Law firm wins ruling against EY over swaps case

A TEAM at the Manchester law firm Berg has won the right for a businessman to sue the Royal Bank of Scotland over an allegedly mis-sold interest rate swap, even though his company is in administration.

Acting for the Hockin family, whose company is the Plymouth-based business park developer London and Westcountry Estates, Berg challenged a decision by administrators at accountancy firm EY not to pursue the claim.

Berg said RBS converted the company’s £55m loan into an interest rate swap with a 10-year term which added £600,000 of extra repayments a year, and an £11m exit fee, which the family were not aware of.

The debt was eventually passed to RBS’ Global Restructuring Group (GRG) and some of it was sold to US asset management business, Blackstone. Administrators were appointed when the debt was called in. GRG’s activities are now being scrutinised by the Financial Conduct Authority after Government adviser Lawrence Tomlinson alleged it had tipped viable businesses into bankruptcy.

Alison Loveday, managing partner at Berg, said: “This is the result we have fought so hard for but it’s only the beginning. It has taken 15 months for us to get to this point and we could not understand why administrators, who are under a duty to collect and distribute to creditors, would fight this, even admitting they had no interest in pursuing the claim themselves.

“We will now be issuing proceedings against RBS and the question must now be asked whether it is a good use of taxpayers’ money defending the bank’s actions. At the end of the day their business was, and still is, a very profitable company, with administrators being paid handsomely throughout this process. It leads one to question the relationship between banks and administrators, and this case is important as it breaks their seemingly unstoppable monopoly on the control of businesses.”

EY said in a statement: “Further to the hearing held on 12 March 2014 and judgment handed down on 19 March 2014, the administrators respectfully acknowledge the order and will act in accordance with the court’s judgment.”

An RBS spokesperson said: “The Hockins have previously raised issues concerning their swap transactions, which the bank has investigated and responded to in full. We have not found any evidence of wrongdoing by the bank.”