Judge urges ‘careful consideration’ of group litigation rules as RBS case halted

A senior judge has called for an investigation into the rules governing expensive group litigation cases after halting a marathon legal action against Royal Bank of Scotland.

Mr Justice Hildyard, sitting at the High Court in London, said the action brought by thousands of shareholders had exposed the need for an inquiry.

The judge said pre-trial hearings in the multimillion-pound case had been ongoing for nearly four years and he was concerned that current rules might not sufficiently promote “cohesion and certainty''.

The judge called for “further careful consideration'' of the structure of group litigation as he agreed to a request from both sides to “vacate'' the RBS trial date.

He left the door open for a further hearing if negotiations still in progress failed to reach a full settlement.

The legal action centred on a rights issue overseen by former boss Fred Goodwin in April 2008 when RBS asked existing shareholders to pump £12 billion into the bank after leading a consortium that spent £49 billion on Dutch lender ABN Amro.

Shareholders claimed they were left nursing hefty losses following the cash call after RBS shares plunged 90% and the Government was forced to step in with a £45.5 billion bailout when the deal turned toxic.

At a hearing on Wednesday, the judge was told that a settlement deal in the current action had so far been agreed by 87% “by value'' of claimants.

Jonathan Nash QC, for the investors, said it was hoped and “anticipated'' that the remaining “undecided'' 13% would also accept the offer.

The judge indicated that any application to restore the proceedings if there was not full acceptance had to be made by July 28.

The bank has previously settled compensation claims brought against it by other shareholder groups in connection with the 2008 rights issue.

But the lender, which is still 73% owned by the Government, stressed payments were made without any admission of liability.

Thanking the legal teams on both sides for the “great assistance'' they had given the court over nearly four years, the judge said: “I have certainly learned some lessons from the process.

“I think it has exposed the need for further careful consideration of the structure of group litigation orders.''

The judge said he was concerned “the rules to promote cohesion and certainty'' in proceedings might not be sufficient.

He said: “Whilst it is not for me, a single judge, to determine what the rules should be, I shall be urging further consideration.''

He also wished to find out from those involved in the group litigation process “what lessons they have learned from this very complex process.''