The ongoing saga that is the £4bn shareholder group action against the Royal Bank of Scotland (RBS) continues to prove controversial, as it has emerged that litigation powerhouses Quinn Emanuel Urquhart & Sullivan, Stewarts Law and Signature Litigation are seeking millions worth of costs incurred from the claimants of Mishcon de Reya.
Essentially the argument centres over whether Mishcon’s clients should continue to have a free ride, and keeping benefiting from other claimants’ lawyers’ work, despite having left the shareholder group in October last year.
The RBS action is brought against the bank’s former chief executive Fred Goodwin and three other directors, and relates to a rights issue in April 2008, in which RBS sold its shares at £2 per share. The claimants allege that the prospectus on which the rights issue was based was ‘defective’ and contained material misstatements and omissions.
At a recent case management conference (CMC) in mid-June before Justice Robert Hildyard, an application was made by the three lead claimant groups, represented by Quinn, Stewarts and Signature, demanding that Mishcon’s clients – which include nine pension investment subsidiaries connected to Lloyds Banking Group and are listed as follower claimants – to pay their share of the costs incurred by the lead groups in taking the litigation forward on behalf of all claimants.
The follower claimants (whose damages are worth £420m of the £4bn total) are the same group that instructed Mishcon in place of Signature. The costs estimate, says one City litigator, is said to ‘run into the millions’ and dates from the time Mishcon came on the record last year and leading up to the trial in March 2017.
Separately, Mishcon disputes partner Richard Leedham, who took the instruction to lead the institutional clients from Signature last year, has filed a costs estimate totalling £700,000 for legal work on the case so far.
At the CMC in June, the judge expressed surprise that there was an issue in this respect and said he assumed the matter would be resolved quickly without the need for the application to be heard by him this month where it has been scheduled for a half-day hearing.
Evidence has been swapped by parties over the last few weeks and Justice Hildyard has considered using a judicial assistant to help him with the trial and the mass of expert evidence in particular. A decision on the costs debacle between advisers is expected to be handed down in July.
No additional costs budgets were filed or raised at the CMC however it is understood that RBS’s adviser firm, Herbert Smith Freehills, is likely to exceed its previous cost estimate of £92m.
The RBS Shareholder Action group is the largest of three currently in dispute with RBS. Herbert Smith Freehills continues to defend RBS, with a team lead by partners Adam Johnson, Simon Clarke, Kirsten Massey and James Norris-Jones.