In my last post I considered the possibility of various sorts of actions being raised as a result of the Libor fixing scandal. It seems that Libor fixing may have an interesting knock on effect to interest rate swap claims.
The English Law Society Gazette has reported on an ongoing case brought in Birmingham Mercantile Court by Guardian Care Homes against Barclays in respect to the mis-selling of two interest rate swap agreements. Guardian claim they had been mis-sold these agreements which they then had to pay fees in the region of £9m to exit.
Guardian are now intending to argue that the swap agreements, which were based on Libor, are void. It was an implied (i.e. non-written) term of the swap agreements that representations made by Barclays as to the Libor rate were true. Barclays knew, or ought to have known, that that the Libor rate they were providing to Guardian was not the true Libor rate. As a result they were in breach of this implied term of the swap agreements, effectively allowing them to be considered void by Guardian. It is a clever and compelling augment and we will be watching this case closely.
Could such an argument be deployed against other banks and not just against Barclays based on their knowledge of Libor fixing? As we learn more about the true extent of the fixing of Libor this may well be a possibility
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