RBS payout may trigger other group litigations

RBS £200m payout could lead to similar group litigation brought by small investors in other companies.

You may recall that investors alleged that RBS had misled them over the state of its health before a £12bn rights issue in spring 2008. Most of that investment was wiped out soon after, when RBS required a £45.5bn taxpayer-backed bailout.

Thousands of retail investors and institutions worked together to bring a court case that was due to start in May. But over the previous few months, a number of institutions and other investors — representing nearly 90 percent of claims by value — agreed to a settlement worth between 41p and 43.2p per share.

The deal struck in early June with thousands of retail investors at double that price is a sign that individuals can successfully pursue a group litigation case. So expect similar action in the future.

Other group litigation cases with similarities to RBS are already in the pipeline. A case against Lloyds Banking Group, which was only freed from the shackles of government ownership last month, is due to commence in October. Again, it is being brought by thousands of investors who complain about the bank’s rescue of the beleaguered HBOS in 2008. Annoyingly the action group is no longer open to new members so I cannot join it! I found out too late.

Investors allege they lost about £400m as a result of the deal and that HBOS shares were “valueless” at the time. They claim they were misled into approving the HBOS merger as key information over the true financial health of the bank was withheld.

Stephen Rosen, a partner at law firm Collyer Bristow was quoted as saying “there are litigation funders who are actively looking to fund shareholders’ actions.”

With more litigation funding readily available, the success of the RBS investors could inspire more small shareholders to take action.

Cliff Weight