There was an interesting article by Geoff Ho in the Sunday Express yesterday (31/5/2015) on the law suit being pursued by shareholders against RBS. He reports that the RBoS Shareholders Action Group was presented with a bill for £1.2 million by its former solicitors Bird & Bird and a demand for “prompt payment” after they changed lawyers to Fladgate following concerns over costs and communication. Indeed the original demand was even higher but was subsequently reduced. Fladgate are working on a conditional fee arrangement which will help to control costs going forward. The RBoS Shareholders Action Group is just one of several groups pursuing a legal case over the rights issue prospectus in 2008. Royal Bank of Scotland have said they will vigorously defend the case.
Martin Flanagan in the Scotsman also reported that the High Court had earmarked from December 2016 to summer 2017 to hear the case because of the enormous amount of evidence and complexity of the case.
US legal firm US law firm Quinn Emanuel Urquhart & Sullivan are also pursuing a case based on complaints from business customers of RBS that the “turnaround” division acted unethically.
Comment: as expected the prospectus claim is becoming one of the largest and most expensive legal actions ever launched in the UK. One can see exactly why so many lawyers are keen to get involved in the case when they can rack up such large fees. Just imagine what the bills will be from QCs for weeks in court and for the supporting legal teams. Even if the case is won, it is not clear that private investors will get much back after taking into account their own contributions and third party costs. It is a good example of how the legal system in England makes it very difficult to pursue legal actions at reasonable cost which of course plays into the hands of large corporations who can absorb the fees (in this case even backed up by the Government who own a majority of RBS). Yes the legal system under which such cases operate, and the associated costs, do need reform. And before you ask, no I have no idea who might win this marathon battle between leading legal counsel. Moral justification may have little to do with the outcome, despite many private investors being impoverished by events back in 2008.
Robert, all I can say is that I might have arranged matters differently. I was involved in the action group initially but dropped out after a couple of years and we certainly did not run up enormous legal costs in that time. I think they are now on their third set of lawyers, or is it fourth?
I agree. As a solicitor having condicted many actions against big financial insitutions for private clients and SMEs, including some pretty big ones for mulpiple claimants, I can testify that the costs aspects of our legal system results in bias in favour of Goliath and against David.
There is intrinsic no reason why this should be. The situation is as it is because of politics – the Conservatives and their big business backers like it that way. The “compensation culture” soundbites we had a few months ago were just spin inspired by professional lobbyists.
However, the RBS claimants might have been better to seek out a firm willing to work on conditional fees at the outset. It is important to budget from the beginning so as to make sure you can see the case through to the end and that the defendant knows there is no escape except by defeating the claim on the merits of the claim itself.
I am in the RBOS Shareholders Action Group and was told by phone in early 2015 that indemnity insurance was in place which would cover any costs incurred should the action fail.
In a letter received this week the Sharehoders Group say they are concerned about the banks rising costs and want a cap putting on these costs in the event the bank being successful.
Can anybody tell me if members of the Shareholders Action Group would be liable to pay costs in the event of the bank winning the case
Jeff. The answer depends on the particular arrangement under which this claim is being run. The solicitors running it for you must explain your potential liability to you. Ask them.