City litigation boutique Cooke Young & Keidan has been given the go-ahead to proceed to trial for Guardian Care Homes over Libor-related allegations against Barclays.

The case, one of the first of its kind to be heard since the Libor scandal broke earlier this year, has been widely viewed as a test case for the UK banking sector.

The judge overseeing the case yesterday (29 October) ruled that Barclays should face fraud allegations in relation to attempted Libor-rigging and the aggressive selling of hedging products, with the case set to go to trial in the new year.

Clifford Chance (CC) is advising Barclays, with litigation partner Ian Moulding in the lead role. The magic circle firm instructed Adrian Beltrami QC and Richard Hanke from 3VB as counsel.

Cooke Young is acting for for Guardian led by litigation partner Philip Young, with Brick Court Chambers' Tim Lord QC leading the proceedings alongside Farhaz Khan from Outer Temple.

The dispute, known as Barclays Plc v Graiseley Investments & Ors (Guardian Care Homes), has seen care home provider Guardian attempt to sue Barclays over the alleged mis-selling of interest rate hedging products, known as 'swaps', that the company claims has cost it more than £12m since 2008 based on manipulated Libor rates.

The case will be closely watched by small businesses which have been sold swaps on the basis they would be protected against interest rate changes.

In a statement, Guardian chief executive Gary Hartland said: "We are delighted that the judge has accepted our pleadings that Barclays should face fraud allegations in relation to attempted Libor-rigging and the aggressive selling of hedging products.

"Barclays' attempt to have this claim thrown out has now been wholeheartedly rejected by the judge. Today is a huge milestone with a trial now going forward to determine whether these financial products should be declared void. Our claim is not just based on mis-selling but on the effect of senior management at Barclays instructing the aggressive selling of swaps while attempting to rig Libor."

CC has been advising both Barclays and the Royal Bank of Scotland on the fallout from the Libor scandal, with a Chinese wall set up to avoid potential conflicts.

Norton Rose also secured a high-profile mandate this summer to advise former Barclays chief executive Bob Diamond in relation to the scandal.