Mr John Greenwood and Others v Mr Frederick Goodwin and Others
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Hildyard,The Hon. Mr Justice Hildyard |
| Judgment Date | 12 February 2014 |
| Neutral Citation | [2014] EWHC 227 (Ch) |
| Docket Number | Case Nos: HC13F01247 HC13C03047 |
| Court | Chancery Division |
| Date | 12 February 2014 |
[2014] EWHC 227 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Hildyard
Case Nos: HC13F01247
HC13D01192
HC13C03047
Philip Marshall QC, Thomas Raphael and Luke Pearce (instructed by Bird & Bird LLP) for the BB Action Group
Andrew Onslow QC and Adam Kramer (instructed by Stewarts Law LLP) for the SL Group
Michael Lazarus (instructed by Leon Kaye Solicitors) for the LK Group
Richard Snowden QC and Alex Barden (instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for the QE Group
Jonathan Gaisman QC and James McClelland (instructed by Herbert Smith Freehills LLP) for the Defendants
Hearing dates: 4, 5 & 19 December 2013
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
At the conclusion of the third CMC in this matter, the hearing of which ranged over three days (on 4, 5 and 19 December 2013), I gave an ex tempore summary of my views on the arguments advanced to me on the important question as to how costs are to be shared in this action, which is the subject of a Group Litigation Order ("GLO") made by me and approved by the Chancellor (as is required by the Rules). I indicated that I would confirm and elaborate these views in a reserved judgment, in which I would also address various other matters raised in the course of that CMC, including measures to ensure (as far as practical) that the issues which are the subject of the GLO are adjudicated as between all persons interested. This is that judgment.
It may assist an understanding of the questions in issue (and my answers to them) for me first briefly to outline the context in which they have arisen.
The actions before the Court, and those which it is anticipated may be issued, all of which are subject to a GLO, concern a Rights Issue of shares in the Royal Bank of Scotland ("RBS") which was taken up between 15 May 2008 and 6 June 2008 ("the Rights Issue").
The Rights Issue price was 200p. The rump placement price announced on 9 June 2008 for the shares not taken up in the Rights Issue was 230p. In October 2008, and in the wake of the financial crisis presaged in this country by the earlier collapse of Northern Rock plc and triggered globally by the failure of Lehman Brothers, RBS failed and required emergency public support. By 3 November 2009 it had effectively been nationalised with 84% of its shares owned by the UK Government.
The RBS share price has deteriorated very considerably. Many of those who had subscribed for shares pursuant to the Rights Issue have suffered losses amounting to most of the value of their investment in the Rights Issue shares.
By the various actions, shareholders seek recovery of their investment losses on the grounds that the prospectus for the Rights Issue was not accurate or complete.
They seek to invoke statutory remedies against RBS under section 90 of the Financial Services and Markets Act 2000 (" FSMA"); and some also, further or in the alternative, seek or may seek recovery against certain of the key RBS directors responsible for that prospectus.
The profile of the shareholder claimants (actual and potential) is very varied.
There are a considerable number of shareholders who each made relatively small investments in comparison to the value of the Rights Issue (though in many if not most cases, no doubt, their investment represented a considerable proportion of their savings). Around 20,000 such shareholders, so far, have gathered together in Action Groups (see below).
Over 170 institutional investors subscribed for very considerable amounts in the Rights Issue. Their losses are enormous. Some of them have already formed an Action Group (again, see below); and others may follow suit, either joining an existing suitable Action Group or forming another one.
The total value of the potential claims runs into billions.
Two Action Groups have already commenced and another appears to be at the point of commencing proceedings. Another has indicated a likely intention to sue, although to some extent remains inchoate. Other claimants or action groups may emerge.
The two Action Groups which have already issued proceedings are:
(1) John Greenwood and the RBoS Shareholders Action Group Limited, with around 12,000 retail and around 100 corporate, institutional and charitable members, represented by Bird & Bird LLP (the "BB Action Group"/"BB Claimants"); and
(2) The Trustees of the Mineworkers' Pension Scheme Limited, together with a further 77 or more institutional investors, represented by Stewarts Law LLP (the "SL Group"/"SL Claimants").
Not all the members of these two Action Groups have (yet) actually issued proceedings. In the case of the BB Action Group, I should note, with concern, that I have been provided with substantially fluctuating figures as to the value of claims issued. Thus, in the fifth witness statement of Mr Steven Baker of Bird & Bird LLP (dated 22 November 2013) I was told that " the losses suffered by the members of the BB Action Group who have actually issued proceedings so far would equate to approximately £900 million ([on] BB Action Group's pleaded measure), and the total acquisition value of those claimants' shares is £1.25 billion." These were the figures Mr Marshall QC invited me to rely on at the Third CMC.
In his seventh witness statement, dated 20 January 2014, Mr Steven Baker corrected these figures to £392 million (in place of £900 million) and approximately £490 million (in place of £1.125 billion) respectively. The explanation (and excuse) for these startling differences given by Mr Baker is that there was a mistake made in differentiating between members of the Group and actual Claimants, and thus in calculating the value of aggregate claims. This mistake is regrettable in itself, especially in the wake of earlier inaccuracies in statements made by the BB Action Group or on its behalf as to the availability of ATE cover. I shall expect a greater degree of care and accuracy in the future. For present purposes, however, what the explanation given does illustrate is that, at least in the case of the BB Action Group, there is a considerable difference between the total number of members and the number of members who have become parties to the proceedings.
A further two groups of potential claimants have appeared before me as interested persons (and with my express permission) both at the third CMC and the previous two CMCs:
(1) A shareholder group of some 8,200 members, represented by Leon Kaye Solicitors (the "LK Group"); and
(2) A small group of large investors, represented by Quinn, Emanuel, Urquhart & Sullivan LLP (the "QE Group").
At these hearings, Counsel has appeared for each of the above groups and made submissions.
At the first CMC (on 30 July 2013) I concluded that, subject to the approval of the Chancellor and further argument as to the effect, a GLO would be appropriate. After further argument (especially in relation to the effect on GLOs of the Court of Appeal's decision in Taylor v Nugent Care Society [2004] 1 WLR 1129), at the second CMC on 17 September 2013 I confirmed my view, subject again to the Chancellor's approval. That approval was given in December 2013. The GLO was finally sealed on 18 December 2013.
The following main common issues will require to be decided:
(1) Whether RBS made misleading disclosures in its prospectus and/or omitted material information and whether a supplemental prospectus should have been issued;
(2) Whether the Claimants suffered loss and issues of causation; and
(3) Whether the Defendants (or at least RBS) have a defence under FSMA Schedule 10.
Put very summarily, the principal intentions and effect of the GLO are as follows:
(1) all claims in respect of loss in consequence of investment in the RBS Rights Issue must be entered in a Group Register which I have directed to be maintained by Bird & Bird;
(2) Claimants and potential claimants may proceed in whichever group they choose, or in a new group or on their own; but they must be registered in the first instance (though they may apply to be removed) and they will be subject to the management of the GLO court and more specifically by me as the designated Judge for these purposes, acting together (where appropriate) with Master Marsh;
(3) the Court may invite co-operation between various groups, and it may restrict (using its case management powers) the submissions to be made by each on issues common to them; but a GLO has not the effect of a consolidation and (though a single solicitor will be appointed to manage the GLO Register) does not preclude claimants having separate representation;
(4) so far as possible, all claims will be managed to achieve a single resolution of all common issues: and the GLO Court can (and I would be minded to) require all claimants, whether adjudicated within the GLO or outside it, to agree to be bound by those resolutions of common issues as a condition of pursuing any claim outside the GLO;
(5) a particular consequence and perceived advantage of a GLO is that it opens the way to orders for cost sharing, without which many smaller investors would in all probability be prevented from pursuing a claim (since the exposure...
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