In yet another example of disclosure wrongdoing, The Lawyer’s Tabby Kinder reports that Dentons and RBS have been accused in the High Court of deliberate non-disclosure of documents relating to the bank’s controversial Global Restructuring Group (GRG). The allegations were made by the claimant’s solicitors in Wall v The Royal Bank of Scotland; the outcome of the application is awaited.
Non-disclosure allegations
According to The Lawyer magazine, the application containing the allegations was filed at court in early November and states that a secret cache of documents leaked to BBC Newsnight and Buzzfeed in October, known as the “Dash for Cash” leaks, prove that “RBS is in serious and substantial breach of its disclosure duties” in the case of Wall v RBS.
The leaked documents demonstrate that RBS and Dentons “failed to disclose in these proceedings any or the majority of the high level documents which relate to the purpose, structure, organisation and management of GRG”, according to the application. The evidence supporting the application is reported to state:
“It is difficult to understand how such wholesale non-disclosure can be other than deliberate”;
“RBS’ approach to disclosure is disrupting an orderly process to trial”;
“In light of the BBC/Buzzfeed documents, it is now possible to identify some of the obvious and core emissions from RBS’ disclosure”; and
“What is required is a sea-change in RBS’ attitude to its disclosure obligations”.
Legal claim against RBS GRG
Businessman Stuart Wall is reported to be suing the bank for £700m over claims RBS forced his business, Opal Property Group, into financial distress and subsequent administration. Wall’s business Opal Property Group was the largest private owner of student accommodation prior to it going to administration in spring 2013 following a lengthy restructuring attempt.
The non-disclosure application was filed alongside a witness statement by a solicitor seen by The Lawyer, supporting the allegation of deliberate non-disclosure. The statement said RBS’s failure to disclose documents related to GRG and why his client’s business was put into GRG “is far more serious than its failures during the PAG litigation”.
Previous Non-disclosure by RBS
RBS and Dentons also came under fire for recent disclosure failings in the case Property Alliance Group (PAG) v RBS. The pair were criticised by Mrs Justice Asplin for their “cavalier” attitude to disclosure in the case, which also centres around claims of Libor manipulation and allegations relating to the operations of GRG in running down profitable businesses.
Wall’s legal team received disclosure from RBS in August but now say the bank and its lawyers have declined to provide all the relevant documents. Its latest disclosure application is expected to be heard in December.
What is RBS GRG?
NatWest and RBS’s ‘Global Restructuring Group’, was a business support unit set up in the early nineties and was formerly known as ‘Specialised Lending Services’. Following the credit crunch, GRG took control of 12,000 SME customers with £65 billion of assets. Following allegations of wrongdoing, GRG was disbanded in August 2014 and re-named ‘Restructuring Group’.
GRG is currently the subject of a regulatory investigation by the Financial Conduct Authority with the final report on the probe expected to be published imminently. It emerged on Tuesday (8 November) that RBS will set aside £400m to repay businesses fees charged by the GRG division.
What is Litigation Disclosure?
Part 31 of the Civil Procedure Rules 1999 (as amended) set out the disclosure rules in full. Disclosure (formerly discovery) is a stage of litigation in which the parties disclose documentary evidence by list to each other. Only documents that are relevant because they support or undermine a parties case must be disclosed. Standard disclosure occurs after each party has set out its position in statements of case (formerly pleadings).
Importance of Disclosure in Litigation
Disclosure is a fundamental litigation process whereby, in summary, each party produces all documents they hold or have control over, which are relevant to the litigation regardless of whether they assist or harm their case. Lawyers, as officers of the court, are effectively tasked with ensuring their clients comply with disclosure obligations.
The rules around disclosure are designed to ensure a fair and just outcome is reached in the litigation and that all relevant and disclosable documents are seen by both sides. Banks are not in a special class of litigant and must comply with the CPR like any other party to litigation and their legal advisors should ensure compliance.
Unfortunately, this is not the first time that RBS and Dentons have failed in respect of adequate disclosure in litigation proceedings.
Other examples of RBS Disclosure misconduct
Firstly, in a recent unreported decision by Chief Master Marsh in the case of Chaudhry v. RBS [1] the bank were forced to redo their standard disclosure exercise and hand over documents relating to the bank’s FCA-agreed review over its past sales of Interest Rate Hedging Products (the IRHP Review). RBS and Dentons had wrongly argued and maintained that the documents generated by and held within the IRHP Review were not disclosable in a claim for the mis-selling of the same IRHP. The bank drafted in heavyweight silk, Adrian Beltrami QC, to rehearse this meritless argument at great cost.
Secondly, RBS were also found, by the Court of Appeal in 2013, to to have deliberately and dishonestly failed to disclose relevant documents and thereby, remarkably, obtained judgment by fraud in the case of RBS v Highland Financial Partners [2]. It was held that RBS had misled their client, their own lawyers and the court.
Thirdly, RBS’ conduct in litigation it pursued in Scotland against Derek Carlyle in 2010 (Royal Bank of Scotland Plc v Carlyle [2010] ScotCS CSOH_3) [3] was found by the Court of Session, per Lord Glennie, to fall far below the required standards. The learned judge said that that the Royal Bank of Scotland lacked “candour” in the proceedings, specifically in its deliberate failure to admit to key evidence in the Court of Session. In a debate in the House of Commons on March 10th, 2010 Carlye’s MP, Jim Hood (Labour, Lanark and Hamilton East) said: “If someone is described in a judge’s language as lacking candour, that might mean to some of us in the House that they were lying through their back teeth.”
Fourthly, a Financial List judge, Asplin J, determined Dentons and Royal Bank of Scotland to be “cavalier” in failing to comply with a disclosure order handed down last year in the case of Property Alliance Group Limited v Royal Bank of Scotland [4]. Asplin J was “particularly concerned” about RBS’s failure to comply with a previous disclosure order that required RBS’s lawyers to hand over around 25 million documents made up of “high level” internal reports, reviews and summaries relating to the allegations of Libor misconduct.
No change in culture at RBS?
The 2013 Highland Financial Partners judgment, which followed the 2010 judicial comments in the Scottish Court of Session in RBS v Carlyle, raised grave doubts about the culture of RBS and its approach to litigation. Both the recent order of Chief Master Marsh in Chaudhry v RBS [1] and the recent judicial comments made by Asplin J in PAG v RBS [4] and now the application made in the Wall v RBS litigation [5] suggest that nothing has changed in the culture at RBS.
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FOOTNOTES:
[1] Mehnaaz Chaudhry & Another v. The Royal Bank of Scotland PLC (High Court of Justice, Chancery Division, Claim No: HC-2013-000489) [2] The Royal Bank of Scotland Plc v. Highland Financial Partners LP [2013] EWCA Civ 328 [3] Royal Bank of Scotland Plc v Carlyle [2010] ScotCS CSOH_3 [4] Property Alliance Group Ltd v The Royal Bank of Scotland Plc [2015] EWHC 322 (Ch) (19 February 2015) [5] Wall v The Royal Bank of Scotland Plc [2016] EWHC 2460 (Comm)