Wednesday, January 28, 2009

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

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.


Anonymous said...

When financial partnerships break down there is always bickering and bargaining to get it back and I think what Keen said is aimed at bringing the banks back into the fold.I doubt class actions will be allowed in Scotland because as you point out it will probably be the legal profession who will lose out the most as they feel it turned on themselves.

Always a pleasure to read your stuff Peter,you should be writing in a newspaper !

Anonymous said...

"How about allowing class actions, without restrictions, Mr Keen ?"

Yes I agree with you why should it just be allowed against banks because the lawyers arent getting their blood money now

Anonymous said...

Thanks, didn't know about the petition and the scotsman are obviously too biased to mention it.
I presume Keen knew of the petition and this is his attempt to take control of the debate and steer it in his favour which means no class actions in Scotland without lawyers approval !

Anonymous said...

These sweet deals you talk about are not available to many sole practitioners although I know all about them.Very unfair of you not to mention that.

idiotproof said...

all part of a plan if you read the following by the same Richard KeenQC

07 Jan 2009
Reasons to be cheerful
Richard Keen, QC
Dean of the Faculty of Advocates
Richard Keen, QC
A financial maelstrom that nobody predicted, the collapse of the banks, and the costly introduction of the new legal complaints commission. Richard Keen QC found little to cheer about during 2008, and wonders if models coming on stream in 2009 will find a legal market buoyant enough to make them successful.

If anyone had suggested to me on 1 January 2008 that by the end of the year we would have witnessed a part-nationalisation of our largest public company RBS, the almost complete destruction of shareholder value in the now second bank, HBOS, and the virtual disappearance of lending in the property market, I would have suggested (albeit in my own gentle manner) that they were still suffering the effect of the night before. Nevertheless, all of this has come to pass and the events cited are merely the manifestations of a more deep-rooted and fundamental change in our economy.

It is not of course just Scotland which has suffered in this way. Indeed events have shown that we do not function as some kind of stand-alone or independent economy. Having aspired to join an arc of prosperity across the Nordic economies of Iceland, Norway and Denmark, we have had to watch while these economies melted into a puddle of insolvency.

Closer to home, there can be no doubt that the legal profession in Scotland will face very hard times in 2009. Except in the areas of litigation and insolvency, the financial crisis has left many firms both large and small becalmed.

The banks don’t lend and parties do not transact. If they do not, then lawyers do not receive instructions. Is there any silver lining? Well the introduction of class action certification for litigation would certainly be an attractive development. I can think of at least one shareholder in RBS who would readily sign up.

A legal services bill is about to be introduced by the Scottish Government. This will provide solicitors with the opportunity to embrace Alternative Business Structures. I do however wonder who at the present time would have either the means or desire to invest capital in a large firm of solicitors. There will also be the prospect of Multi Discipline Practice but in a period of recession and retrenchment I do wonder whether that will take off.

Are there any prospects for growth in the present environment? I would predict that over the next 12 months we are almost certainly going to see a substantial increase in the identification of loan fraud related to buy to let projects. I would not be at all surprised if this came to dominate claims on the Master Policy and the Guarantee Fund.

During 2008 the Scottish Legal Complaints Commission announced that it had “opened” for business.” The website for the SLCC declares that it is “independent impartial and accessible”. It is all of these things, although the first disgruntled consumer will point out that it includes 4 lawyers. It is also chaired by the able and dedicated Jane Irvine. However, as the SLCC has in its own words “opened for business” some may be prompted to ask if it represents value for money – either for lawyers or consumers.

The initial budget of the SLCC was estimated at about £1 million. The SLCC has now projected an actual budget of £3.5 million per annum. This is hardly surprising as the Commission requires suitable offices; a Chief Executive; and an estimate of up to 60 staff. This does however translate into a levy for each solicitor of about £400 per annum. The figure is a little less for an in house solicitor, newly admitted solicitor or an advocate. With the overheads of solicitors ranging north of 60% this suggests that the average solicitors are going to have to work 2-3 days at legal aid rates just to meet their obligations to the SLCC. It does beg the question of whether we may have created a Rolls Royce where a Mini might have done.

The rule prohibiting “mixed doubles” was revoked in order that advocates and solicitor advocates may now appear together for the same client. Whether these developments can be made to work for the benefit of clients depends to a large extent on instructing solicitors. I look forward how matters develop in the coming year.

I shall not wish you all prosperous New Year, because I don’t frankly believe that is in prospect for many within the legal profession. I do hope the readers of the Firm enjoyed a happy Christmas and I look forward to crossing swords with at least some of you in the New Year.
Articles by : Richard Keen, QC

Anonymous said...

Access to class actions is as you write, long overdue, and has been yet another victim of the Legal Profession's monopoly and the self serving and thoroughly selfish complacency of those empowered to bring beneficial change.

The petition will get my signature as will any seeking to allow our Human Rights Commissioner to appear as an amicus curiae before a Scottish Court, something presently denied him but available to other HR Commissioners in other jurisdictions.

Anonymous said...

Yes clearly advocates are only demanding class actions be allowed now their business is down so its all about making new business nothing to do with helping anyone other than themselves.
Some good points too in your story about the SCC and just why has it taken so long for someone in the legal establishment to come forward and say we should have this ?

Anonymous said...

"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."

errm that sounds like fraud and there should be an investigation into it pronto

anyone about to be sacked by a bank feel like spilling the beans on this ?

Anonymous said...

just to correct the comment made on sole practitioners,the Law Society usually bargains collectively for the membership so please don't spout such rubbish whoever you are
next you will be saying each solicitor makes his own deal for pii which as probably everyone knows through Peter's blog is handled directly by the Law Society

Anonymous said...

class action isnt allowed in Scotland ? that sounds kinda restrictive are u guys trying to model on china now ?

Anonymous said...

If you want to get class action approved you should agree with Keen and start a campaign!
Use his own words as a start for it!

Anonymous said...

QC wants class actions in Scotland.Well yes the rest of us could benefit from that but I presume the only people conducting the action will be the high fee earning QCs themselves with no hope of anyone else getting in on the business.
Putting it another way however if you are involved in a class action you need the best counsel going because you can be sure the defenders will have it so where do class actions stand with abs ?

Anonymous said...

There is no sensible argument for the prohibition of class actions in Scotland but if Mr Keen does not get his way he could always take legal action against the Government to force the issue.If he chooses not to you can tell the whole thing was a sham.
Put up or shut up!

Anonymous said...

*yawn* heard it all before from people such as Keen

you were spot on in your first paragraph - they are too afraid to allow it because they would end up being sued by most of their clients !

Anonymous said...

Christine Grahame wants a fraud investigation of the RBS !

What a joke !

Anonymous said...

This is the same Richard Keen who defended Tommy Sheridan who sacked him then asked him back.

Is this guy believable or what ? I don't think so !

Anonymous said...

I tend to take anything the Dean says with a pinch of salt so I wont be surprised when this idea comes to nothing.

However the comment which posted his piece in "The Firm" magazine seems to agree with you on the slcc.Maybe you two should join forces ?

Anonymous said...

So much waffle from Richard Keen.The country cant afford an investigation into the RBS or class actions because too much will come out as to who in high places was getting the money and that I bet includes plenty scots politicians including SNP'ers

Anonymous said...

So much waffle from Richard Keen.The country cant afford an investigation into the RBS or class actions because too much will come out as to who in high places was getting the money and that I bet includes plenty scots politicians including SNP'ers

Anonymous said...

I hear you have a new fan.Richard Keen !