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Dean of Faculty calls for class actions against banks as Scots legal profession turns against financial sector

28 Jan

richard keen qcEarlier this week the Dean of Faculty, Richard Keen QC, appeared in the media to call for a lifting of the ban on Class Action litigation in Scotland, ending a long tradition and campaign by Scotland’s legal profession to keep class action litigation out of reach of Scots, due to the Law Society of Scotland’s fears that thousands of clients of ‘crooked lawyers’ may turn on the legal profession itself and instigate class actions for the profession’s governing body’s poor regulation of solicitors work and lack of compensation to victims.

A lifting of the Scottish Government’s ban on class action litigation in Scotland would be a most welcome matter, ending a prejudice maintained against ordinary Scots for too long, at the behest of vested interests in the legal profession, who until now, have not raised the issue as a matter for reform, with regard solely to the public interest.

However, the Scottish Consumer Council, now renamed Consumer Focus Scotland, have been calling for class action litigation to be allowed since 1992, and the Scottish Law Commission also recommended progress on the issue in 1996, so Mr Keen QC is slightly tardy in his recent call that class actions be allowed.

The Royal Bank of Scotland is of course, first in the firing line apparently, as members of Scotland’s legal profession are letting it be known they feel there should be a raft of class actions against the RBS, particularly due to an alleged lack of information relating to rights issues, which have been used to fund takeovers, such as the disastrous RBS participation in the deal for Dutch banking giant ABN Amro, which has effectively brought the RBS to its knees.

As we see however, from the Scotsman’s report on Richard Keen QC’s call for class actions to be enabled in Scotland, his suggestion apparently relates only to the banking sector, as perish the thought class actions could be used against any other sector of business in Scotland, including of course, his own beloved colleagues in the legal profession, who themselves receive upwards of four thousands complaints a year on everything from poor service to widespread embezzlement of client funds.

It is slightly strange, the Scots legal profession should now feel this way about its own bank, as the Royal Bank of Scotland handles a significant amount of business for the Law Society of Scotland itself, as well as thousands of solicitors and legal firms in Scotland.

As things appear not to be as they seem, we must therefore examine the legal profession’s motives for this abrupt change of strategy towards their once friendly business partners such as the RBS, who even sponsor the Scots legal profession’s annual legal awards ceremonies for the ‘quality’ of solicitors legal work !

I note for instance, what has seemingly escaped mention by the Dean of Faculty, is the coincidental fact many of those ‘sweet finance deals’ which solicitors & legal firms have regularly received from the banks, as a reward for steering client funds into particular banks & other financial institutions, have effectively come to a halt due to the financial turmoil in the banking sector and the low levels of interest rate returns currently on offer.

Basically these ‘sweat finance deals’ work like this : A solicitor will steer any funds received from his clients to his preferred bank or financial institution, in return for a ‘sweet finance deal’ at special interest rates, which ordinary consumers could never hope to negotiate. These funds include money received for all types of legal work, including conveyancing, handling deceased wills & probate, financial claims litigation including settlements, legal aid payments, account fees etc …

The only person excluded from this deal, is you, the client.

So, while perhaps, your house purchase is delayed supposedly due to the signing of a few extra documents, or a few loose ends, or perhaps your dead wife’s estate takes a whopping four years to be confirmed & finalised, or some other legal work or case you are involved in is taking years and hundreds of letters to achieve only a little momentum, your solicitor and their legal firm will be earning a significant rate of interest and finance, and the bank will be profiting from their holding of clients funds for a little longer, while you are none the wiser for what is going on.

Little doubt therefore remains as to why the legal profession has now turned against it’s once business partners in the financial community .. its all about money, and the lack of it, nothing to do with the public interest or improving the rights & entitlements of Scots when it comes to Justice & Law.

As it happens however, there is a more reasonable & public spirited approach to the matter, in the form of a Petition before the Scottish Parliament calling for class action litigation to be allowed in Scotland.

You can visit the Petition and sign it online HERE.

Please sign the petition, it is in your best interests that we as a country are not excluded from the legal rights & entitlements which hundreds of millions of others enjoy around the world.

Scottish class action procedure

Raised by: Peter Brown on 12 January 2009

Calling on the Scottish Parliament to urge the Scottish Government to instigate a class action procedure or similar in Scots Law to correspond with the legal systems of many other countries including England and the United States.

The background to the Petition can be read here : Background to Class Action Petition

A Brief extract of the Background to the Petition :

There is documented evidence (ref1) that some people are denied access to justice within the Scottish legal system for many reasons including their perception that court action is prohibitively expensive.

Specifically, in Scots Law there is no mechanism to allow a group of people with the same grievance to collectively take litigation action against a commercial company.

A Class Actions procedure in Scots Law has been called for since 1982 (ref2) and, in fact, was recommended in 1996 by the Scottish Law Commission (ref3). Draft court rules were also presented in this report. Nevertheless, in 2000 the Court of Session Rules Council decided that existing procedures were adequate and, hence, the recommendation of the Scottish Law Commission has, to date, not been implemented.

The ongoing Scottish Civil Courts Review is currently considering the introduction of a Class Action procedure in conjunction with many other proposals. Its recommendations are due for publication in Spring 2009. This is a promising development but, as stated by Lord Gill at the consultation paper launch in November 2007, the review needs to ensure that [members of the publics] voice is heard and that their interests are central to any recommendations for reform that we make.

MacAskill tight lippedOne can only wonder as to why the SNP controlled Scottish Government have not made it a priority to change the law allowing class actions, but as Justice Secretary Kenny MacAskill has always said, even on video, he will always protect the legal profession from just about anyone or anything .. so perhaps not too much need to wonder why there has been no action on the matter yet.

Here follows the Scotsman’s report on the Dean of Faculty ‘breaking ranks’, so to speak, and calling for class actions … against banks. How about allowing class actions, without restrictions, Mr Keen ?

QC: Allow class actions against banks

Published Date: 26 January 2009
By Jane Bradley and John Forsyth

ONE of Scotland’s most senior lawyers is calling for ministers to scrap the restriction banning class actions in Scots law, a move that could see a wave of claims against banks.

The suggestion by Richard Keen, QC, the dean of the Faculty of Advocates, would open up the prospect of challenges by groups of shareholders against financial institutions over a lack of information about the state of their business.

It is understood that Scotland’s legal profession believes there could be a raft of actions against Royal Bank of Scotland and other financial institutions on the basis that the information given out at the time of rights issues had been inadequate.

Mr Keen said: “The absence of class action certification inhibits pursuit of remedy. It is difficult to fund major litigation of that kind unless you can put together a class action.”

Mr Keen’s comments follow a string of calls from politicians demanding legal and political action to tackle the crisis – with RBS most in the firing line. Alex Salmond, the First Minister, said yesterday that he believed a parliamentary inquiry should be carried out into the banking crisis in Scotland.

He said any investigation should cover the Financial Services Authority and the role of politicians in overseeing the administration of the financial sector “to ask them why they were asleep on the job”.

He said: “I’d rather favour a parliamentary investigation, not just into the Royal Bank of Scotland – that would be daft, as the Royal Bank of Scotland is only one of hundreds of banks worldwide which has got into serious trouble – but into the financial sector.”

It emerged at the weekend that Christine Grahame, an SNP MSP, has written to Lothian and Borders Police, demanding that an investigation be carried out into RBS’s conduct over its two rights issues last year, while Tavish Scott, MSP, the leader of the Scottish Liberal Democrats, has called for an investigation by the Serious Fraud Office.

Under the leadership of Sir Fred Goodwin, RBS carried out its first £12 billion rights issue in April last year, when thousands of investors forked out £2 a share for a tranche of new stock in the firm. A second rights issue, in November, was shunned by investors and the government had to underwrite the £15 billion issue. RBS’s fortunes have nosedived in recent months, with investors watching shares plummet, to close at 12.1p on Friday.

Mrs Grahame’s letter told police she believed RBS “appeared to have committed a fraud”.

RBS revealed last week it was on course for the biggest loss in UK corporate history, as it expected to write down as much as £20 billion on the falling value of its assets.

Mr Scott said: “I think the banks across the UK must have known what their financial position was much earlier than they were letting on, and that particularly applies to RBS.

“At the time they were asking investors for more money to help their financial position, as RBS giving a full picture of how strong or weak they were as a financial institution? I genuinely don’t know, but I believe that the Serious Fraud Office should have a look at it.”

He warned that a political inquiry could turn the crisis into a partisan issue and could detract from solving the question of whether investors were misled.

Just last week, the veteran lawyer Ian Hamilton lodged a small-claims action against RBS, saying he had been persuaded to buy 640 shares at the £2 offer price in its 2008 rights issue.

A spokeswoman for RBS refused to comment.

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