Claimant & Bank Settlement Agreement Cases On The Rise

In recent years there has been a dramatic rise in claimants choosing to only bring a case before tribunal once they have reached a settlement agreement with their bank. This use of banking litigation is very troubling to fair employment law rulings, and has risen considerably since the July 2013 introduction of mandatory tribunal fees.

The most frequent way of creating a settlement agreement involves the claimant ensuring the it does not intentionally cover claims of fraud. This move is often followed by an attempt to evoke misrepresentation under the guidelines of The London Interbank Offered Rate.

A second way of justifying non-payment of costs for a case is for the claimant to declare they have no choice but to form the settlement due to issues of economic duress. This usually involves a bank threatening to enforce its legal rights in response to the claimant refusing to drop their claim.

Whenever a case involving these settlements is presented before tribunal there is an indication that legal liberties have been taken by the claimant’s lawyers in order to present legal opposition to a claim that would otherwise likely succeed on factual basis alone.

Marsden v Barclays

Presiding over the July 2016 case of Marsden v Barclays [2016] EWHC 1601 (QB), Mr Justice Phillips refused all claims of economic duress put forward by the claimant. In summing up his decision Justice Phillips was direct in his explanation:

“… the entry by the Parties into the facility letter dated 27 January 2011 with a loan amount of £3,671,374.00 is in full and final settlement of all complaints, claims and causes of action which arise directly or indirectly, or may arise, out of or are in any way connected with the Swaps.”

The judge also gave little consideration to the economy of the drafting:

“The Settlement Agreement is worded in the very widest of terms, expressly compromising both existing and future causes of action arising out of or in any way connected with the Swaps. On its face, that wording plainly covers all aspects of the present claim”.

Despite this ruling, settlement agreements are not usually allowed to contradict claims of fraud or deceit unless express wording is used in the employee contract to cater for such an occasion, or in instances where it can be shown the parties intended to settle fraud claims between them should an incident come up.

In the case of Marsden v Barclays, the claimant made clear in a letter to Barclays, written before the settlement, that the bank may have intentionally misled him in the sale of the swaps. This was the key evidence the judge required to rule that the release wording did actually extend to claims of fraud and deceit.

The assertion that Barclays obtained the settlement via economic duress was also rejected by the tribunal. Barclay’s ‘threat’ of only re-financing certain defaulted loans if the claimant withdrew his case was ruled fair practice by Justice Philips who explained how the decision was reached:

“It follows that the Bank’s requirement that Mr Marsden sign the Settlement Agreement was part of a commercial negotiation of the terms on which the Bank would provide a large new loan to a defaulting debtor. To the extent that the Bank threatened not to provide the facility (or to cancel it) if Mr Marsden did not release outstanding claims, it was a threat to adopt an entirely lawful position, one which the Bank could hardly be criticised for taking. Further, there is no reason to suspect that the Bank did not believe that it was entitled to make such a demand. The result was a compromise entered by Mr Marsden for good commercial reasons and with the benefit of legal advice. I can see nothing which would arguably make this one of the rare cases in which a lawful action amounts to an illegitimate threat”.