On 28th September, the Court of Appeal dismissed the ground breaking challenge against big-five accountancy firm, KPMG, finding it wasn’t amenable to challenge when acting as a “skilled person’ – upholding a decision that the High Court made over 3 years ago.
Several years ago, various UK banks mis-sold interest rate hedging products to their customers. When investigating, the Financial Conduct Authority found that Barclays should offer compensation to all of its affected customers. The FCA has the power to appoint a third party – a ‘skilled person’ – to review a regulated firm’s activities if it’s concerned or wants further analysis. In this case, it appointed KMPG as the ‘skilled person’ to conduct an independent review, working out how much compensation Barclays should offer, and making sure it was appropriate, fair, and reasonable.
Holmcroft Properties, one of Barclay’s affected commercial customers, disagreed with KMPG’s decision to approve the compensation offer that Barclays had made. Holmcroft challenged the fairness of the decision – and the key issue for the Court was whether or not KPMG, by performing this role, was undertaking a public function subject to public law principles. When organisations, governing bodies or industry regulators undertake what’s known as a ‘public role’, their decisions can be subject to scrutiny by the courts.
The Court’s long awaited judgment stated that there was no ‘public law flavour’ to KPMG’s function, as the case essentially boiled down to a private dispute between KPMG and Holmcroft. As a result, KPMG couldn’t be challenged by way of public law principles for the fairness of its decision about Barclays’ compensation offer.
What does this mean?
Essentially, this case sets a precedent that those acting as a ‘skilled person’ can breathe a sigh of relief – following an anxious wait – that their decisions are less susceptible to public law challenges in the future. If the Court had ruled against KMPG, ‘skilled persons’ would have potentially been subject to challenge by way of both public law and private law proceedings.