Legal Business

RBS dispute: Mishcon de Reya instructed as Lloyds Bank claimants break away from shareholder group

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Litigation Lloyds Banking GroupMishcon de ReyaThe Royal Bank of Scotland
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Several Lloyds Banking Group institutional clients have instructed Mishcon de Reya after breaking away from the shareholder action group involved in a multi-billion pound court battle against the Royal Bank of Scotland (RBS).

The nine claimants have left the RBS Shareholder Action group which continues to be represented by Signature Litigation.

The 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.

The nine pension investment subsidiaries are suing Government-owned RBS for £420m in damages through nine of its pensions and investment management subsidiaries, in what is considered the first class-action style dispute in the English courts. Having gone on the record in court last week, Mishcon de Reya disputes partner Richard Leedham is now leading the case for claimants connected to Lloyds Banking Group.

Those claimants include Scottish Widows, Scottish Widows Unit Funds, Pensions Management (SWF), Scottish Widows Unit Trust Managers, Clerical Medical Investment Group, St Andrews Life Assurance, Clerical Medical Managed Funds, Halifax Life and HBOS Investment Fund Managers.

A spokesperson from the RBS Shareholders Action group said: ‘It’s always been a surprise that Lloyds, a part state-owned bank, should wish to be involved in an action group against another majority state owned bank, and so their wish now to go their own way and to terminate their contract with the action group is not entirely unexpected.

‘This changes nothing in relation to this group’s determination to obtain justice for our members, and we are delighted with the progress we are making following the appointment of Signature Litigation.’

In November last year Bird & Bird lost its high-profile advisory role on the dispute following a disagreement over fees, a significant instruction that was given to Fladgate.

By early August this year funding for the case had run out, according to a lawyer close to the dispute. As such, disputes boutique Signature had won the instruction from the shareholders and had helped secure third-party funding for the case, led by founding partner Graham Huntley.

It is a long-running and complex dispute: with a hearing on liability scheduled for December 2016, there have been eight case management conferences as of this month before Mr Justice Hildyard QC.

The RBS Shareholder Action group is the largest of three currently in dispute with RBS, with the others represented by Quinn Emanuel Urquhart & Sullivan and Stewarts Law.

Herbert Smith Freehills continues to defend RBS in both cases, with a team lead by partners Adam Johnson, Simon Clarke, Kirsten Massey and James Norris-Jones.

sarah.downey@legalease.co.uk

Legal Business

Funding issue sees Signature Litigation replace Fladgate on RBS litigation

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Litigation FladgateSignature LitigationThe Royal Bank of Scotland
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Having helped secure third-party funding, City boutique Signature Litigation has been instructed by the RBS Shareholders Action Group in its high profile £1.2bn court battle against the Royal Bank of Scotland (RBS), the second change for the case and a move which has replaced Fladgate.

In November last year Legal Business revealed that Bird & Bird had lost its high profile advisory role on the complex RBS shareholder dispute over its 2008 rights issue, a significant instruction that was given to Fladgate.

But that has now been handed to Signature, with founder and partner Graham Huntley going on the record in mid-July. Huntley has instructed 3 Verulam Buildings duo Jonathan Nash and Peter de Verneuil Smith, who appeared for the group at the case management conference last week, along with junior Ian Higgins.

Bird & Bird had been representing the bank’s former chief executive John Greenwood and the RBoS Shareholders Action Group Limited, with around 12,000 retail and around 100 corporate, institutional and charitable members (the BB Action Group). At the time the firm said it had continued to ‘work on their behalf despite issues with receiving payment of fees from the Action Group’.

According to one source close to the case, this time there has been no disagreement between the claimants and Fladgate in relation to fees but rather the absence of funding for the case as the ‘money ran out’. However, John Campbell QC, a representative for the client group, said in evidence to the Court that ‘the instruction of Signature brought to the Group some legal advisers who clearly had more experience than many in funding, and funding negotiations’, adding that ‘all the previous stumbling blocks have been overcome as we have secured an agreement with respect to our current funder’.

A statement issued today (3 August) stated that funding had ‘hampered the group’s ability to participate in recent months’, something which Mr Campbell said in evidence Signature had ‘worked hard to resolve’.

Signature’s claimant group is the largest of three currently in dispute with RBS, with the others represented by Quinn Emanuel Urquhart & Sullivan and Stewarts Law.

The action is being 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.

Herbert Smith Freehills continues to defend RBS in both cases.

sarah.downey@legalease.co.uk

Legal Business

Survival of the fittest

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Guest blogs The Royal Bank of Scotland
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RBS’s James Tsolakis on why law firms must adapt

On so many levels, the business of law is changing and the velocity of change has never been greater. These changes are creating unforeseen tensions within law firms and they challenge some of the fundamental principles that have historically defined the legal profession in the UK, a profession characterised by a tradition of conservatism and consistency, which are both foundations on which the enduring stability of the profession was founded.

Legal Business

The Royal Bank of Scotland

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In-house The Royal Bank of Scotland
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  • Group general counsel: John Collins.
  • Team headcount: 400 lawyers.

It has undoubtedly been a difficult few years at The Royal Bank of Scotland (RBS) but the bank’s former group GC, Chris Campbell, maintains that
the work the team has done stands above any other bank in the UK. ‘The world and his dog are aware of the difficulties RBS has had over the last few years
and most of these involved the legal team,’ says Campbell. ‘We have had some enormously complex and innovative legal issues – enforcements, regulatory matters, litigations and disposals.’

And for all the challenges facing the bank, RBS has sustained its reputation for having a robust team with a strong bench of highly capable lawyers. Prominent figures in the team include the astute head of litigation William Luker and senior counsel M&A/corporate Scott Gibson, who was cited in our 2014 Rising Stars report.

Major recent mandates include The Citizens Bank listing on the New York stock exchange, which in September last year raised $3bn in an initial public offering, as well as a £1bn sell-off of the majority of its remaining stake in Direct Line insurance. Following its £20bn government bailout in 2008, the British banking giant is also fighting off two large claims: one involving an action against the bank’s former chief executive Fred Goodwin relating to a rights issue in April 2008, and the other comprising a group of 313 claimants across a number of UK and international financial institutions and pension funds.

Praising the team on its performance, Alan Nelson, an IT partner at CMS says: ‘Amid a turbulent time for the bank, this team has embraced the challenges it faced. It has sought to realise greater value from its panel and deliver better services to its internal clients. It has greatly improved its stakeholder relations, which will make the legal team a far more integral part of the bank.’

Legal Business

Succession planning: RBS and Barclays lose their GCs

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In-house BarclaysThe Royal Bank of Scotland
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Last month saw both Barclays and The Royal Bank of Scotland (RBS) put succession planning into place as global general counsel (GC) of corporate and investment banking at Barclays, Judith Shepherd, announced she would step down in the first half of 2015, while RBS’s group GC Chris Campbell was replaced as he prepares to retire.

Shepherd had risen steadily through the ranks, having joined as deputy group GC in 2006 from US firm Gibson, Dunn & Crutcher, where she was a partner specialising in M&A, particularly public takeovers and cross-border securities issues.

Legal Business

Succession planning: RBS appoints new group GC as Chris Campbell steps down

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In-house The Royal Bank of Scotland
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Deputy general counsel (GC) John Collins has replaced Chris Campbell as the group GC of the Royal Bank of Scotland as Campbell prepares to retire.

Collins took up the role on 1 January, however Campbell will stay on for a further three months as part of a handover process before going into retirement.

Speaking to Legal Business Campbell said: ‘I am pleased to be finding more time for myself going forward and I think it is excellent that John Collins who served the bank so well over the last few years has stepped up to replace me. I am very pleased to see that succession.’

Collins trained at legacy firm Wilde Sapte before joining Citibank in 1995 as a loan product lawyer. He moved in 2001 to ABN AMRO, first as wholesale legal head for loan product and corporate finance/M&A and then was appointed GC of the lender after it was acquired by a consortium including RBS.

He takes over a group legal team of 400 who provide legal support to the bank’s divisions and businesses globally and will also oversee RBS’s upcoming panel review, which is due to commence shortly. The bank’s formal panel is refreshed every three years with firms including Allen & Overy, Ashurst, BLP, Clifford Chance and Eversheds all currently on the roster. In September last year RBS turned to US firms Davis Polk & Wardwell and Cleary Gottlieb Steen & Hamilton on the sale of its US subsidiary Citizens Financial Group in a bid to raise $3.5bn.

Campbell joined RBS in August 2005 and served as director of legal services and deputy general counsel before taking up the group GC role in 2010 from Miller McLean. Prior to that he was managing partner of Scotland’s largest law firm, Dundas & Wilson for nine years.

kathryn.mccann@legalease.co.uk

For more on in-house succession planning see, Filling big shoes.

Legal Business

Davis Polk and Cleary advise on RBS float of Citizens as Alibaba US IPO generates $15.8m in legal fees

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Corporate Cleary Gottlieb Steen & HamiltonDavis Polk & WardwellThe Royal Bank of Scotland
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US firms Davis Polk & Wardwell and Cleary Gottlieb Steen & Hamilton are advising on Royal Bank of Scotland’s sale of its US subsidiary Citizens Financial Group.

RBS is floating 25% of its holding in Citizens in a bid to raise $3.5bn. The sale involves 140 million shares in its US retail bank with an expected price of between $23 and $25 each, the lender has also been granted a 30-day over-allotment option of up to an additional 21 million shares.

Davis Polk’s corporate partners Nicholas Kronfeld and Luigi De Ghenghi are advising Citizens Financial, while Cleary Gottlieb partners Leslie Silverman and Derek Bush are representing the underwriters which include Morgan Stanley, Goldman Sachs and JPMorgan.

The bank’s decision to float comes as RBS plans to sell its non-core assets in a bid to increase finances as UK regulators increasingly press the bank to re-focus its domestic operations. Last year, RBS said it would sell up to a quarter of Citizens by the end of 2014.

The legal fees for the initial public offering (IPO) were revealed in US Securities and Exchange Commission filings as being $6.7m, considerably lower than the legal fees of Chinese e-commerce giant Alibaba’s IPO, published on 5 September, which have totalled $15.8m.

US firm Simpson Thacher & Bartlett advised Alibaba on US federal securities and New York State law with China head Leiming Chen and partners Daniel Fertig and William Hinman advising, while Sullivan & Cromwell partners William Chua, Jay Clayton and Sarah Payne are advising the underwriters. Maples and Calder advised on Cayman Islands law while Chinese law was covered by Fangda Partners for Alibaba and King & Wood Mallesons for the underwriters.

Amid much market speculation over roles and particularly the levels of fees that will be commanded, the US firms won lead roles to advise on the deal after Magic Circle firm Freshfields Bruckhaus Deringer was understood to be advising the China e-commerce giant on the IPO.

jaishree.kalia@legalease.co.uk

Legal Business

Taylor Wessing and Macfarlanes advise on £350m RBS credit facility deal

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Finance MacfarlanesTaylor WessingThe Royal Bank of Scotland
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Anglo-German firm Taylor Wessing and City-firm Macfarlanes have both landed leading roles on a major refinancing deal as the real estate market continues to see an upturn.

Taylor Wessing advised a syndicate of lenders including the Royal Bank of Scotland, Wells Fargo and Legal & General Pensions in their capacity as agent and arranger for the refinancing of a portfolio of over 160 multi-let industrial properties in England, Wales and Scotland, worth a gross value of over £1bn. Macfarlanes advised the owner of the portfolio, the Industrial Property Investment Fund, an investment fund managed by Legal & General.

Leading the deal for Taylor Wessing was finance partner Ross Caldwell with others involved including the firm’s head of finance Rodney Dukes, real estate partner Raman Sharma, and tax partner Richard Carson.

Macfarlanes’ debt finance transactions partner Jat Bains advised the Legal & General-managed Industrial Property Investment Fund.

Commenting on increased activity in real estate, Taylor Wessing’s Caldwell said: ‘This transaction reflects the current state of the real estate finance market in which we are seeing a marked upturn in the number and size of deals, including the industrial property sector. We look forward to continuing to represent our clients in this thriving and dynamic market.’

The new debt facilities refinanced existing £210m facilities that are due to expire in September next year and also comprised an additional term loan of £65m as well as a revolving facility working capital line of £75m.

Arranged over a six-year term, the £350m facilities support the Industrial Property Investment Fund through its recently extended life-span and provide it with ‘significantly increased firepower with which to seek attractive market investment opportunities’.

Sarah.downey@legalease.co.uk

Legal Business

Bank spend – RBS warns of £3bn extra litigation costs ahead of next month’s financial results

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Financial results 2013/14 The Royal Bank of Scotland
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In a statement rushed out late yesterday (27 January) to soften the blow of its official results announcement next month, Royal Bank of Scotland (RBS) has revealed that it is heading for a pre-tax loss of between £7bn-£8bn after setting aside an extra £3bn to cover litigation and compensation costs.

The retail bank, which was rescued from collapse by the Government in 2008 at the height of the financial crisis and continues to be dogged by claims arising out of that era, has set aside £1.9bn to cover ‘various claims and conduct related matters affecting group companies, primarily those related to mortgage-backed securities and securities related to litigation, following recent third party litigation settlement and regulatory decisions.’

A further £465m has been set aside to cover the bank for its mis-selling of payment protection insurance and related costs, which have continued at a rate of around £225m per quarter ‘rather than declining as anticipated.’ Claims are now forecast for a longer period, with the cumulative provision now £3.1bn, of which £2.2bn had been utilised as at 31 December 2013.

The bank has set aside another £500m for mis-selling of interest rate hedging products and administration costs, reflecting ‘both higher volumes and anticipated redress payments, recalibration of our methodology based on experience during Q4 2013, and additional administration charges.’ The cumulative provision was £1.25bn as at 31 December 2013.

The government currently hold 81% of the bank’s shares, which fell following yesterday’s news of the losses, with chief executive Ross McEwan and eight members of the executive committee waiving their bonuses for 2013.

McEwan said in yesterday’s statement: ‘Billions of pounds have been spent to resolve conduct and litigation issues in recent years. Costs on this scale were not predicted by anyone when RBS was rescued in 2008. They come in addition to the costs of restructuring the bank’s bad assets and restoring its funding to prudent levels after the financial crisis.’

RBS’ 21-strong legal panel includes includes Clifford Chance (CC), Allen & Overy, Freshfields Bruckhaus Deringer and Linklaters as well as many of the larger City and transatlantic firms such as Eversheds, Hogan Lovells and Norton Rose Fulbright, which could benefit if this latest announcement triggers a further sell off of RBS assets to improve its capital position.

The losses come after Deutsche Bank earlier this month blamed its 2013 litigation expenses of €2.5bn for its fourth quarter pre-tax loss of €1.2bn.

In October 2013, JP Morgan suffered a rare quarterly loss after setting aside $9.2bn in legal fees.

david.stevenson@legalease.co.uk

Legal Business

Investigations: RBS appoints panel firm Clifford Chance to conduct independent review

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In-house Clifford ChanceLinklatersThe Royal Bank of Scotland
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Investigations have become big business for the City’s thriving litigation teams although the majority of them happen behind closed doors for valued clients and are not said to offer an ‘independent’ assessment.

A recent exception is the Royal Bank of Scotland’s (RBS) disclosure yesterday (25 November) that it has appointed Clifford Chance (CC) to conduct an independent inquiry into the treatment received by small business customers in financial distress, after allegations that the bank deliberately drove them to collapse for its own gain.

While large City firms are undoubtedly sophisticated providers of complex legal services their close relationship with many of the large banks and financial institutions at the very least raises questions over their ability to give a truly independent viewpoint.

Despite bank panels shrinking over recent years it is still common for them to include a number of the Magic Circle and larger firms, with RBS 21-strong legal roster, unveiled in July, including CC, Allen & Overy, Freshfields Bruckhaus Deringer and Linklaters as well as many of the larger City and transatlantic firms such as Eversheds, Hogan Lovells and Norton Rose Fulbright.

CC itself is on the panel for Europe, the Middle East and Asia, with a mandate to act in most of the jurisdictions where it has offices.

However, when asked to discuss how the inquiry will work given the Magic Circle client’s existing relationship with the bank, a spokesperson declined to comment.

CC’s instruction by RBS comes after independent reports from both the former Bank of England deputy governor Sir Andrew Large and government adviser Lawrence Tomlinson raised concerns over the bank’s treatment of struggling small businesses, with the report by Tomlinson accusing the bank of pushing small firms into its turnaround unit, the Global Restructuring Group (GRG), so it could charge higher fees and take control of their assets.

In a letter published on RBS’ website, group chief executive Ross McEwan noted that changes had already been put in place but added: ‘to ensure our customers can have full confidence in our commitment to them I have asked the law firm, Clifford Chance, to conduct an inquiry into this matter, reporting back to me in the new year.’

On a more general level, City law firms’ investigations practices are highly developed and their ability to provide detailed evidentiary analysis, often alongside accountants, is increasingly being used to show seriousness of intent.

Only recently, fellow Magic Circle firm Linklaters, alongside accountants PwC, entered into an ongoing independent review of client private securities company G4S, following allegations that employees engaged in false billing practices between 2005 and 2013.

As G4S attempts to rebuild its brand the company asked Linklaters to assess whether there was evidence of dishonesty or criminal conduct by employees who billed the Ministry of Justice as part of an electronic monitoring contract.

The firm is also advising G4S in relation to a Serious Fraud Office (SFO) probe on the same matter.

francesca.fanshawe@legalease.co.uk