High Court issues warning to 2Birds over RBS shareholder action

Bird & Bird dispute resolution head Steven Baker has come under fire from the High Court after he made a £635m “mistake” in calculating the claim value of a mammoth shareholder group action against the Royal Bank of Scotland (RBS).


The firm is representing around 12,000 retail and around 100 institutional clients which are suing the bank alleging that the prospectus for RBS’s April 2008 rights issue was defective and contained “material misstatements and omissions.”

It emerged during a pre-trial review, which determined how costs should be shared between 2 Birds and Stewarts Law, that the value of the claim put forward by the 2Birds group had fluctuated considerably. Stewarts Law partner Clive Zietman is representing 77 institutional investors in their joined case against the bank.

In a judgment earlier this month Mr Justice Hildyard told 2Birds that he “expect[ed] a greater degree of care and accuracy in the future”. 

Hildyard J commented: “I should note, with concern, that I have been provided with substantially fluctuating figures as to the value of claims issued.”

In November, Baker submitted a witness statement to the court in which he said losses were the equivalent of around £900m in shares and that the total acquisition value of those shares would be £1.25bn. A month later he lowered the losses estimate to £392m and the acquisition value to £490m, blaming “a mistake made in differentiating between members of the group and actual claimants, and thus in calculating the value of aggregate claims”.

The judge acknowledged that difficulties had emerged in part due to the confusion swirling over which firms had formally filed claims against RBS.

While 2Birds and Stewarts Law have been formally recognised by the court as claimant firms, Quinn Emanuel Urquhart & Sullivan and Leon Kaye, which have also been circling the case and threatening to follow suit with their own set of claimants, are yet to be formally joined to the group action.

Leon Kaye is understood to have around 8,200 shareholders involved in its potential group litigation, while Quinn Emanuel is representing small and large insitutional clients. 

Hildyard J said: “What the explanation given does illustrate is that, at least in the case of the BB Action Group, there is a considerable difference between the total number of members and the number of members who have become parties to the proceedings.”

In the December hearing 2Birds requested that Quinn Emanuel and Leon Kaye should no longer be entitled to be participate in proceedings unless they had filed a claim by 15 January.

Hildyard J rejected the application, stating: “There may yet be matters that touch and concern interested persons even though they have not yet issued and on which I consider it right that they be heard.”

2Birds has submitted a costs estimate of £10-12m for the case. That compares to Stewarts Law’s £8.5m estimate and RBS’ mammoth costs estimate of £42m submitted by Herbert Smith Freehills.

In a statement Bird & Bird said: “This is the biggest ever such claim in the UK, and we are representing the leading shareholder group. It is a major achievement to have mustered such a group to fight for compensation on behalf of shareholders who suffered huge losses in RBS’ Rights Issue in 2008.

“There was no miscalculation of the issued members of the Action Group’s claims. There was simply a factual error in expressing the value of claims issued when in fact some of those claims had been deferred. In any event, the balance of those claims will be issued shortly, together with further substantial claims.”

The legal line up

For claimants the 2Birds Action group

Serle Court’s Philip Marshall QC, 20 Essex Street’s Thomas Raphael, Luke Pearce instructed by Bird & Bird partner Steven Baker

For claimants the Stewarts Law group

3 Verulam Buildings’ Andrew Onslow QC, Adam Kramer instructed by Stewarts Law partners Clive Zietman, Keith Thomas and Fiona Gillett

For the Leon Kaye group

3 Verulam Buildings’ Michael Lazarus instructed by Leon Kaye partner Leon Kaye 

For the Quinn Emanuel Urquhart & Sullivan group

Erskine Chambers’ Richard Snowden QC, Alex Barden instructed by Quinn Emanuel partner Sue Prevezer QC 

For the defendants, RBS 

7KBW Jonathan Gaisman QC, Serle Court’s David Blayney QC; Simon Hattan and Fountain Court’s James McClelland instructed by Herbert Smith Freehills  partners Simon Clarke, Adam Johnson, Kirsten Massey