David & Goliath

Cheeky bankers at the Royal Bank of Scotland did a volte-face this week in plans to award themselves £1bn in bonuses. I say cheeky because senior executives would have largely been on the dole if the UK Government hadn’t taken a 70% stake in their company. A total of £175m will now be paid out in bonuses.

Don’t get me wrong I’m sympathetic to the front-line workers who rely on these payments to top-up their £17,000 per annum salaries. Those bonuses are really workers’ wages. But it could never have been right to award millions of pounds to executives who had brought the bank to its knees. It’s the moral equivalent of suggesting jail birds be given a pino colada and sent on a Caribbean cruise.

Up in Oban the RBS are under fire from Ian Hamilton Q.C. His small claims action alleges the bank were negligent in selling him shares last April by representing themselves as solvent when they were in fact insolvent. What say the RBS? Err, never mind that question we want to remit this to the ordinary cause roll please. Why? Because there are complex documents to examine? Is this a Machiavellian tactic?

If a claim turns on complex issues of fact why can’t a sheriff sitting in the small claims court examine that evidence? I accept if there are substantial preliminary debate points then small claims procedure is not perfect – and the same might be said for summary applications - however, it is still possible to fix a hearing which can proceed as a ‘debate’ if the court and parties are happy.

Examining ‘complex evidence’ is what a sheriff does day in day out whether sitting in the small claims, summary or ordinary court. From Ian Hamilton’s stance if his claim is remitted to the ordinary court his protection against an unlimited award of expenses flies-off and pursuing a claim worth £1,282 becomes an absurdity. Why would anyone pursue such a relatively small sum when they could be faced with a legal bill for many thousands of pounds in the event of failure?

In the context of unfair bank charges litigation across the UK I’ve seen the banks employ and deploy all sorts of tactics over the years against party litigants – picking them off and upping the ante because they have the economic muscle to do so. All of which means Mr Hamilton’s case raises a very important principle about access to justice. If he is picked-off then justice will have been denied.

Mr Hamilton’s claim illustrates a weakness in the Scottish legal system. Scotland does not have a class action procedure. It is interesting to note that a couple of weeks ago a class action was filed in the Southern District of New York against RBS, essentially along the same lines as Ian Hamilton’s case. The reality is a class action can allow lots of people with similar small claims to come together, pool their resources, so that they have an equality of arms against a economically powerful opponent.

The Scottish Law Commission set out model rules for such a procedure 16 years ago in a draft Act of Sederunt. So why has there been no real progress? The Scottish Government could easily introduce a procedure for class actions in Scotland speedily. After all this would have no impact whatsoever upon the substantive law of the law – and the Scottish Parliament can consent to Acts of Sederunts in a 40 day turn-around.

So come on let give David a box to stand on when he tackles Goliath.