Property developer loses £multi-million RBS claim: Lessons for future claimants

Judge Timothy Kerr handed down judgment yesterday in the case of Oliver Dean Morley (trading as Morley Estates) v. The Royal Bank of Scotland PLC (case number HC-2017-002318). Unfortunately for potential claimants against RBS (or other banks), the High Court found that Morley’s contentions of intimidation and economic duress against RBS (and GRG) were not established on the balance of probabilities. This case is another example of unscrupulous banks in mis-selling litigation using their superior financial resources to discourage poorly resourced claimants with strong cases from being able to litigate to trial and shaping precedent by instead fighting cases all the way to trial which are winnable for them (and creating poor precedents for future claimants).

However, one bonus from this litigation is the disclosure acquired by Morley. Disclosure reportedly revealed that the Treasury played a significant role in GRG’s systematic asset stripping of the British business sector. Official Treasury documents have allegedly indicated that the now defunct Asset Protection Agency (a Treasury- controlled executive agency established to operate the Asset Protection Scheme which insured RBS’s loans) played a crucial role in influencing GRG’s widespread endemic predatory decision making. The potential revelation may open the door to possible new claims by SMEs against HM Treasury seeking compensation for the government agency’s role in artificially distressing and asset stripping businesses.   

What was the claimant’s case against RBS?

The claimant was advised to issue a claim against RBS (and later amend the pleadings to include a claim against West Register) in 2017. The claim was in the region of over £30 million in damages after his company suffered financial losses as a result of a £75 million loan and a £49 million interest rate arrangement dating from around 2006.

The gist of the claim was that RBS allegedly attempted to improve the bank’s own financial position after he struggled to repay the loan and put him under “unlawful and illegitimate pressure” to transfer assets to RBS’s West Register division.

What did the High Court decide in Morley v RBS?

The High Court dismissed Morley’s claim and stated that RBS was not at fault in this case and had not subjected him to economic duress. In this case, the court stated that:

“The bank’s duty of skill and care did not require it to negotiate the restructuring any differently from the way it did so,”

Mr Justice Kerr

In addition, what may distinguish this case from others is Morley’s personal (frivolous) spending, and had he kept around £5 million in reserve, he may have retained ownership of his properties rather than them being transferred to West Register:

“He did not put any of it aside for a rainy day. He spent it on South African mining investments, property, cars, a yacht and a jet. These assets turned out not to be very liquid when the impact of the downturn hit home”

Mr Justice Kerr

Another example of case law being shaped by heavily resourced defendant banks

A disparity of resources between claimants (who are usually individuals, not­ for profits or small and medium ­sized enterprises) and defendants in bank dispute litigation is common.

Heavily resourced defendant banks usually seek to capitalise on such an advantage by increasing the costs of litigation and leave claimants with no choice but to discontinue their claims. Consequently, defendant banks have been able to carefully shape mis-selling and bank disputes litigation via a process (in a term coined by LEXLAW’s Kumaran Sivathillianathan) of “unnatural selection”.

Therefore, this case did not settle because (it seems from the comments of the judge) that the claim as pleaded for the Claimant was weak. If the case was stronger, it would likely have been settled before trial or (if the claimant is not well-resourced) would have been discontinued to avoid the risk of being liable for substantial legal costs. It is key to get advice from financial services litigation specialists at an early stage in order to get advice on a strategy to maximise financial return (either through settlement or litigation) going forward.

What role did HM Treasury play in RBS’s GRG unit?

Documents disclosed to the High Court in Morley v The Royal Bank of Scotland Plc allegedly show that officials in the APA were involved in instructing GRG to withdraw customer support, even when the notoriously predatory GRG unit did not want to. In particular, the Asset Protection Agency reportedly instructed GRG to resist an economically viable rescue package for the distressed business and instead encouraged GRG to sell the assets at an artificially distressed price to RBS’s own West Register division. It is also alleged that the HM Treasury agency exercised a veto over any banking re-financing decisions and effectively prevented RBS from discharging GRG customers from secured loans without its approval.

Claims against HM Treasury for its alleged role in the GRG scandal

The disclosure of official APA documents may open the door to claims by SMEs and individuals against HM Treasury for its officials’ roles in influencing GRG decisions on re-financing. It is expected that once more information about the Government’s role in the GRG scandal comes to light, claims may start to be made against the Treasury by GRG’s former customers seeking compensation.

There are also potentially compensation claims against the Treasury for misfeasance in public office. If it can be proved that the state agency used its powers for an improper purpose, then there may be a claim if: (i) the conduct was carried out by an employee of a state agency; and (ii) that conduct caused financial loss. Our team can assist clients with bringing claims for misfeasance in public office.

LEXLAW Banking Litigation & Dispute Resolution

It is an absolute must that victims of RBS GRG or other bank BSUs protect their legal rights. This is the only sensible course of action when a business is facing a high value dispute with a major bank, such as the Royal Bank of Scotland or National Westminster Bank.  Otherwise, if there is no redress scheme, or if the bank refuses to offer reasonable redress, customers may well find they are time-barred from commencing legal action and their high value claim is now worthless. Legal rights can be protected by taking urgent legal advice and by instructing specialist GRG solicitors to issue a protective claim form or by instructing GRG litigation solicitors to prepare and agree a carefully written standstill agreement.

Our Financial Services Litigation team of Solicitors and Barristers in London are highly experienced in banking litigation and specialise in representing SMEs in banking disputes. Our high profile and high value cases regularly appear in the national and international media. Our banking litigators advise on the protection of borrower legal rights in the face of predatory bank practices. We have successfully managed and settled court litigation against all major UK banks. Call us on 02071830529 or complete our online contact form.