Kays Hotels Ltd v Barclays Bank Plc.

Posted on 21/06/2014 · Posted in Financial Litigation, Interest Rate Swap

Kays was a family-owned company which owned a country house hotel. They entered into a loan agreement with Barclays in 2005 to borrow £1.34m repayable over 20 years. Before the end of 2005 Kays entered into a collar agreement to hedge its interest rate exposure. No payment was made by either party between 2005 and 2007 as per the agreement terms, but when rates fell sharply (below 4%) in 2008 K was obliged to make payments to Barclays……again, as per the terms.

There’s time enough, but none to spare. .”
Charles W. Chesnutt

Kays brought a claim for mis-selling against Barclays in 2012 whereupon Barclays applied to have the claim struck out. This was on the grounds that it was time-barred, Kays having been sold the product over 6 years before(the usual limitation period). Kays sought to rely on s14 Limitation Act 1980 which provides for an extended limitation period in negligence actions for those who have suffered loss but do not have the requisite knowledge relating to that loss at the time it occurred.

The test was when the claimant knew the essence of the act or omission to which his damage was attributable ( ie the point at which he could take advice and issue proceedings), at which point the 6 year time limit started running. Kays main argument was that it did not have the requisite knowledge to bring an action until November 2009. However Barclays contended that Kays must have, or should have, known that it had a claim before then, since by that date it had already paid £36,000 to Barclays under the collar.

The High Court felt that the Kays had a real prospect of establishing that it could rely on s14 and thus the case should go forward to trial (and not be summarily dismissed ) to have the facts established, thereby determining when Kays actually had knowledge that they might have a claim.

It will be interesting to see the eventual outcome of this case. The bank may still be successful at trial but it is clear that in future banks will find it more difficult to dismiss claims initially where s14LA 1980 is invoked.

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