The Lawyer: ‘Charity gains ground in RBS and NatWest mis-selling claim’

The Lawyer reports: Not-for-profit organisation Wenta has gained ground in its case against DLA Piper clients NatWest and the Royal Bank of Scotland for which it is now seeking damages of over £500,000.

Litigation Lawyers London LEXLAW Wenta RBS Banks
The Lawyer reports on High Court disclosure applications in Wenta v RBS & NatWest (trial in October 2017)

The charity has won the right to see documents it claims will illustrate that the banks mis-sold it an interest rate hedging product (IRHP) as part of a wider trend that has since been subject to a review by the Financial Conduct Authority (FCA).

Wenta claims that RBS and NatWest breached its alleged “contractual tortious, statutory and fiduciary duties” resulting in loss and damage over the sale of the IRHP, which allows companies to manage fluctuations in interest rates, in April 2009 at the banks’ “strong recommendation”.

In 2012, the FCA identified failings in the way that some banks structured collars, swaps, simple collars and cap products, or IRHPs, with a full review launched a year later. The banks implicated in the review include the two defendants and most of the major banks, such as Allied Irish Bank (UK), Bank of Ireland, Barclays, Clydesdale & Yorkshire banks, Lloyds Banking Group, Santander UK, Co-operative Bank and HSBC.

Last year, the FCA said that all nine banks had completed their sales reviews and had delivered redress letters to the majority of customers, paying out £2.2bn, including £509m to cover consequential losses. However, a small number of cases remain.

David Berkley QC of 3 Paper Buildings is acting for the claimant, instructed by Ali Akram and Kumaran Sivathillainathan of LexLaw solicitors; while Natwest and RBS are represented by John Odgers QC and Anne Jeavons of 3 Verulam Buildings. They are instructed by Paul Smith, Hugh Evans and Yasmin Bailey of DLA Piper.

In April 2009, Wenta, which facilitates the start up of small businesses, was sold a ten-year interest rate hedging product by the two banks, which they said was suitable for the agency’s needs.

In March 2013, Wenta sought to buy another business centre but did not receive the expected financial assistance from NatWest to assist with the purchase. It claims that other banks would not accept the interest rate as transferable, forcing Wenta to terminate the swap at a costs of £144,500.

Wenta claims NatWest had advised it that the interest rate would be transferable, and that when it complained about its situation it was subjected to a “one-sided and unfair review process”. It says subsequent advice given to the organisation suggests that the swap was inappropriate, overpriced and that the risks of the swap were not adequately disclosed, in what it says amounts to a breach of regulations.

The case between Wenta and RBS and NatWest is due to be heard in the High Court in October.

The litigation against the banks has been ongoing for nearly three years, with the banks continuing to deny wrongdoing.

In its skeleton arguments, seen by The Lawyerthe two banks claim the application for disclosure has been made “far too late, without any explanation”.

The banks allege that since first filing an application for disclosure nearly two years ago in August 2015, Wenta failed to follow it up at a case management hearing last year in February 2016, or upon receipt of the banks’ disclosure later in May.

It reads: “The application is made after the exchange of all the witness statements from both sides and both parties’ expert reports. It is an attempt to open up new, unpleaded issues based upon whatever might turn up and therefore threatens to make the parties ‘go around again’ on pleadings, witness statements and experts’ reports. All this, shortly before trial of a claim where the combined costs are already estimated to rise to double the damages sought.”

It continues: “The arguments of relevance advanced by the claimant in relation to the documents are bare assertions, and the claimant’s delay in bringing the application is entirely inconsistent with its assertion that these documents are of significant relevance to the claim. In reality, this application is a fishing expedition by the claimant, shortly before trial, which threatens to escalate costs to quite a disproportionate level.”

Akram told The Lawyer: “The disclosure application was successful in forcing the banks and their solicitors to disclose sales training manuals and to review and potentially disclose documents generated in the FCA-backed IRHP review system.

“It is clear to us, based on our extensive financial services litigation experience against RBS and NatWest, that the bank’s tactics are to use their financial might to drag out litigation as long as possible, taking advantage of both the heavily discounted panel solicitor rates they have in place and also of the possibility that claims may be discontinued because of costs and the stressful impact of litigation has on parties that are not serial defendants such as RBS and NatWest.”

Wenta has said that it has only been able to bring the case this far because of a conditional fee arrangement it has with its lawyers, while RBS has been accused of accruing “staggering” legal fees in the now settled £4bn rights issue and its separate ongoing battle with property tycoon Stuart Wall.

The legal line-up:

For the claimant, Wenta Limited

David Berkley QC of 3 Paper buildings, instructed by Ali Akram and Kumaran Sivathillainathan of LexLaw solicitors

For the defendants, NatWest and RBS

3 Verulam Buildings’  John Odgers QC and Anne Jeavons, instructed by Paul Smith, Hugh Evans and Yasmin Bailey of DLA Piper.