Linklaters client RBS loses CoA case against Highland Capital

Linklaters client RBS has been refused an appeal against hedge fund Highland Capital after the court found that the first instance ruling in favour of the bank was based on fraudulent representations.


It is understood to be the first domestic case where a UK bank has had judgment struck down on the basis it was obtained by the bank’s fraud.

The CoA said former RBS trader, Sam Griffiths, upon whose evidence RBS had sought to build a case had been an unreliable witness who was “continuing positively to mislead both Highland and the court.”

Lord Justice Aikens added: “There can be no argument that the acts of SG [Sam Griffiths] must be attributed to RBS, so there was a positive misstatement by RBS of the true position.”

The snowballing action originally started out as a debt collection exercise for RBS after the bank, which is majority owned by the state, attempted to reclaim monies from a US hedge fund it said had defaulted on a collateralised debt obligation (CDO).

The court upheld the claim after ordering RBS to disclose privileged communications communications between its in-house legal team and legacy Herbert Smith (28 November 2011).

This came a month after RBS switched Herbert Smith for Linklaters as advisers on the case (24 October 2011).

The bank claimed £36m but that was awarded £18m by the court.

When Highland launched a counterclaim against the bank in Texas, RBS sought an anti-suit injunction against the hedge fund. The bank relied on jurisdiction clauses in the agreements in the CDO transaction, contending that Highland should not be allowed to carry on litigating in Texas matters which were already the subject of an English judgment.

The High Court however rejected the bid and the bank took the point to the appeal court.

Highland, meanwhile, argued before the CoA that Burton J’s judgement should be set aside because RBS had knowingly misled the court.

In a ruling handed down by Aikens LJ last week (11 April) the CoA accepted arguments put forward by One Essex Court’s Stephen Auld QC for Highland that the bank obtained the judgment by way of fraud.

“In my view the liability judgment was obtained by the fraud of RBS through the misstatement and concealment of facts by [former RBS senior employee Sam Griffiths],” the judge said.

The court also held that two previous judgments that RBS had obtained against the Highland – in respect of liability and quantum in relation to various CDO transactions – should be overturned on the basis that they were obtained only through the dishonest suppression of the true facts of the case.

It will come as a blow to RBS which started the proceedings in the first place. The case is understood to have cost the bank in excess of £5m by way of legal fees since the litigation began in 2009.

For the appellant RBS

Linklaters partner Andrew Hughes instructed Maitland Chambers’ John Nicholls QC to lead Louise Hutton of the same set

For the respondent (1) Highland FInancial Partners; (2) HFP CDO Construction Corp; (3) Highland CDO Opportunity Master Fund LLP

CYK partners Marc Keidan and Philip Young instructed One Essex Court’s Stephen Auld QC to lead Ben Strong and Laurence Emmett of the same set

For the respondent Scott Law Group

DaySparkes directors John Day and Michael Sparkes instructed Essex Court’s Graham Dunning QC to lead Jeremy Brier