A JUDGE has ordered thousands of shareholders suing Royal Bank of Scotland over a 'misleading' £12 billion rescue fundraising at the height of the financial crisis to prove they have the insurance to meet the costs of a trial.
RBoS Shareholder Action Group, a 27,000-strong group of retail shareholders backed by around 100 institutions, was told to be more transparent about its ability to cover legal expenses if they lose the case, dating back to 2008, according to court documents. The trial is due to start in May.
The state-owned lender, which has not admitted any liability, said in December that it had reached a “full and final settlement” with three of the five shareholder groups that have been pursuing claims totalling £4bn against the bank.
However, two groups made up of tens of thousands of retail investors, had not agreed to the settlement, meaning RBS was faced with an expensive legal battle that could last up to seven years.
The RBoS Shareholder Action Group action is said to be on behalf of "thousands of investors, both private and institutional, who lost money by subscribing for shares during the 2008 RBS rights issue” before the bank collapsed leading to a a £45bn taxpayer bailout.
High Court Judge Robert Hildyard said he was "troubled by the inconsistency of statements" by legal representatives of the shareholder group. At least one statement was inaccurate and had been made without the knowledge of the claimants' solicitors, he said.
"I have also become concerned whether there is sufficient funding," Hildyard said. "In light of the concerns I have expressed, I think it appropriate and necessary that there should be more transparency as to the funding position."
State-backed RBS is said to have run up a legal bill of well over £100 million pounds so far in the case and is expected to spend another £25 million pounds to the end of the first trial.
The RBoS shareholder group has so far exceeded £20 million pounds in costs, the judge said.
The bank had sought to push the claimants to reveal details of its funding because of what the judge called "the magnitude of the claimants' exposure."
RBoS Shareholder Action Group and the bank declined to comment on the latest development. But RBS has denied allegations that it misled investors.
The investors are suing for compensation, alleging RBS did not give a proper picture of its finances at the time of the cash call.
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