the claim which he asserted was avowedly brought on the part of the Company. For my part, the idea of a complete stranger bringing such a case seems rather fanciful. If for some reason it were to prove real, it seems to me that the court would be likely to regard it as an unsuitable exercise of the court's discretion to substitute the Company as claimant outside the limitation period for a complete stranger who had brought a case… which could no doubt have been struck out because he had no right to bring the claim. It seems somewhat unlikely that if this hypothetical complete stranger were to bring proceedings… would in fact assert the same cause of action as that which the Company could itself assert but had chosen not to."

59. I shall deal with the case of Merrett v Babb [2001] QB 1174 a little more briefly. Here a mother and daughter had a joint claim against a valuer for negligence in the valuation, they having bought a property jointly in reliance upon it. Only the daughter sued and she was awarded the full amount of the loss. On appeal the valuer contended that he should only have to pay half the damages to the daughter because she only had half an interest in the property. The Court of Appeal held that this was in truth a joint claim for the full loss only brought by the daughter. In those circumstances the claim could not be maintained in the absence of the mother as a party and she was, therefore, joined. That case is quite different from this one when there is no joint claim.
60. In my judgment the additional substitutional company is not necessary here. The original claim, despite reference to the Company and reference to duties owed to the Company, was made by the claimants in their own right for their loss either directly or on a reflective basis on the basis of duties owed to them, whether in addition to duties owed to the Company or not. They were not bringing the claim in any representative capacity because there was no basis to do so. Compare shareholders who are Claimants in a derivative action brought for the benefit of a deadlocked company.
61. The Particulars of Claim expressly pleads that the duties are owed to them. Even if they could have claimed reflective loss as part of their losses, it does not alter the fact it is their cause of action not the Company's. This clearly distinguishes Irwin and Parkinson in my view. The matter can be tested thus: the Particulars of Claim contain claims made by and for the benefit of Mr. and Mrs. Bartels for breach of duty to them and for losses they have suffered. The addition of the Company is not, in fact, necessary for them to maintain their claims.
62. This point is eloquently expressed by Christopher Clarke J, as he then was, in the case of ABB Asea Brown Boveri Ltd. v Hiscox Dedicated Corporate Member Ltd. [2007] EWHC 1150 at para.116:

"The question, therefore, is whether the claim made by Inc or BV… cannot legally be maintained without the addition of DPIL or PII. The purpose of section 35 is to address the situation in which, the limitation period having expired, a claimant's claim will fail because he has not joined a party without whose joinder his claim is unmaintainable [he then refers to some examples]… The section does not enable a claimant whose claim is worth £ x, but who has claimed £ 2x, to join another claimant who has another similar claim of his own, based on substantially the same facts, which is also worth £ x, in order that between them they may claim £ 2x. Nor is there any power under section 35 (6) to add a claimant or claimants because they, and not the original claimants, may have suffered the loss claimed. If that were so the FCO's appeal in Weston v Gribben would have been dismissed. If there is no such power under section 35(6), CPR 19.5(3)(b) cannot be interpreted in some wider fashion so as to create one. The rule cannot have an ambit greater than the statutory framework from which it is derived. Nor is there any presumption in favour of a liberal construction of a provision which removes a limitation defence..."

63. Those observations are entirely apposite here. In truth, the joinder of the Company is only necessary so that it can bring its own claims which is obvious. Accordingly, plainly there is no necessity here in the sense required by 19.5(3)(b). Accordingly this requirement is not made out.

Discretion

64. Even if necessity was established, the court then needs to be satisfied that is should exercise its discretion to allow the amendment. In my view, and despite the ingenuity of Mr. Hatt's seven points in favour of that exercise of discretion, the court plainly should not do so. First and foremost, all of this has come about because of the device adopted by Mr. and Mrs. Bartels to get the claim on foot without having to pay the £10,000 issue fee. Once the claim was on foot no further issue fee was payable to join and the Company only has to pay a modest application fee. On their own case they must have intended to join the Company as a party afterwards. At para.7 of Mrs. Bartels' first witness statement she refers to the fact that they restored the Company. They wanted to include the Company as a claimant in the first place but when they attempted to issue a claim form they were told the issue fee would be £10,000. The Company had no assets and they had no money to speak of since the demise of the Company. They were entitled to full remission. Her statement goes on to say:

"We have looked into funding. We have been unable to obtain the necessary huge sum of monies. We simply could not afford to pay £10,000. However, now that the claim form has been issued and the issue fee has been remitted, it is possible for the court to add the Company as a further claimant and I would ask the court to do that."

65. I have every sympathy for Mr. and Mrs. Bartels following the failure of the business whether the fault of the Bank or not, but this cannot alter the fact that the course of action taken was clearly an abuse of process in my judgment. To accede to the application would be to countenance this device which this court will not do.
66. Of Mr. Hatt's seven points, first, he says this is an exceptional case. There is, therefore, no "floodgates" argument. First, I am not sure it is exceptional. There are cases following the crash of 2008 where the consequences are still being felt, and anyway, this is no answer to the abuse point. The court cannot condone such a device whether occasionally or otherwise. Secondly, it is said to be analogist of those cases of stifling involved in security for costs. That is a false analogy because this is not the Bank stifling the claim, the fee concerned is charged by the court and not by the Bank. The third point refers to the merits of the case but I have dealt with that above. Mr. Hatt also says that Mr. and Mrs. Bartels are not strangers here. In one sense, of course they are not, but in contrast to Irwin and Parkinson they are not officers who have a duty to collect in the assets of the Company unlike a liquidator or an administrator. Fourthly, I accept that they were frank about what they did but that does not help them here. Fifthly, nor does the fact that the Bank at an earlier stage had been prepared to countenance the amendment in the context of the review claim as presently formulated. In any event, the abuse point is one which concerns the court as much as the Bank. Sixthly, Mr. Hatt then said that the £10,000 fee might be able to be paid where there was an undertaking that if the Company won and there was a net surplus the fee could be taken out of that and that the claim was so large that there was a possibility of that. I certainly have my doubts as to this but, of course, in any event the Company might lose and, in my judgment, it cannot affect the question of abuse. Seventhly, the fact that they told the Company's registrar what they did and he did not object seems to me to be irrelevant. It is a matter for this court and the exercise of this court's discretion. Accordingly, even if the Company had a viable negligence claim it cannot satisfy either the requirement of Part 19.5 or the question of discretion. On that basis it cannot be joined to make the negligence claim.
67. This means that it is strictly unnecessary to consider the s.14A position in relation to the negligence claim because my conclusion on 19.5 assumes a viable argument there. However, since I have heard argument on the point, I will deal with it briefly.

S14A

68. Section 14A says an action to which this section applies shall not be brought after the expiration of six years from the date when the court of action approved it or three years from the starting date as defined by s.5 below. Subsection 5 says that for the purpose of this the starting date is the earliest date under which the plaintiff had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such action. Subsection (6) says that the relevant knowledge meant knowledge of the material facts about the damage in respect of which damages are claimed and (b) other facts relevant to the current action mentioned in 8 below. In subsection (8) below the other facts are:

"(a)that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence; and

(b)the identity of the defendant; and

(a) if it is alleged that the act or omission was that of a person other than the defendant, the identity of that person...."

69. Subparagraph (9) states, "Knowledge that any acts or omissions did or did not, as a matter of law, involve negligence is irrelevant". Subparagraph (10) is not relevant in this case.
70. There is a considerable body of case law on the extent of the knowledge required. In Qadir the deputy judge set out a useful summary of the relevant case law, again, in the context of an application to strike out an interest rate Swap claim inter alias on the basis that the primary limitation had expired and there was no sustainable s.14A extension which could save the claim. At para.35 she said the claimant must in broad terms know the factual essence of the claim and in para.36 stated that this has been described as the essence of the fact or omission to which the injury is attributable or the essential thrust of the case or the act or omission which has cause to be relevant. And, to paraphrase paras. 37-41, it is not all of the detail of the knowledge required to bring an action which is required. It is not necessary for it to be possible to plead out the case. In advice cases the question of "material facts about damage" is regarded as pertaining to matters of quantum. The focus of the enquiry is on attributability. The claimant must know enough to realise the damage was capable of being attributable to the defendant and to begin to investigate further. The claimant must realise there is a real possibility of damage having been caused by some flaw or inadequacy in his advisors and enough to start an investigation into that possibility where there is then three years to complete it. A line has to be drawn between knowledge of facts which put the clamant onto enquiry and knowing that he has a claim. What is required is the factual essence of what is subsequently alleged as negligence but there need not be knowledge that as a matter of law negligence was involved. It is a question of sufficient knowledge to make it reasonable to begin to investigate whether they have a case against the defendant."
71. In this case the claimants say they did not acquire the relevant knowledge until 29th June 2012 as a result of something which appeared on a BBC website. That is summarised in para.47 of Mrs. Bartels' third witness statement. She says her husband saw an announcement about banks' wrongdoing somewhere and asked was that not the same as the mortgage that they had. They went to her mother's house where all the paperwork was. They went to visit the FCA website where one could fill in one's details. There was an icon about BBC so they clicked on that. She telephoned the FCA. They took the paperwork to a friend's house. They stopped at Asda to pick up some food. The phone rang, it was BBC, and asked if they were happy to do an interview. They were asked whether they would have paperwork and they said the team would help them. That day the team arrived by 4 p.m. They said this was the product the FCA were talking about. That was the point when they had sufficient knowledge to understand that, "We were the victim of financial mis-selling of a product that was not the mortgage. The BCC team explained this to us" and they were asked to do a live radio show saying a solicitor of Capital Law was also on the show. That happened, in fact, it was recorded on the same day.
72. In contrast the Bank says that Mr. and Mrs. Bartels and, therefore, the Company had sufficient knowledge by May 2010 at the latest and that the three-year period expired long before the issue of proceedings. Here one needs to look first at how Mrs. Bartels has described the events of 2010 in the Bank's "fact find" of May 2014. At pages 902 to 904 she recounted what had happened in 2010. She said that is when she became aware of a hedge product. She was juggling cash flow and asked an advisor whether they could move the payment and so mortgage paperwork was dug out. She rang back with a copy of the mortgage offer letter and circled, she said, 10.3(d), that was the condition of the loan that required the interest rate protection. She said, "there is an issue with this, there's more cases coming up, I've got the name of a solicitor in Cardiff. Send over your mortgage documents, I am sure he will be able to help". She said, "What?" and Mrs. Bartels said she was asked, "What is that?" she thought it was a life policy, she said, "No, this is a different product" and they sent it over.
73. Then they found a document they signed in the December which must, in fact, be the January. They went to a Mr. Cully who was a solicitor who said, "'Have you had a meeting? Have you done this? Have you done that?' I said no, he said, 'Look we're at an early stage, we think there is an issue with this product but at this time we are just taking it to the FSA'. I said, my business and situation, I've got payments out and he said, 'There's nothing I can do. We're going through this with the FSA, you'll have to try to find an alternative method'".
74. Later on she says the accountant at the time had said, "You're increasing this hedge is killing you" and she asked what the hedge was and she said "it is to do with your mortgage interest". She asked, "What is a hedge?". She said she could not explain. NatWest were approached, they said they could not take over the account because of buying out the hedge. Mrs. Bartels said, "What did that mean, is it not like a house mortgage you can transfer?". She said no and she spoke to Alan Thomas who said they could not afford it.
75. She then wrote to the administrators and later on she said Deloitte said:

"'The hedge has killed you. We've got an account saying your hedge has killed you. You had Barclays. At the end of the day you should never have been set up. They saw you coming. I wish you luck for the future'. We had gone into administration. We did not know why, we didn't know what hedge was.

From that point on we started to resource what is a hedge and how it is attached to our business. So we went to see a solicitor in May 2010, Capital Law. He advised we had no finance, we have no money, Barclays was too big to us and it was not worth pursuing. He said 'I understand what they've done, I understand the product has been attached. You're too small to fight them. What Barclays will do is drag you through the hedge. Barclays know that so walk away now. You have six years' litigation from knowledge of the fact which is now' and that was that."

76. However, all of that must all be read in the context of Mrs. Bartels' present evidence in relation to those matters. That is set out at para.50 of her third statement. I have just referred to some parts of it. She said that some of what she said in the interview was mixed up with what she was learning about later on by 2014. She said she had contact with Finance Assist in early 2010 without any understanding of the facts. When she looked at 10.3(d) she thought it was simply an insurance. Finance Wales did not explain otherwise. Mr. Cully had called and she explained the position. He said there was nothing that can be done to help. He said he was in the early stage of investigations, it was a complex issue he did not want to bog them down with it and said forget it. She could see now that Mr. Cully was aware it would be possible to take a complaint to the FSA but that was not explained at that point. She said the focus was on short-term cash flow relief. She said:

"Although it had become apparent the word 'hedge' had some significance, we thought it was still a question of moving the mortgage. Deloitte did not believe they had a bad business and they recommended Capital Law."

77. She has waived privilege in relation to the conversation with Capital Law, there being no attendance note from the earlier conversation with Mr. Cully. First of all, there was, in fact, a preliminary note for the meeting with Capital Law. She describes it as minutes of the meeting but that is clearly not correct. It is dated 20th May 2010. It begins as if it is minutes as it refers to those present and the time and the object to establish if there has been a case of professional negligence during the purchase of the Gwenllian Court Hotel in June 2006. It then refers to companies involved, commercial broker, accountant, solicitor, and the Bank. It refers to the purchase price. It said that they contacted CCF. It referred to some meetings in February 2006 and that they were introduced to the Bank. It then said that the Bank gave a valuation and the Bank provided the mortgage. That is all that it says.
78. It is interesting to note that there is no reference to any hedge or any particular role of the Bank who had provided the mortgage. I accept that the Bartels were looking to see if it was professional negligence. They were obviously casting their net widely on the materials. As it now stands it seems that Capital Law did not refer to hedge and told the Bartels to walk away. That is what, at least, Mrs. Bartels says about the matter.
79. She said there was no discussion of any potential mis-selling of an interest rate hedging product. She said, "If there had been any idea of the product we would have raised". In essence the solicitor at Capital Law said it was all a mess. Mrs. Bartels said:

"We lost homes and businesses and everyone knew we had no finance. His advice was to walk away. He told us the limitation period was six years in the case of a contract and three years in negligence. She says that what she said in the interview was somewhat garbled."

80. It is possible that Mrs. Bartels might not be entirely accurate about what she says she was told or said but in matters of that kind that would only be suitable for investigation at trial. On the face of it, what the Bartels knew in 2010 was (a) there was something attached to the mortgage called a hedge (b) it would cost a significant amount of money to come out and the administrators then in place had been given the precise costs. There was a potential problem with it. Others had raised the issue of such products with the FCA. Finally, Mr. Cully said that he was at the early stage of an investigation and that they should forget it.
81. That knowledge must be tested against the essential nature of the Company's complaint which is that the Bank had not given any real explanation for the Swap when it was sold including features such as break costs and that they were not told there were alternatives which the Bank later accepted there were. In short, mis-selling, at least in these respects.
82. Mr. Goodall makes the point that at p.872 and 874(b) of the transcript the Bartels were saying that they did not appreciate that they had a hedge product until the Company went into administration and ergo if the discovery was then they also knew the Bank had no told them which, at least, is part of their complaint. I see that, although they seem to have regarded it as part of the mortgage which they did know about.
83. Mr. Goodall also referred me to p.972(w) of the meeting of 28th August 2014 when Mrs. Bartels explained how she was told of the hedge by Finance Wales and then went to see Mr. Cully, but I do not think that adds very much. He also reminds me that what Capital Law did was to tell Mrs. Bartels about the three-year knowledge exception to limitation. That is true although not, it seems, in relation to any particular claim.
84. What does not seem to me to be clear at this stage is that the Bartels had knowledge that the Bank may have mis-sold the Swap to them in the sense complained of so that they suffered loss as a result, albeit only enough knowledge for them to investigate further whether they then had a case against the Bank. In my judgment, even at this summary stage, the issue is finely balanced but had it been necessary I would have concluded, just, that there was a real prospect of arguing that the time under s.14A did not start to run until 29th June 2012. In the event, however, for the reasons given above, this conclusion is academic and cannot save the claims for the reasons already given.

The review claims

Introduction

85. It is common ground that the Bank agreed with the FSA to carry out a review of past Swap sales which included the Swap here. The original Particulars of Claim alleged a duty of care owed to the Company and Mr. and Mrs. Bartels, first, in the same terms as the Bank's duties owed to the FSA (the primary duty) and, secondly and separately, a duty of care in the circumstances of this particular case (the additional duty). The proposed amendment brings in the Company as a claimant in this respect and also pleads an entirely new review claim based on contract which I will deal with later.
86. The review claim is set out in paras.47 to 52. It is said that by reason of agreement to provide redress in accordance with the agreement, the Bank voluntarily accepted a duty of care to all the claimants or, alternatively, they agree to confer on customers whose swaps are being reviewed a duty to implement the review properly because otherwise they would be in breach of the FSA agreement.
87. At para.51 it says the Bank made a voluntary assumption of responsibility to all the Claimants. It owed the primary duties to them but in addition it owed duties review what consequential losses might be due and determine whether the entry to administration was the result of the sale of the Swap. They were to do that with reasonable care and skill, to co-operate with the claimants and to fairly and in good faith.
88. So far as the primary duty to the Company is concerned, the Bank accepts for the purpose of these applications only that there is a real prospect of the Company demonstrating this at trial because, and only because, the Court of Appeal has recently given permission to appeal the decision of His Honour Judge Bird in CGL Group Ltd. v RBS Royal Bank of Scotland [2016] EWHC 281 who had rejected such a duty as an argument. The Bank, for its part, maintains its position that the duty is, in fact, unarguable.
89. However, the Bank continues to maintain (a) that no primary duty is owed to Mr. and Mrs. Bartels as distinct from the Company and (b) the alleged secondary duty is unarguable. Moreover, it contends that there is no real prospect of the claimant showing any breach of the alleged duty so that in any event none of these review claims should be allowed to be pursued whether per the original Particulars of Claim or the amendments.
90. In the course of oral argument, the claimant's position on the duties and breach became somewhat more refined. I shall concentrate on how these matters were put at the hearing.

The facts

91. I deal firstly with the FSA agreement. I have already referred to this to some extent. It was entered into in July 2012. I now refer to the appendix at p.732. The skilled person means the independent third party approved by the FSA who will report to the FSA on the Bank's conduct of the review. That was the accountants KPMG here. At p.735, also in the appendix, the firm and the skilled person would design the methodology for past business review which would include agreeing the information obtained from the customer and would take into account the matters set out in para.3.8 to 3.6 through to para.4. Once the methodology had been approved the firm would carry out the review in accordance with the methodology.
92. Subsequently the Bank agreed to further terms of the review as set out in the letter from the FSA dated 29th January 2013 and the annexes thereto. I refer to the following. In that letter is says:

"Set out in more detail is our final position but in summary –

Point 7 – Offsetting

We also accept you can offset amounts payable as redress but only against loans that have been taken out for the sole purpose of paying break costs."

93. That is set out in more detail at paras.36 and 37 of Annex 1. Paragraph 38 also says in certain circumstances where the Company has sought or would like to seek third party advice in respect of the redress proposal, the firm should consider whether it is fair and reasonable to pay for the costs of that advice.
94. I was then shown the document at p.918. This is a document headed "Project Violet" and has a client reference name "the Company". The claimants say that this document was, in fact, the methodology as applied to this particular review. The Bank does not accept this but there is little further information for present purposes. I accept that it is reasonably arguable that this is what the document is.
95. At p.921 it says that the methodology from the review is intended to facilitate the individual and holistic assessment of each individual sale to ensure the circumstances are properly taken into account together with a degree of standardisation to ensure a consistent outcome in a timely and fair manner. There are then seven stages to the review. Stage 4 refers to Barclays' assessment and the decision on redress. The redress proposal should be fair and reasonable in all the circumstances. Any decision made by the decision maker will be assessed by the skilled person as to whether it is fair and reasonable.
96. It is said at stage 5, once a decision on redress has been made the decision maker will hold a further recorded telephone conversation in all cases. Unless the client objects telephone conversations shall be recorded. Stage 6 refers to the redress proposal, this details the design and development of the redress proposal solutions. Stage 7 says:

"Once the skilled person has agreed to the redress proposal a client engagement team led at all times by the decision maker will seek an opportunity to meet with the client and discuss their proposal. It is anticipated each client will require more than one meeting and an appropriate time to consider Barclays redress proposal and take advice. Barclays will seek to accommodate client's timetable in this regard. At the end of the review process if the client accepts the redress proposal the proposed redress shall be implied as fast as possible."

97. I also need to refer to the FCA's guidance on how dissolved companies who purchased Swaps were to be treated in the review. This is available online and there is at least an extract at p.970 of 3A. In the material parts this states that it is to deal with businesses in financial difficulty or in administration or dissolved companies. In the context of administration, it says that after determination of fair and reasonable redress including consequential losses the application is set off and the orders in which secured and unsecured liabilities are settled are a matter of insolvency law. Of course, that is true for companies in liquidation or dissolved as well.
98. For dissolved companies the Bank will review the files and take a reasonable effort to contact interested parties. They can then decide whether to restore the Company to the Companies Register. If a Company is restored it is treated as if it has been in existence and not struck off. For a business that was insolvent prior to being struck off this means that any redress due would be subject to the laws of priority of distribution to creditors set out in insolvency law which means that in some cases there may be little or no redress for the Company itself and, therefore, to the shareholders.
99. In reality and apart from the particular process being laid down there, this is no more than a restatement of the law. Any award of compensation by the Bank to an insolvent Company would be subject to the usual rules of distribution to creditors, secured and unsecured and mandatory insolvency set-off must apply. As we shall we, the Bank correctly made this clear to Mr. and Mrs. Bartels in the course of the review.

The claimant's case on breach of duty as against the Company

100. What I have said above is sufficient by way of background to deal with the claimant's case. This is put in three ways. Firstly, contrary to what the Bank contents, there is a real prospect of showing breach of the Bank's duties owed to the FSA. Secondly, the methodology applied to this review was broken and accordingly it was a breach of para.3.7 of the appendix or a real prospect of showing such breach. Thirdly, there was or may be a breach in relation to how the Bank dealt with the Company as an insolvent Company and the claimant should be allowed to investigate this point further. I deal with these points below.
101. It is common ground that the offer letter of 12th August said that the actual amount payable would be zero because of the application of insolvency set-off. Mr. Hatt says this is in breach of para.36 and 37 Annex 2 which allows set-off only in relation to any loan taken out to pay the breakage costs. Manifestly, that was not dealing with cases where the customer was an insolvent Company as the published guidance makes clear. What this or any review could not do was alter the general law on which insolvency set-off is a notable part. Accordingly, there is nothing in this first alleged breach.
102. I should only add that although Mr. Hatt said that the insolvent companies guidelines had not been put in, they clearly were, as noted above or as much as were necessary, in any event, it transpired that prior to the hearing the claimants had not actually asked for copies. It follows that this finding must dispose of one of the other related points made by Mr. Hatt which was that the treatment in insolvent companies is something which might be significant and should be investigated at trial. That is pure speculation and is unwarranted by reason of the clear conclusion in relation to set-off and the guidance that I have now reached.
103. As for the other points, they require me to rehearse some further facts. It appears that along with the former review the Bank had, in any event, agreed to review the Company's case generally. While the Swap itself would only be formally considered as part of the FSA review Mr. Gallagher would also look at it in the context of the internal review (see para.50 of the second witness statement of Ms. Stott summarising the correspondence).
104. The backdrop to that particular point was this. At an interim stage in July and August 2013, at least according to the letter written by Mr and Mrs Bartels on 18th September, Mr Gallagher was concluding there could be a mis-sale and there were consequential losses because it had caused the Company to fail. This is according to Mrs. Bartels note, but even if it is accurate it was only a provisional view.
105. That is because of a letter can be seen from the letter from Mr. Ho, a managing Director of the Bank on 10 January 2014. He said that having looked at the facts available to Barclays and having referred, first of all, to the extent of the indebtedness (£1.4 million), he said that he referred to the fact that the Company's concern about mis-selling was subject to consideration in the formal review with the FSA and the sale of the Swap would be reviewed in that context. He went on to say that as part of the review, should the Swap be found to have been mis-sold Barclays will consider what, if any, consequential losses might be due. Their review during the complaints process determined that the entry of the Company into administration was not as a result of the sale of the Swap. It could be that the review determines otherwise in which case an assessment of consequential losses will look at the impact that this had on the Company.
106. It is plain from this that the Bank's internal position was that any consequential loss could not be shown but that the formal FSA review still underway would consider that question and that is what Mr. Ho's letter said. What that means is if there was a mis-sale then the Bank would follow the mechanism of the review which would include the procedure for offering redress which includes the question of consequential loss, obviously assuming such a claim was made and that all fell to be dealt with under the redress letter and the 40 days.
107. Mr. Hatt argues that the letter and others which refer to consequential losses show that the Bank was undertaking quite separately to the review to consider the question of the Company's losses, in any event, and without any specific time limit so as to amount to some freestanding duty to the Company which he goes on to say was latter broken. That, in my view, is a hopeless contention given the terms of the letter of 10th January 2014.
108. Equally, I should say at this stage that Mr. Hatt made an argument regarding the reference at para.38 of the Project Violet document referred to in the letter of 29th January. Paragraph 38 said that in certain circumstances where the customer has sought or would like to seek third party advice in respect of the redress proposal, the firm should consider whether it is fair and reasonable to pay for the cost of the advice. Mr. Hatt sought ambitiously to draw out of that the suggestion that implicit in that was that not only in any given case should the Bank pay for the cost of advice but it should extend as appropriate any time for consideration of any offer until that advice had been obtained. That conclusion is wholly unwarranted, in my judgment, from that brief paragraph.
109. The formal FSA review included a detailed interview with Mr. and Mrs. Bartels called a fact find. I have referred to parts of that. At para.909 Mrs. Bartels said that the product had been a "sleeping cancer" in the business and then at para.911 she said that if the Swap had not been there the business would still be up and running today, that was their argument and that they had tried every avenue. Accordingly, says Mr. Hatt, at this point a claim for consequential losses was being made which the Bank should have investigated without further review and pursuant to its alleged separate duty and quite apart from the review. I reject that since there was no further duty.
110. In any event and as noted above, the Company through Mr. and Mrs. Bartels was given the opportunity to make such a claim in the offer letter of 12th August. Indeed, following that letter there was a meeting called the "challenge meeting" with the Bank on 28th August, i.e. within the 40 day period. Mr. Hatt makes an initial point that there was only one such meeting and so was a breach of stage 7 and its reference to more than one meeting. That is absurd, with respect. The Bank was under no duty to hold more than one meeting if the customer did not want it and there is no evidence that they did. Indeed, the meeting on 28th August was detailed and wide-ranging. The following points plainly emerge from the transcript of that meeting:

(1) Mr. and Mrs. Bartels said that they could not afford to restore the Company which was necessary for any consequential loss claim to be made and, indeed, that is what the offer letter said, that aspect of the offer cannot be criticised. Mr. Ponikwer was not sure about that but the Bartels insisted it was the position and, indeed, as a matter of law it would have to be.

(2) Later Mr. Ponikwer said that the Bank could look at a consequential loss claim if there was a claim but also made the point which the Bartels knew that any award would be subject to set-off and any residue would be distributed to the general body of creditors where the total liability was £1.4 million.

(3) Mr. and Mrs. Bartels made plain their disillusionment with the review process. They could not afford to bring a consequential loss claim and it would need a forensic accountant. They said they were now looking at litigation.

111. At one part of the meeting Mr. Bartels said, "At the end of the day the sale of the Swap as you said there's no point even going for consequential losses because it's not going to amount to more than £800,000". Mr. Ponikwer said he did not know what the amount would be and Mr. Bartels said it would not. Mr. Ponikwer said "You've obviously got some talking to do, what you want to do next" and Mr. Bartels said, "No, because we've made a decision". Later on Mr. Ponikwer said "It sounds like the course you want to take is the litigation route" and Mr. Bartels said, "We haven't got any choice".
112. We then know that on 18th September the Bartels sought an extension of the 40 day period. This was refused on 3rd October and I have read out that letter. As to that, Mr. Hatt says that pursuant to stage 7 it should have gone to an extension to accommodate the client's timetable but, in my judgment, there is nothing in this point. First, the original timetable of 40 days was more than reasonable given the extensive review which had already taken place, the extensive involvement of the Bartels, their clear familiarity of the issues and the options that have been made clear at the later meeting and, indeed, the reference to consequential losses in the informal investigation undertaken by the Bank.
113. Secondly, at the meeting they made clear they saw no point in engaging with the process further as recorded in the Bank's letter of 3rd October. What they were asking for in the 18th September letter was to keep the review file open while they examined legal routes and where they said they had no option now but to litigate. It was an open ended extension being sought. Furthermore, by then the Bartels' case on consequential loss was known to them, essentially that the Swap liabilities caused the Company to fail because it was a cash flow burden and the principle loss was that of the Hotel. Indeed, that claim is presented succinctly in the Particulars of Claim. In fact, in letter of 20th September 2015 Mr. Welsby said that Mrs. Bartels had regretted not putting in the consequential loss claim on time.
114. True it is that an extension was sought again, on 17th November 2014 seeking a reasonable time to then respond but that really added little to the previous request. It needs to be borne in mind the 40 -day limit, as with the whole of that letter, had been approved by KPMG. Then it is said that Mr. Ponikwer should not have restricted himself to exceptional circumstances when refusing the extension in the context of the offer. I cannot see any objection to a restriction to exceptional circumstances either generally or in any event at least in this particular case. That is against the background where the Bartels had made plain they could see no point in consequential losses being claimed here because the Bank would insist on insolvency set-off and, in truth, they had no choice.
115. In all those circumstances I cannot see how the Company can begin to make out a case for breach of the FSA duties or any other duties in respect of its treatment of the Bartels and the Company before or after the redress offer was made and in relation to the application for extension of time.
116. I should add, although this is not necessary for my decision, that in any event as matters stand it remains extremely speculative whether any consequential loss claim could exceed the amount presently due to the Bank and other creditors so as to produce any net result for the Company. In truth, and in my judgment, the Bartels real complaint here is that the Bank said it would apply the set-off. I understand their frustration about that but this is a matter of general law which the Bank has to apply and, moreover, it will apply just as much to any litigation if there was to be any.
117. Finally, the notion that the Bank could owe a duty of care to a customer in relation to any internal investigation it carries out is obviously misplaced. There is no assumption of responsibility in such a case. There is no policy reason to have one since, as with any informal dispute resolution process, if the customer is not satisfied it can litigate. Accordingly, the wider duty of care relied upon by the claimants in respect of the review and/or the Bank's informal investigations cannot be substantiated.
118. This is part of the judgment which I was summarising earlier on and I will read it back into the correct place afterwards.
119. For all those various reasons I am quite satisfied that there is no arguable case of breach of duty by the Bank towards the Company in respect of the review process or, indeed, towards Mr. and Mrs. Bartels as I shall explain below.
120. In relation to any other relevant review points I can take these more briefly. Firstly, there is no question of duty of care owed by the Bank to Mr. and Mrs. Bartels personally in relation to the review whether in terms of the narrow or wider duties under other Company claims. There is no basis to add those duties just because they were directors or shareholders and just because the Bank dealt with them. The fact that Mr. Gallagher might have suggested that the Company did not need to be restored to the Register is irrelevant because the Bank's ultimate position was that it most certainly did. In any event, that would not generate a duty to the Bartels.
121. Nor in this case was it foreseeable that the Bartels would suffer loss in the event of breach of duty to the Company. On any real view, the likelihood of them getting anything if there was an award was highly speculative for the reasons already given. In any event, in any case where duties are owed to a Company client, for example by a solicitor or a surveyor or a financial advisor, it could be argued on this basis that if it was broken and the Company suffered loss there would be loss to the shareholders but that is no basis for saying there were duties owed to their shareholders. Accordingly, whatever test is adopted for duties of care, it must fail so far as the Bartels are concerned.
122. The only remaining point on the review was a claim added to the amendment more recently that the letter of 20th September 2015 amounted to an acceptance of an offer contained in the redress letter of 12th August 2014 but that is hopeless since that offer was no longer open for acceptance, at least other than the option 1 redress of £110,000 which, as the correspondence showed, had then been fixed. That was set out in the 20th September 2015 letter and, indeed, in the letter of 3rd October 2014. The offer that is being alleged was accepted was in relation to consequential losses but that had been closed off the previous year.
123. In all those circumstances it is not necessary or proportionate for me to deal with two further arguments raised by the Bank to show that the claims were unarguable, i.e. first, that the Company was not a private person for the purpose of the breach of statutory duty and, secondly, that the claims or some of them were barred out by the basis clauses contained in the Confirmation.

CONCLUSIONS

124. For all those reasons I find there is no real prospect of any of these claims succeeding against the Bank whether by the Bartels or the Company, save in relation to the negligence claim by the Company but in that regard permission to amend is refused because of non-compliance of 19.5 and, in any event, is a matter of discretion.
125. I appreciate that this is bad news indeed for the Bartels who are in very difficult circumstances but I have given this judgment, at perhaps greater length than otherwise, to show that all of the points advanced on their behalf have been very carefully considered so that they can see precisely why it is that these claims, in reality, cannot go any further. I hope Mr. Goodall will not mind me observing also that although they have lost, Mr. and Mrs. Bartels have been extremely fortunate to have as their advocate Mr. Hatt who has argued every point that could be argued on their behalf with consummate skill and tenacity.