RBS legal bill for investor battle soars past £100 million

Royal Bank of Scotland has racked up more than £100 million in costs to defend itself against a £4 billion legal action set to drag disgraced former chief executive Fred Goodwin into the witness box next year, the Standard understands.

More than 30,000 retail investors and hundreds of institutions are suing the bank over a £12 billion fundraising in April 2008, just five months before it was forced into a £45 billion bailout in the financial crisis.

The claimants allege they were misled into backing the rights issue, triggering the huge claim as the shares they paid for later collapsed. The bank is still 72% owned by the state eight years on.

Documents from RBS’s solicitors Herbert Smith Freehills show the bank has built up a mammoth £86.2 million in costs so far in the case between December 2009 to July 31 this year.

Including VAT at 20%, that brings the bank’s bill to £103 million so far.

News of the bill came as the bank paid £846 million to partially settle US claims over mis-sold toxic mortgage debt in the run-up to the crisis.

The plunging value of mortgage-backed assets held by RBS as well as its disastrous purchase of ABN Amro were the original drivers behind the 2008 rights issue.

Legal sources said the bill could even double next year as the case moves towards a six-month trial, scheduled to begin in March.

The case is likely to see leading actors in the bank’s downfall including Goodwin and former chairman Sir Tom McKillop take the stand. The Herbert Smith Freehills letter also shows solicitor fees for individual directors reaching £6.1 million.

One source close to the case said: “We’ve had 10 case management conferences so far, when usually we would have one. It is a very, very large sum of money. When you’ve had the trial to decide liability then there’s also the quantum hearing (to decide the level of compensation).”

Including interest, the size of the claim — being handled by five different legal teams — could hit £6 billion. RBS offered a £700 million settlement to the claimants in July which was rejected. The parties are due in court for another case management hearing next month.