Lloyds pulls out of £420m RBS class action

In May 2014, it emerged that Lloyds was suing RBS for £420m as part of a wider “group litigation order” lawsuit over RBS’s allegedly “misleading” 2008 right issue.

However, according to latest reports, Lloyds will now no longer be part of the RBoS Shareholders’ Action Group (RBSAG) - which is taking legal action against still 73 per cent state-owned RBS on behalf of more than 30,000 investors.

‘City sources’ cited by the Herald newspaper, claim that the move comes as a result of “pressure” applied by Chancellor George Osborne’s Treasury, and has been branded an “act of sabotage” by a source within the action group.

Lloyd’s claim has instead been “warehoused” with law firm, Mishcon de Reya, according to the reports.

The Treasury is alleged to have been concerned that a high-profile legal spat between two partly state-owned banks would be “embarrassing” and interfere with its plans to return the banks to private ownership.

The Treasury has cut its stake in Lloyds from 43 per cent in 2008 to less than 10 per cent as of last week.

However a Treasury source denied any involvement in Lloyds’s decision to pull out of the action group, and sources close to Lloyds said it quit the group because litigation is progressing slowly.

Nine Lloyds investment and insurance entities filed papers in the High Court to sue RBS – Scottish Widows, Scottish Widows Unit Fund, Pensions Management (SWF), Scottish Widows Unit Trust Managers, Clerical Medical Investments Group, Halifax Life, Clerical Medical Management Fund, HBOS Investment Fund Managers and St Andrews Life Assurance.

At the time Lloyds said management of these insurance businesses had thought hard about “whether it was in the interests of policyholders to join the legal proceedings and decided that it was”.

The 34,000 claimants in the case, which include retail and institutional investors, allege that RBS, then led by Fred Goodwin, effectively duped them into investing £12 billion in RBS shares just weeks before the Gogarburn-based bank collapsed and needed a £45.5bn taxpayer bailout. Some 85 to 95 per cent of the money the claimants invested was lost.

The claimants allege RBS’s rights issue prospectus was “defective” and contained material mis-statements and omissions.

Following eight case management conferences in front of high court judge Mr Justice Hildyard the trial, expected to be the largest civil lawsuit to be heard in the UK next year, will commence in December 2016.

The RBoS Shareholders’ Action Group accuses Lloyds of using “spurious reasons to quit” including claims that the action group lacked “after-the-event (ATE) insurance” and had insufficient funding.

The Action Group denies this saying it paid a multi-million premium for ATE insurance last week and has £15.5m of funding in place.