The Royal Bank of Scotland news, updates and analysis | Page 1 of 4

Some 9,000 Royal Bank of Scotland (RBS) shareholders have accepted a last-minute 82p per share out-of-court deal from the bank over its 2008 share sale, ahead of this morning’s court appearance.

The hearing is set to resume this morning in London’s High Court before Mr Justice Hildyard. A final settlement would draw to a close one of the most high profile and expensive commercial disputes to hit the London courts for years.

The majority of remaining claimants, represented by the RBS Shareholders Action Group, were prepared to accept an offer made last week in the rights issue damages claim against the bank and four of its former senior executives.

A few former investors, however, have been seeking further investment since being urged to settle last week by lead investor tycoon Trevor Hemmings and the RBS Action group.

One adviser close to the case told Legal Business that ‘for them it was no longer about the money, they want justice and Fred Goodwin [former RBS chief executive] to take the stand. But I would have been astounded if they obtained the extra funding to continue.’

The bank’s final offer of 82p per £1 remains a fraction of the 200-300p-per-share that claimants paid for RBS shares back in 2008, in the run-up to the bank’s £45bn public bailout.

The trial was due to open on 22 May, but was adjourned until 7 June for settlement negotiations following the last-minute offer.

The claim was launched in 2012 by around 27,000 retail investors who claimed they were misled about the bank’s financial health. It sought £12bn from investors in 2008 for a rights issue during the financial crisis.

Eighty seven percent of investors, represented by Stewarts Law, Mishcon de Reya, Quinn Emanuel Urquhart & Sullivan and some of Signature Litigation’s clients, had already settled with RBS for around £800m in total in December 2016 and April this year, at 41p and 43.2p per share respectively.

Over 9,000 claimants remained in the action after the majority of claimants settled with RBS for 41p per share in December 2016. In April 2017, 40% of the Signature Litigation Group also settled with RBS for 43.2p per share.

The original claimants included RBS staff and pensioners, institutional investors such as Wells Fargo, Boeing pension fund, Bank of America Merrill Lynch and Bank of Ireland. Some UK local authority pension funds, including Bedfordshire County Council, Essex, Nottinghamshire and the London Borough of Merton, also joined the litigation.

The remaining claimants have been represented by Signature Litigation partners Graham Huntley and Julian Connerty. RBS is represented by Herbert Smith Freehills, led by partners Simon Clarke, Adam Johnson and Kirsten Massey.

Goodwin, who was listed as a witness in the trial, is represented by Clifford Chance (CC) litigation partner Dorian Drew. K&L Gates head of litigation John Magnin is advising London and Northern Capital Partners (LNCP), owned by the majority funder in the litigation Trevor Hemmings.

Litigation boutique Hausfeld, led by partner Lianne Craig, represents asset recovery and private equity firm Hunnewell Partners (BVI).

RBS and the Shareholder Action Group have both declined to comment at press time.

georgiana.tudor@legalease.co.uk

The board of the 9,000-strong Royal Bank of Scotland (RBS) Shareholders Action Group has endorsed a settlement to claimants of 82p per £1 offer made by RBS on the evening of the trial, although the sum is below original estimates.

In a letter to theshareholders published on 27 May, the group said: ‘We have decided to accept the offer of 82p per share on behalf of our membership, [a decision] fully supported by our legal advisers. Taking into account all of the relevant factors, we have come to the conclusion that it is in the best interests of all claimants for us to accept the 82p per share offer.’

Acknowledging that the decision may be ‘surprising to some’ claimants, as the offer was ‘slightly below the previously advised ranges of damages, being 92p per share and 234p per share’, the group said accepting the offer would avoid the practical and legal risks involved in a full trial.

The statement adds that ‘a substantial claimant in the action’ is funding the case and has chosen to accept the offer, leaving no available funding to take the matter to trial. All corporate claimants have indicated their acceptance of the offer. Settlement would also lessen legal costs, which would be deducted from the total damages the claimants receive.

 ‘This is a significant sum and is effectively double the amount that was paid to the other settling claimant groups,’ the statement noted.

The next step is for at least 70% of the remaining claimants, some 9,000 retail investors, to agree to the settlement individually before 1 June. The case will then return to the High Court on Thursday, where Mr Justice Hildyard will hear any representations from the parties.

The trial was due to open on 22 May, but was adjourned until 7 June for settlement negotiations following the last-minute offer. The claim was launched in 2012 by around 27,000 retail investors who claimed they were misled about the bank’s financial health before it sought £12bn from investors in 2008 for a rights issue.

Over 9,000 claimants remain in the action after the majority of claimants settled with RBS for 41p per share in December 2016. In April 2017, 40% of the Signature Litigation Group also settled with RBS for 43.2p per share.

The original claimants included RBS staff and pensioners, institutional investors such as Wells Fargo, Boeing pension fund, Bank of America Merrill Lynch and Bank of Ireland.

Some UK local authority pension funds, including Bedfordshire County Council, Essex, Nottinghamshire and the London Borough of Merton, also joined the litigation.

The remaining claimants have been represented by Signature Litigation partner Graham Huntley. RBS is represented by Herbert Smith Freehills, led by partners Simon Clarke, Adam Johnson and Kirsten Massey. Former RBS CEO Fred Goodwin, who was listed as a witness, is represented by Clifford Chance (CC) litigation partner Dorian Drew. K&L Gates is representing London and Northern Capital Partners (LNCP). Hausfeld is representing Hunnewell Partners. 

geoorgiana.tudor@legalease.co.uk

The judge hearing the Royal Bank of Scotland (RBS) £4bn rights issue damages case – currently stayed pending settlement negotiations – has highlighted the bank’s ‘extraordinary’ £129m costs in the case, in a preliminary judgment published on 23 May.

In deciding RBS’s application for £11.6m security for costs against the claimant litigation funders Hunnewell Partners (BVI) and London and Northern Capital Partners (LNCP), Justice Hildyard noted the ‘sheer size’ of the defence team’s legal costs had resulted in the prospect of securing adequate after-the-event (ATE) insurance cover ‘difficult, if not impossible’.

Hildyard said: ‘the extraordinary (indeed, in my experience, unparalleled) amount of the costs apparently incurred in this litigation by, in particular, the defendants has in the past caused me, and continues to cause me, very great concern.’

The 9,000 claimant shareholders maintain they were misled about the true state of RBS’ finances when it issued its prospectus for a £12bn Rights share Issue in 2008.  

The trial was due to open on 22 May, but is currently stayed until 7 June for negotiations following an 82p per £1 settlement offer from RBS on 21 May – the evening before the trial. The offer is double that of previous settlements in the claim. Herbert Smith Freehills acts (HSF) for RBS.

In noting the ‘magnitude of the costs’, the excess of which was over the ‘already huge’ estimates originally given, Hildyard referred to RBS’s defence having instructed 13 counsel in and ‘serried ranks of solicitors and paralegals (probably over 20)’.

This contributed to ‘a present overall estimate of costs on the defendants’ side of nearly £129 million, must be a prohibitive context in which to seek adverse costs insurance’ he added.

An RBS spokesperson said: ‘This is a substantial and complex case and the manner in which it has been pursued has resulted in the bank incurring substantial legal costs.

‘We have a duty to act in the best interests of all of our shareholders, including the UK taxpayer. We believe we have strong defences to this claim and will defend ourselves vigorously in court,’ she added.

The legal claim was launched in 2012 by around 27,000 retail investors. There are currently 9,000 remaining claimants in the action, after all claimant groups except 60% of the Signature Litigation Group settled with RBS for 41p per share in December 2016. In April 2017, 40% of the Signature Litigation Group also settled with RBS for 43.2p per share.

The original claimants included RBS staff and pensioners, institutional investors such as Wells Fargo, Boeing pension fund, Bank of America Merrill Lynch and Bank of Ireland. A number of UK local authority pension funds, some of which were Bedfordshire County Council, Essex, Nottinghamshire and the London Borough of Merton, also joined the litigation.

The remaining claimants are represented by Signature Litigation partner Graham Huntley.  

RBS is represented by HSF led by partners Simon Clarke, Adam Johnson and Kirsten Massey.

Former RBS CEO Fred Goodwin, who is listed as a witness, is represented by Clifford Chance (CC) litigation partner Dorian Drew.

HSF and Signature Litigation Group declined to comment.

Georgiana.tudor@legalease.co.uk