A £520m case is scheduled to begin in the high court on Monday that will scrutinise the months leading up to Royal Bank of Scotland’s £45bn bailout at the height of the financial crisis.



Along with other directors, the disgraced former RBS chief executive Fred Goodwin will be forced to defend accusations that investors were misled into buying shares in the Edinburgh-based bank.

Barring an eleventh-hour settlement, the case will open in London’s high court and will require top bankers to give evidence in court for the first time since the bank was bailed out with taxpayers’ cash in 2008.

Goodwin and other former senior bankers will be forced to pore over the detail in the prospectus issued when RBS conducted a £12bn cash call in April 2008. At the time, it was a record-breaking sum.



The long-running legal action, which is a civil case that will be heard by a high court judge without a jury, is being brought by 9,000 individuals and big City investors who put up their cash to take part in the April rights issue and lost out when the bank was bailed out six months later.

Alongside Goodwin, the case names three former directors and the bank itself in a claim that focuses on accusations that untrue or misleading statements were made about the financial health of the bank at the time of the cash call.

RBS – which is supporting the former directors’ legal cases and costs – has settled with 87% of the investors who had brought claims related to the rights issue, and has not admitted liability during the settlements. Earlier this month, Sir Howard Davies, chairman of RBS, said: “If we do not reach settlement with the remaining claimants, we will defend ourselves vigorously when the trial starts on 22 May.”

The claim was originally brought in the name of John Greenwood, a 75-year-old retired civil engineer from Huddersfield who lost £45,000, although RBS eventually faced claims from five groups of investors whose total claims reached £4bn.

In December, RBS said it had £800m to share among the different groups making claims. RBS has settled with all but the remaining group, whose claim is for £520m but which could amount to £800m if interest is included.

Some of the funding for the investor group is provided by the racehorse and pub owner Trevor Hemmings – who also owns Preston North End football club – who lost money himself. RBS staff are also among the claimants, while the former RBS board member Sir Angus Grossart, also a former shareholder, has attempted to join the action.

Goodwin is scheduled to give evidence for two days, starting on 8 June – the day of the general election. He has not publicly discussed his role at RBS since February 2009, when he appeared before the Treasury select committee and offered a “profound and unqualified apology for all of the distress that has been caused.” However, he said it was too simple to blame him for the bank’s collapse.

The case, for which RBS expects to incur £125m of legal fees, will be heard by Mr Justice Hildyard and is expected to last 14 weeks. But according to reports, it could take seven years to establish the bank’s liability and quantify damages if appeals are made.

The rights issue took place just months after the Edinburgh-based bank had been part of a consortium taking over the Dutch bank ABN Amro.



Shareholders were offered 11 new shares at 200p for every 18 they owned. Comparisons with the current share price are made difficult by changes to the share base since the bailout but the equivalent price would be 2,000p. The shares were trading on Friday at 266p, compared with the average price of 502p at which the bank was bailed out. Taxpayers still own more than 70% of the bank.

Goodwin had been named Forbes business man of the year in 2002 after masterminding the takeover of NatWest but in 2012 was stripped of the knighthood he was awarded in 2004.