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FTSE 100 Companies face 76% increase in High Court cases

Financial services companies involved in more than half of all litigation Banks involved in 47% of all litigation

The number of High Court cases involving FTSE 100 companies has jumped by 76% this year – taking the total to the highest since the credit crisis, reveals research by the Legal business of Thomson Reuters, the world’s leading source of intelligent information for businesses and professionals.

According to data from Thomson Reuters Lawtel service*, there were 201 High Court cases involving FTSE 100 companies in the last year (year to June 30th 2013), up from 114 the previous year.

55% of these involved financial services companies, which equates to 112 cases in 2012/13 up from 65 the year before. Banks were involved in 95 of those cases or 47% of all cases involving FTSE 100 companies.

“There was a substantial increase in litigation against banks in particular at the outset of the financial crisis, and now we are seeing what looks like a second spike. Since claimants generally have up to six years in which to bring their case, it can take a while for disputes to reach the courts so there is every possibility that there are more cases involving financial services to come,” said Ros Innes, head of In-House and ABS services at Thomson Reuters.

The legal business of Thomson Reuters says that banks are in the unenviable position of being criticised on the one hand for leniency towards so-called “zombie” companies and on the other hand of being too aggressive in their dealings with failing businesses who have breached their banking covenants.”

Banks have been on the receiving end of litigation on a number of fronts over the last few years partly due to scandals such as the mis-selling of mortgage-backed securities and interest rate swaps through to LIBOR manipulation.

Financial services businesses are claimants in 45% of cases

Thomson Reuters says that financial services businesses were the claimants in 45% of the 112 cases involving the sector. For example, there have been several cases where banks have sued surveyors for negligently over valuing properties that the bank has loaned money against before the collapse of property valuations in the early stages of the credit crunch.

“The cases involving financial services are split fairly evenly between those where they are the claimant and those where they are being sued. It demonstrates that financial services, like many other businesses, are willing to take action more frequently to protect their financial position and to make good unexpected financial losses and apportion blame,” said Ros Innes.

Examples of recent High Court cases involving banks include:

  • Barclays Bank PLC vs. Svizera Holdings B.V and another – case heard in the Commercial Court concerning a US$38million claim for monies allegedly owed to the bank by an Indian pharmaceuticals group under a loan contract.
  • RBS PLC vs. Highland Financial Partners - Court of Appeal hearing of a case concerning the bank’s original claim attempting to recover monies from a US hedge fund, after its alleged default on a Collateralised Debt Obligation.
  • Green & Rowley vs. RBS – business partners alleged that they had been mis-sold interest-rate swaps as a hedge against existing loan liabilities. They claimed they had not been informed of the potential costs involved in terminating swaps early.
  • Rubenstein vs. HSBC Bank Plc – this case related to allegations of negligent investment advice given to a retail investor, after the investor suffered losses from money invested in a fund following the financial crisis.

*All figures should be attributed to Thomson Reuters. Data from Thomson Reuters Lawtel service – cases that have led to court appearances in the Queen’s Bench and Chancery divisions of the High Court, the Court of Appeal and the Supreme Court