RBS is set to rack up legal costs estimated at more than £125m defending a case brought by shareholders hit hard by the bank’s rights issue in 2008.
The cost, thought to be one of the highest ever for a civil action, includes at least £6.5m to defend four former RBS executives, including disgraced banker Fred Goodwin.
The case is being brought by the RBS Shareholder Action Group which represents several institutions as well as 27,000 retail shareholders including more than 4,000 RBS employees.
They are suing the bank and former management for allegedly misleading investors ahead of a £12bn fundraising in 2008. The bank subsequently required a £45bn taxpayer rescue, eliminating most of the share value. RBS is still more than 70 per cent owned by the taxpayer.
The defendants are RBS, former chief executive Fred Goodwin, former chairman Tom McKillop, former head of corporate markets Johnny Cameron, and former group finance director Guy Whittaker.
Unless a deal between the action group and the bank is agreed, a trial to establish liability is due to start in May and expected to last 12 weeks. Depending on the outcome, there could then be a second trial to determine the quantum of any damages due.
An interim ruling relating to the case by Mr Justice Hildyard and seen by City A.M. says: “The estimated costs of the proceedings are very considerable. The defendants’ cost alone so far exceed £100m of which some £6.5m has been incurred in relation to the claim against the directors joined as individual defendants.” The bank’s legal costs are understood to have passed the £100m mark before the end of last year.
The ruling adds: “The defendants’ current estimate is that they will incur approximately £25m from the date of the settlement [with other shareholders last December] to the end of trial 1.”
Mr Justice Hildyard said in the ruling that the figures were “very large”. Sources say the bank deployed three QCs and 10 additional barristers at recent pre-trial hearings.
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Claimant costs so far exceed £20m.
RBS has made a settlement offer of £800m to all groups affected by 2008’s cash call, covered by existing provisions, but has made no admission of liability. Last December, institutional investors represented by Stewarts Law and Quinn Emanuel Urquhart & Sullivan said that they would accept a settlement offer from the bank equivalent to 21p in the pound at the time of the fundraising.
However, City A.M. understands that the RBS Shareholder Action Group is holding out for a higher offer. Talks between the bank and the group have taken place but a settlement is not believed to be imminent.
RBS declined to comment yesterday, as did the RBS Shareholder Action Group.