The Watching Brief | April 2024

Our Watching Brief covers banking and finance cases and market updates that have been of significance or interest in the last quarter.

If you would like to speak to us about any of the updates, please feel free to get in touch.

Market updates

The Court's latest approach to ADR

ADR is becoming increasingly mandated and the recent decision in Churchill (below) seems indicative of that trend toward more court-ordered ADR. This has significant implications as more cases will be referred for ADR, slowing down proceedings but may lead to earlier settlements and saved costs for all parties involved. However, as ADR is often at the forefront of a litigator's mind, such a mandate, may actually increase costs by introducing a further procedural step when parties have already explored this or are not otherwise inclined to resolve the dispute.

Churchill v Merthyr Tydfil County Borough Council – The court has the power to stay proceedings to allow and can actually order, parties to engage in non-court ADR. When making these orders, the court can make such orders provided:

  • It does not impair the claimant’s right to proceed to a judicial hearing; and
  • It would be proportionate to settling the dispute fairly, quickly and at reasonable cost.

All Party Parliamentary Group (APPG) on Fair Business Banking – Financial Services Tribunal

Recently, the APPG have publicly criticised the Business Banking Resolution Service (BBRS) which was implemented to settle disputes between larger SMEs and those banks who voluntarily subscribe to the service. Following a Treasury Committee hearing that took place on 23 January 2024, the APPG have released statements on their social media which state that 'SMEs are rightly frustrated by the BBRS. Only 137 out of the 1,014 registered cases have been resolved since it began in 2021'.

They claim that SMEs need a new, statutory mechanism for the resolution of financial disputes that is effective and accessible and as such, they have renewed their call for a Financial Services Tribunal (the Tribunal) which will 'level the playing field' between SMEs and Banks.

The APPG first called for the introduction of the Tribunal in its dispute resolution report in July 2018. In this report, the APPG set out their case for a tribunal system designed to fill the gap between the FOS and the court which would allow SMEs access to justice that the APPG believed they did not have.

Although the BBRS was set-up after this report, the APPG have been consistently critical about the alleged failings of the BBRS and as such, they have reiterated their call for the tribunal.

We will keep you updated with any further movement towards the implementation of the Tribunal but for further reading, the APPG's dispute resolution updates can be found here.

APPG v Financial Conduct Authority (FCA)

We have previously highlighted the ongoing dispute between the APPG and the FCA in respect of the independent review of the Interest Rate Hedging Products Redress Scheme (the "Scheme") that was conducted by John Swift KC in 2021.

In March 2022, the APPG issued judicial review proceedings against the FCA regarding their decision not to act on the findings of the Swift Review (the "Decision"). Specifically, the proceedings were brought on the basis that the FCA failed to disclose key documents that were relevant to its decision making.

On 29 June 2023, the High Court granted the APPG permission to bring the judicial review on the following grounds:

  1. That the FCA's decision is irrational and therefore unlawful; and
  2. That the FCA failed to consult with the customers who were affected as a result of being excluded from the Scheme ("Excluded Customers") before making its decision.

Following the above decision, the FCA filed its Defence on 13 October 2023. The key provisions of the defence are as follows:

  1. Abuse of processthe APPG alleges that the FCA (and its predecessor, the FSA) unlawfully entered into voluntary agreements in 2012/2013 which established the Scheme. The FCA state that if the APPG wished to challenge the Decision on the basis of these agreements, it should have brought a claim for judicial review in 2012/2013 and that the Decision does not provide suitable grounds for impugning decisions that should have been challenged years ago, if at all.
  2. Irrationality – the FCA state that the APPG failed to identify any legal obligation on the FCA to establish a scheme akin to the Scheme for excluded customers. The FCA goes on to state that it acted rationally in deciding not to take steps to require Redress Banks (those which established the Scheme between 2012 and 2013) to provide redress to excluded customers in 2021.
  3. Procedural unfairness the FCA argue that they did not have a duty to consult and conduct an impact assessment in 2021 regarding the Scheme when the Scheme was established nearly a decade earlier and the Swift Review did not recommend that the FCA take opinions from others who may have had a competing view of what action the FCA should take.
  4. Limitation the FCA made a point around the practicalities of bringing the claim/starting Judicial Review proceedings when the decisions that are subject to the review date back to 2012/2013. Although the decision was made in 2021, it is not a fresh decision as it relates to matters that occurred in 2012/2013.
  5. Effect on the outcome – It is argued by the FCA, that even if the APPG could satisfy the court that they have an arguable claim, the outcome for the APPG would not have been substantially different in this case and so there has been no prejudice or loss. There is also a lack of public interest in the matter, being another reason why this should not proceed.

The APPG have rejected the points raised by the FCA and have responded with a short reply and the case is due to proceed to a full trial in 2024.

These proceedings are not the only occasion on which the APPG have sought to criticise financial institutions' current redress mechanisms and compensation schemes. In their report of February 2023 titled 'Building a Framework for Compensation and Redress', the APPG commented that:

  • The relationship between banks and their customers has been damaged due to a series of high-profile incidents and high-profile scandals involving both private companies and government bodies. Specifically, the APPG state that these incidents have eroded public trust.
  • The current landscape for institutional mechanisms for redress (including the FOS and FCA) is fragmented and difficult for both firms and customers to navigate. As such it fails to produce fair and reasonable compensation to those who have been harmed through no fault of their own.
  • Mass redress schemes are ad hoc; they are established to combat a specific incident and the process is often designed in way that limits the liability of the offending party. As a result of this, they fail those that they are seemingly designed to help.
  • Schemes that have been established with the sim of providing fair compensation usually involve a process that is flawed and excludes meaningful victim involvement. This exclusion leads to unfair/sufficient offers and a lack of trust in the schemes' outcomes.

FCA warns Annex 1 firms over anti-money laundering failings

On 5 March 2024, the FCA published its 'Dear CEO' letter to Annex 1 firms which sets out its findings from their recent assessment of how these firms are complying with money laundering regulations.

Annex 1 firms include lenders, money brokers and financial leasing companies which undertake specific activities that require them to be registered with monitored by the CCA for their compliance with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 but are not subject to wider FCA regulation.

The common issues identified by the FCA's assessment include:

  1. Discrepancies between registered and actual activities;
  2. Financial crime controls which had not kept pace with business growth
  3. A failure to risk assess customers' activities properly; and
  4. Inadequate resourcing and oversight of financial crimes issues and requirements.

Following the assessment, the FCA have given the relevant firms six months to assess their financial crime controls against the identified weaknesses but they state that where the firms identify areas in which they are falling short of the FCA's expectation, they must be addressed immediately. If such shortcomings are not adequately addressed within the prescribed timeline, the FCA have stated that the firms will face regulatory action, including possible enforcement action.


Ildar Uzbekov v Revolut Limited [2024]

This recent decision considered issues which are often raised in so-called "de-banking" claims and complaints.

Like many account providers, per its terms and conditions, Revolut is entitled to immediately close or suspend any customer's account in instances where they had reason to suspect that the customer was behaving fraudulently or in such a way that would damage it reputation or goodwill. As such, following media coverage which alleged that Mr Uzbekov was suspected of being involved in money laundering, Revolut closed his account and reversed transactions worth approximately £11,000.

Following closure of his account, Mr Uzbekov, issued a claim against Revolut seeking nominal damages for distress and embarrassment but, importantly, a declaration that Revolut had no good reason to suspect him of money laundering. Whilst Mr Uzbekov acknowledged that he had not suffered any compensable loss, he alleged that he was the victim of a smear campaign which Revolut (and three other banks) had taken at face value. He asserted that there was a public interest element to his claim as it would ensure that financial institutions comply with their contractual terms and take care when making decisions in respect of their customers' accounts.  

Revolut accepted that a breach of contract claim raises triable factual issues but that the declaration sought by Mr Uzbekov would serve no useful purpose. As such, they applied for summary judgment and strike out of Mr Uzbekov's claim on the basis that: (1) he had no real prospect of successfully obtaining declaratory relief and (2) the proceedings were wasteful and disproportionate and therefore an abuse of process.

Court's decision

The Court allowed Revolut's application, finding the following:

  1. The declaration sought by Mr Uzbekov would serve no useful purpose as it would not vindicate his reputation. The Court commented that if vindication was what he sought, Mr Uzbekov should have pursued a defamation claim against the media outlets that reported he was involved in money laundering.
  2. In respect of the public interest element alleged by Mr Uzbekov, the Court found that it was not in the public interest for declarations to be granted to this end and, instead, it was for the financial services regulator to continue its work in respect of de-banking.
  3. Finally, even though this may be an actionable breach of contract per se, it is subject to the Court's power to guard against abuse of process and in this instance, as Mr Uzbekov's claim was for nominal damages and when considering the significant costs that Revolut would incur in defending the claim, the Court held that 'the game is not worth the candle'. Specifically, and when addressing the overriding objective of the CPR, the Court stated that 'it is no longer correct to say that a claimant alleging a wrong where damages is not part of the gift of the cause of action (a wrong actionable per se) is entitled to have his claim adjudicated as of right'.

This decision reiterates the importance the Court places on the overriding objective when making decisions regarding which claims should be permitted to proceed. It highlights that whilst the Court's focus will be to facilitate a just resolution of the issues between the parties, it will not attempt to resolve such issues at all costs and will continue to bear in mind proportionality and a fair allocation of the Court's resources.

The case is also the most recent in a line de-banking of cases in which the Court have upheld a bank's decision to close a customer's account due to suspicious activity.

Farol Holdings Limited & ors v Clydesdale Bank PLC & National Australia Bank Limited [2024] EWHC 593

The High Court have recently dismissed a claim against Clydesdale Bank Plc and its former parent, National Australia Bank Ltd (hereafter collectively referred to as the "Banks") following a 12-week trial in October of last year.


The claimants were four SMEs who commenced action against the Banks in respect of Fixed Rate Tailored Business Loans ("FRTBLs") provided to them and to the Banks' business customers more generally between 1999 and 2012. The claimants alleged that at the time of both entering and terminating the loans the Banks made fraudulent and/or negligent representations.

The claim fell into two broad classes:

  1. Firstly, that under the terms applicable to the FRTBL, the Banks were not entitled to charge the break costs they had upon early repayment and that both the Banks were aware of this; and
  2. Secondly, that the Banks had made false representations when explaining the pricing of the FRTBLs at the point of entering into the loan. The FRTBLs were each provided at a single overall fixed rate of interest which had two elements: the first was the Margin and the second was the Fixed Rate which included an element of income that the Banks referred to as 'Added Value' which was not disclosed to customers. As such, the claimants alleged that the Banks had made a number of fraudulent, or alternatively negligent, representations which lead them to believe that that Margin would be the Banks' only profit from the FRTBLs and that the Fixed Rate was a market rate that did not include any additional profit for the Banks.

Two claimants also pursued a claim on the basis that the non-disclosure of the Added Value rendered customers' relationship with the Bank's unfair pursuant to s.140A of the Consumer Credit Act 1974.


All aspects of the claim failed.

In his judgment, handed down on 19 March 2024, Mr Justice Zacaroli held that the Banks were entitled to charge the break costs and they were also entitled to calculate their loss upon early repayment of the FRTBL on the basis of the net present value of the difference between the fixed rate of interest due for the remaining term of the FRTBL and the interest at the prevailing floating rate for the same period. 

Mr Justice Zacaroli also found that the Banks' employees had not represented (dishonestly or otherwise) that the Margin was the only income generated for the Banks on the FRTBLs.

Further, it was also found that the relationships between the Banks and their customers were not unfair as the FRTBLs provided valuable benefits to customers and there was nothing unfair about the Banks making a profit from the services provided.


Below are links to the most recent articles published by our Banking team that may be of use and interest to you:

  1. Enforcement watch: The Prudential Regulation Authority issues second largest fine against HSBC of £57million
  2. Tackling APP scams: PSR Performance report highlights need for change
  3. The Prudential Regulation Authority outlines 2024 supervision priorities for international banks
  4. Enforcement watch: The Financial Conduct Authority continues its robust enforcement strategy with recent prosecutions for insider dealing
  5. Handling whistleblowing disclosures: the challenges for FCA regulated organisations
  6. Enforcement watch: FCA proposes to name firms under investigation as part of new enforcement approach
  7. FCA publishes consultation paper on diversity & inclusion in the financial sector

If you would like to discuss any of the matters raised in these articles, please do let us know.

The Lenders' Litigation Forum

The next LLF is due to take place in June.

In addition to our usual round up of hot topics, our In Focus session will look at the role of the "Senior Manager – both as defined under the SMCR, the EC&CTA and as a defendant/witness in litigation.

If you would like to attend and/or receive further information, please do let us know.