RBS in yet more hot water as real estate group wins the right to appeal Libor case decision

Lucy White
Property Alliance Group (PAG) attempted to sue RBS last year for more than £30m over Libor, GRG and interest rate swaps
Property Alliance Group (PAG) attempted to sue RBS last year for more than £30m (Source: Getty)

The Royal Bank of Scotland (RBS) has not yet managed to shake its post-financial crisis headache, as one real estate group has won the right to appeal a high-profile legal case to the Court of Appeal.

Property Alliance Group (PAG) attempted to sue RBS last year for more than £30m, alleging that it had been mis-sold interest rate swap products and had been wrongly moved into the bank's Global Restructuring Group (GRG).

The High Court found in favour of RBS in December, and PAG was left empty handed. Yet the Court of Appeal has now granted the group permission to take the case to the next level.

David Russell, PAG's chief executive, said:

PAG is a well-funded property company, and therefore is one of the few companies litigating against RBS on these issues that is able to privately fund its action.

I know that there are many other cases affected by the High Court’s judgement in our claim and I am therefore pleased, not just for ourselves, but for all those many others, that the judgement will now be fully scrutinised by the Court of Appeal.

The first allegation from PAG was that it was mis-sold four interest rate swaps. Supposedly designed to guard businesses against the financial consequences of interest rate rises, these products were hugely profitable for banks.

Read more: British banks face landmark legal challenge over mis-selling of interest rate swaps

But many businesses instead lost out when interest rates fell. PAG felt that this possiblity had not been made clear to them and that RBS neglected to fully explain the terms – claims which were dismissed by Mrs Justice Asplin in the High Court.

Second on PAG's list of woes was that it had been wrongly placed into the GRG, a group for small and medium-sized enterprises in financial trouble to which RBS allegedly applied higher interest rates and pressured to sell assets to repay loans.

But the High Court rejected claims that RBS was bound to act in good faith in the relevant parts of its GRG agreements with customers.

Third, PAG said that the bank had known about Libor manipulation – and that it would not have entered into the interest rate swaps if it had been aware of RBS' alleged complicity in the rigging of the inter-bank lending rate.

Read more: The Libor trials – where we are now and how it could have been very different

Yet Mrs Justice Asplin dismissed all of these claims as, despite RBS' confession to misconduct regarding Japanese yen and Swiss franc Libor, there had been no findings relating to sterling Libor.

A trial date for the appeal case has yet to be set.

RBS already has another high-profile legal challenge on its plate, as a number of shareholders are suing the bank over claims it misled them ahead of a £12bn fundraising round in 2008.

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