HSF to charge RBS £90m for its defence in £4bn shareholder battle

Herbert Smith Freehills (HSF) will run up costs of at least £90m defending public bank the Royal Bank of Scotland (RBS) in its £4bn shareholder battle, due to go to trial in December 2016.

The most recent costs estimate, declared to the court in a case management conference (CMC) in September, has climbed rapidly this year. The firm previously estimated its costs in the mammoth case at approximately £48m.

The figure represents HSF’s estimated costs for the trial on liability, and so does not include money spent on subsequent appeals or a trial on quantum, which could span a number of years even after the initial liability case ends.

One source close to the litigation said the £90m estimate was “on the low side” given the fees expected to rack up if subsequent court applications are made.

HSF is also understood to have around 160 lawyers and fee-earners working solely on document discovery in the case, reviewing upwards of six million documents tied to shareholders’ claims regarding a 2008 rights issue.

One lawyer involved in the litigation said HSF’s team in the courtroom during a recent CMC this year was “more like a rugby team” due to its size.

Between 30 and 60 members of the team dedicated to the RBS case are understood to work at the firm’s global alternative legal services centre in Belfast, which launched in June.

A number of claimant groups are bringing actions against the bank, alleging a £12bn rights issue was defective and contained “material misstatements and omissions”.

Stewarts Law, Signature Litigation, Leon Kaye and Quinn Emanuel Urquhart & Sullivan represent the claimants, which include around 30,000 investors and £4bn of claims.

Stewarts’ claimant group has swelled from 80 institutional investors and pension funds to 313 in recent months. The group’s claim value has also expanded to £1.4bn.

One of the groups, the Royal Bank of Scotland Shareholders Action group, changed its lawyers for the second time last month, swapping Fladgate for Signature. The group had previously been represented by Bird & Bird last year. 

The Government injected £45.5bn into RBS, taking a 79 per cent stake in the bank, to prevent it collapsing in the wake of the 2008 financial crisis.

Chancellor George Osborne made good on plans to begin selling its majority stake this year, selling off a 5.4 per cent share.

HSF declined to comment.

The legal line up

For claimants, the Royal Bank of Scotland Shareholders Action group

3 Verulam Buildings’ Jonathan Nash QC, Peter de Vernueil Smith and Ian Higgins, instructed by Signature Litigation partner Graham Huntley.

For claimants, the Stewarts Law group

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

For the claimants, the Leon Kaye group

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

For the claimants, the Quinn Emanuel Urquhart & Sullivan group

One Essex Court’s Laurence Rabinowitz QC, Erskine Chambers’ Alex Barden and One Essex Court’s Maximillian Schlote, instructed by Quinn Emanuel partner Sue Prevezer QC 

For the defendants, RBS 

7KBW’s Jonathan Gaisman QC, Serle Court’s David Blayney QC and Simon Hattan, 3 Verulam Buildings’ Sonia Tolaney QC and Fountain Court’s James McClelland, instructed by Herbert Smith Freehills partners Simon Clarke, Adam Johnson and Kirsten Massey