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RBS’s Global Restructuring Group: the Saga Continues

A recent decision in Oliver Morley v The Royal Bank of Scotland [2019] EWHC 270 (Ch) has allowed real estate developer Oliver Morley to allege the involvement of the Asset Protection Agency (APA) in The Royal Bank of Scotland’s (RBS) turnaround division.

Background

RBS’s Global Restructuring Group (GRG) has been the target of several claims alleging misconduct in relation to businesses being transferred into, and the subsequent treatment of those businesses in, what was meant to be RBS’s ‘turnaround’ division.

Claimants such as Stuart Wall and Property Alliance Group, amongst others, have alleged that RBS’s GRG deliberately engineered the conditions to bring about the transfer of businesses to GRG using tactics such as creating loan to value covenant breaches or technical covenant breaches as a result of a temporary dip in earnings. In many of these cases, achieving these conditions was facilitated by the prior mis-selling of interest rate swaps and other financial derivatives.

Once in GRG, customers’ businesses often failed and/or were wrongfully placed into administration as a result of, amongst other things, the financial strain caused by additional costs imposed by GRG. This fuelled the further allegation that RBS benefitted from these administrations as the customers’ businesses and properties were sold to an RBS-associated company, known as West Register.

Recent Developments

Oliver Morley, trading as Morley Estates, was one such alleged victim of GRG’s mistreatment. In a recent decision by Judge Eyre QC, Morley was given permission to amend his pleadings to include allegations that the APA, an arm of HM Treasury set up to operate the Asset Protection Scheme (governmental protection for over £280 billion of RBS’s financial assets against losses during the financial crisis), influenced GRG’s decision-making.

Emails referred to in Morley’s application revealed that RBS wanted to agree to Morley’s refinancing proposals in 2010 but that the APA blocked them and exerted pressure on RBS to sell Morley’s property portfolio to West Register. West Register manager, Joss Brushfield, described this as the APA’s “craziest decision yet”.

In June 2010, an email from the APA to RBS’s Asset Unit gave Morley five days to try to redeem his loan, short of which the APA would call for the appointment of receivers and selling Morley’s portfolio.  GRG manager Toni Smith responded to the Asset Unit asking, “Whilst we deal with Morley can you liaise with and appease the APA…??”.

Morley’s allegations have since prompted the Treasury to agree to publish the accession agreement it signed with RBS when RBS entered into the Asset Protection Scheme.  Although this not yet been made public, we will continue to monitor this and update when possible. 

Comment

Although the FCA concluded in July 2018 that it would take no disciplinary action against RBS in relation to GRG, revelations regarding the APA’s alleged influence over GRG’s treatment of its customers could spur further investigations.  The Treasury could also find itself exposed to large claims for compensation from businesses affected by GRG’s mistreatment.

It has now been more than five years since Lawrence Tomlinson first published his report on GRG calling for further investigation into its practices, and more than two years since the internal RBS memo revealing that staff were told to let businesses “hang themselves” was leaked. However, it seems the story is still unfolding.

Hausfeld has acted for a number of claimants in disputes arising from the mistreatment of businesses by various banks’ turnaround divisions. 

Related Lawyers: Edward Nyman
Related Practice Areas: Commercial Disputes