Legal fallout from credit crunch will drag on for years

PROSECUTIONS against banks, accountants and financial advisers resulting from the economic downturn will continue to be brought for years to come, says a City law firm.

Cases at the High Court, where most financial services sector cases are heard, have jumped 16 per cent to 49,583 so far in 2009, up from 42,709 in 2008.

“This data suggests it is too early to call time on the post credit crunch increase in litigation,” said Geraldine Elliott, head of commercial litigation at law firm Reynolds Porter Chamberlain. “Big ticket, significant and complex claims which are launched in the High Court in London still seem to be on the rise.”

The firm added that a growing number of claims have been launched against investment banks who sold clients “toxic” financial products. It said that some sophisticated investors have already taken investment banks to court for mis-selling products or mismanaging funds, and more will follow.

There has also been a rise in negligence cases against surveyors and accountants, said the firm. “Professionals often face legal claims after a recession as businesses and individuals try to pin the blame on them in an attempt to recover their losses.”

The firm also predicted that there will be a slew of claims related to the collapse of businesses, with creditors fighting over assets, just as with collapsed bank Lehman Brothers. Businesses usually have six years ito lodge a legal claim.