Kays Hotels Ltd (T/A Claydon Country House Hotel) v Barclays Bank PLC (2014)
The claimant was a family-run company which operated a country house hotel. In 2005 it entered into a loan agreement with the defendant bank to borrow GBP 1.34 million repayable over 20 years at an interest rate of 1.5% above the defendant's base rate. It also entered into an interest rate hedging product, which was a collar with a ten-year term. If the Bank of England base rate increased above 5.5%, as it did in 2007, the bank would pay the claimant. If the rate fell beneath 4%, as it did in 2008, the claimant would pay the bank. If the rate remained between 4% and 5.5%, neither party would make payment.
In November 2012, the claimant issued proceedings alleging that it had been mis-sold the product. The bank alleged that the claims were time-barred and applied for strike out. The claim was, however, stayed pending review of the sale as part of a wider process agreed between the FSA and banks in 2012 in relation to the sale of interest rate hedging products to non-sophisticated business customers, as a result of which the defendant paid compensation to the claimant. The stay expired and the bank renewed its strike-out application. In relation to the claim concerning the bank's common law duty of care, the claimant relied on section 14A of the Limitation Act 1980 for a three-year time extension to bring proceedings, on the basis that it had not had the requisite knowledge to enable it to bring an action before November 2009 (i.e. three years before proceedings were in fact issued). The bank argued that the claimant knew or ought to have known that it had a claim before proceedings were issued, since by that date it had made substantial payments to the bank in relation to the product over a considerable period of time.
The Court considered the case law regarding the knowledge required for the claimant to rely on section 14A. It held that the test was whether the claimant had been alerted to the factual rudiments of its claim and whether it knew the facts needed to know how to take advice and mount proceedings if so advised. To start time running, it had to know the essence of the...