Stewarts launches RBS rights-issue claim for shareholders

Litigation firm Stewarts Law has filed a High Court claim against RBS in an action relating to the bank’s April 2008 rights issue.

The claimants, including UK and international financial institutions and pension funds, are alleging that the prospectus on which the rights issue was based was defective and contained “material misstatements and omissions”. They are also claiming that the prospectus portrayed the bank as being in good financial health, but the reality was different and the take-up of shares would have been limited “had the truth been known”. Shares in the bank sold for £2 each.

Herbert Smith Freehills (HSF) has been instructed to defend RBS’s claim. The firm would not comment on the case.

Legacy Herbert Smith has long been a regular adviser to RBS, but was replaced by Linklaters on the last high-profile reported case for the bank, against US hedge fund Highland Capital (24 October 2011).

The £12bn rights issue (23 April 2008) was followed in late 2008 by a Government bailout (8 October 2008). Linklaters advised RBS on both the rights issue and the ensuing bailout.

Stewarts litigation head Clive Zietman said the claim was the first writ to be filed in the High Court over the rights issue, although several actions on behalf of shareholder groups have been threatened in recent years. In 2010 Olswang instructed Serle Court silk Philip Marshall to prepare a claim, but this is understood to have never been filed (25 January 2010).

The claim is based on section 90 of the Financial Services and Markets Act 2000, which stipulates that prospectuses and other documents of this kind must be accurate and gives shareholders a right to compensation for any losses they may have suffered.

Zietman added: “Unless the matter can be resolved amicably, the claimants intend to pursue this litigation vigorously and through to trial in order to seek appropriate redress from the court.”

3 Verulam Buildings’ Andrew Onslow QC has been instructed to lead the shareholders’ case.