Judge outlines concern over “extraordinary” £129m costs of RBS in defending rights issue case

Costs: level made ATE cover hard to get

The judge in charge of the RBS rights issue litigation has outlined his “very great concern” about the “extraordinary” costs racked up by the bank, which are currently estimated at £129m.

Mr Justice Hildyard made the comments earlier this month when dealing with an application by RBS for £11.6m in security for costs against two funders backing the last remaining group of claimants, the ‘SG Claimants’, the other four groups having settled in December.

The trial was due to start on Monday but has been delayed due to last-minute settlement negotiations.

In his ruling, published yesterday, the judge said: “As I indicated at the hearing, the extraordinary (indeed, in my experience, unparalleled) amount of the costs apparently incurred in this litigation by, in particular, the defendants has in the past caused me, and continues to cause me, very great concern.”

The security for costs application was made after it became apparent that the after-the-event (ATE) insurance the SG Claimants had in place was insufficient. Herbert Smith Freehills acts for RBS.

The judge speculated that “the sheer size of the defendants’ costs” had made obtaining comprehensive ATE cover “difficult, if not impossible”.

He continued: “As to the latter, the magnitude of the costs, the excess over the already huge estimates originally given, the approach of the defendants as exemplified by the instruction of no less than 13 counsel in addition to serried ranks of solicitors and paralegals (probably over 20) contributing to a present overall estimate of costs on the defendants’ side of nearly £129 million, must be a prohibitive context in which to seek adverse costs insurance.

“It is the lack of ATE cover which to a large extent has justified the application in the first place; and the revelation of it which has coloured my approach. It is important to guard against oppressing the remaining SG Claimants or their funders by making them pay for a problem that in part at least may be the consequence of what may be shown in the end to be disproportionate expenditure by the defendants.

“At the same time, however, it is obviously right to bear in mind that this remains a very complex and large case, though much reduced in scope and size since its review after the December settlements. The nearly 1,000 pages of skeleton arguments that I have recently received as pre-reading for trial illustrate this.”

The security sought was only in respect of 60% of the defendant’s costs from December 2016 onwards.

Hildyard J ordered that one of the funders, Hunnewell Partners (BVI) Ltd, pay £7.5m in security, but made no order against the other, a Manx company called London and Northern Capital Partners (LNCP), in part because, unlike Hunnewell, it was not a commercial litigation funder.

LNCP is owned by “businessman and philanthropist” Trevor Hemmings.

The judge said: “I do not think the evidence presently suggests that LNCP has identified and supported the litigation as a business opportunity; it has extracted a price, but it has sought to assist the parties it has funded to vindicate their rights for their own benefit in the apparent belief that without such assistance a deserving cause would founder.

“Its support is not, as it were, a self-interested and separate commercial adventure in which the litigation is a vehicle not so much for vindication as speculative profit.”

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