We have written a lot about GRG previously.  However, we have seen a pattern in people contacting us (we are a unique litigation only firm that has substantial experience in litigation against banks by SMEs, so we are contacted a lot).

When I qualified in 2012 I went to work on claims involving Interest Rate Hedging Products (“IRHPs”). I worked with a lot of SMEs and I had an almost unblemished success rate.  A lot of what happened with IRHPs is being repeated in regards to GRG, so I think it is important to discuss the traps that some SMEs fall into.

I Can Do This Myself

I was instructed by an SME business owner who did not want to pay me because I got him more money than he had expected (and so the final bill was higher than expected).  He decided that he could in fact do the same job, himself.  He did not need a lawyer.  “The IRHP process is easy and anyone can do it” was his view because I had not only recovered what he wanted but about £400,000 more than he expected.  No doubt many SME owners have read a story or two on internet forums where an SME owner did it himself and won.  Needless to say, he received a rejection of his claim and had to instruct me to take the case through FOS, where we won, twice.  That is because I knew how to frame and argue a case and he did not.  That is no criticism of him; I do understand why some people think that lawyers are just expensive and not needed.  The sad problem is that they find out how needed we are whent hey have no way of progressing their cases having failed initially and on appeal.  I have lost count of the number of cases where I am asked to advise on where the whole claim has become lost due to time bars and appeal rights have been exhausted.

I went to University for five years and I did ten years as a paralegal plus two as a trainee.  I specialise in financial claims by SMEs against banks (and also libel, negligence and corporate disputes).  This is why I am actually good value for money.  I am trained to do this.  As noted above, I have managed to recover more money than some clients expected.

The GRG process has thrown up the same comments.  It is easy and they do not need a lawyer to do it.  The banks very much like it when SME businesses do this.

This is almost certainly one of the most dangerous things an SME can do.  Usually because there is a failure to understand what law applies, how evidence rules work and, crucially, what it is that must be said and what absolutely must never be said.  You only know these things through experience.  Someone on an internet forum might have won their case, but two cases are rarely alike.

My most often repeated phrase since 2012 has been: there is no such thing in English law as “mis-sold”.  No legal concept.  No tort.  No legislation or regulation.  “Mis-sold” and “Mis-selling” are phrases created by the press to simply communicate a complex legal concept.  This predominantly started with endowment mortgages, became big with PPI and was then repeated with IRHPs.  Where a product is sold and it is regulated, the sale is regulated and selling that product in a way that is contrary to those regulations is “mis-selling”.  You would not go to Court and prove mis-selling, you would go and prove a breach of the legislation, regulation or some tort, such a misrepresentation, or even breach of contract.  Proving “mis-selling” is why many SMEs lost out in the IRHP review.

With GRG the most often seen error by an SME is the assumption that they had a right to a loan or had a right to carry on when in default under a loan.  Not appreciating this issue can very easily kill your claim off.

Sadly, with the IRHP review, many SMEs thought that they had a cast iron case so did not need a lawyer, because the facts are so obvious that proving mis-selling was easy.  They therefore undertook the review themselves and proved “mis-selling”.  The problem is, there is no such thing as mis-selling and invariably they overlooked and ignored what actually needed to be proved.  In many cases, they even wrecked their cases by saying things in interview with the bank/bank’s lawyers that undermined their case.  One bank’s law firm particularly directed discussions in those interviews to try and get a phrase out of SMEs that would kill their cases, such as confirming they understood interest rates can go up and down and that they needed protection from this.  A minor point, but if stated incorrectly really could undermine your whole case.  If you do not know that and do not know what you have to prove, you can very easily follow the direction of the law firm and kill off your case.

I have once again started hearing the same stories, this time in respect of GRG.  Again, some SME businesses do not know what exactly it is they have to prove, but have drafted their complaints themselves nonetheless.  One I heard very recently was a chap whose entire relationship with his bank was ruled by a joint venture agreement.  Neither his company nor the bank could do anything unless it was done in accordance with the JV.  Not once did he look at the JV (it is in his loft).  Not once did he refer to it.  Not once did he even think about it.  Yet his entire case is won or lost based upon the terms of that agreement.  He thought he just had to tell the bank why they were bad, and he would get damages.

We lawyers do what we do for two reasons.  One is because we absolutely love what we do.  The other is because we have rent to pay and need an income.  A strictly litigation only law firm like Muldoon Britton has something that you as an SME do not.  We have a combined experience of decades in formulating and drafting legal arguments.  I have been doing litigation since 2006.  Michael Muldoon and Kara Britton are the same.  They have done nothing but litigation.  Between the three of us alone, we have c. 35 years of litigation experience involving almost every facet of litigation imaginable.  Michael Muldoon has been to the Supreme Court, twice.  They set up this firm because litigation runs in their veins.  Creating a legal argument is what we do for a living.

So you will have to pay for what we do.  When we look at a GRG case, we know exactly what we are looking for, we know the usual arguments to be used, we know RBS’s systems and what documents usually have something in them.   We also know how to argue those facts to give a case the absolute best chances of success.  If you build pipes for a living, I have no doubt that you could really educate me on the pros and cons of using copper versus using plastic for pipes.  You may even have been involved in a claim or two so have an understanding of the litigation process.  But what you do not, usually, know is what to look for in a GRG file.  You do not know the tricks employed by RBS on a legal basis.  But most of all, you almost certainly do not know what legal things you must prove and how to prove them in order to create the most robust claim possible.  That is why SME businesses should come to Muldoon Britton to argue their bank cases and we go to you for pipes.  That is why we are value for money.

I Will Not Pay Legal Fees

 One of the first questions I almost invariably hear is “I want a no win no fee”.

There are two principal issues that first need to be understood.  Fee agreements changed in 2013, so what you were able to obtain in 2012 when you instructed a lawyer regarding an IRHP is not what is possible now in 2017.  Prior to 1 April 2013 a success fee and ATE insurance would be recoverable from the other side if you are involved in litigation.  That meant that you received 100% of your damages and the costs, success fee (usually 100% of the costs) and ATE costs were recovered from the other side.  The law changed. Success fees in a Conditional fee Agreement (referred to occasionally as a no win no fee agreement) and ATE insurance premia are no longer recoverable and must be paid by you out of your damages.

Where there is no litigation involved, such as the IRHP review itself or the new GRG complaints’ procedure, a contingency fee must be used because the other side does not pay any legal fees.  Those legal fees must therefore be paid by you out of your damages.  Usually firms used a contingency of about 30% + VAT.  Many SMEs were requiring fee agreements, but when it came to actually paying, because they had won, there were some very sudden changes of heart about how useful a contingency fee agreement is, or a conditional fee agreement with a 100% success fee.  Suddenly businesses were not quite so sure that they had got a bargain.  That is because paying 30% of your damages plus VAT is significant and had you paid hourly/fixed fees as you go you would not be required to pay such a large fee.

Suddenly a “no win no fee” when compared to paying fixed fees on an hourly billing basis is actually much more preferable.  This is something you must seriously consider before agreeing to and entering into any fee agreement.  A CFA arrangement means a law firm cannot pay its staff from income whilst they work on your case.  Equally, some cases are lost, meaning no payment at all will be received by the firm for the hours of work on your case.  A law firm therefore has a right to require that you pay an additional fee to recognise the risk taken by the law firm; this is known as the success fee.

As such, you must really think carefully when instructing a law firm.  A “no win no fee” sounds great when you have no damages.  But when a bank offers you £1.5 million, you suddenly may not think that the 30% + VAT arrangement was actually in your best interests.  And yes, I have had a client tell me to my face that he did not expect I could get him £1 million, so when he got £1 million he wanted to change the terms of the arrangement from 25% to 20%, because he thought that was fair.  After working for two years on a case and getting a result that few others could get, suddenly having your work questioned is difficult to hear.

Think through what you actually want.  If you want the cheapest means of doing the work, a fixed fee/hourly billing arrangement is likely to be the cheapest.  If litigation is involved you will likely recoup about 70% of those costs when you win.  Paying a review fee and then having a CFA means you have to expect to pay out a significantly higher amount.  And if you get the unexpected multi-million pound outcome and are on a contingency fee, then you will be paying out 30% + VAT on that.  Calculate that at the start before you ask a law firm to take on the substantial risk of undertaking the work with no monthly income to pay staff and firm costs.  You have to pay them not only their costs but also an uplift (known as the success fee) or a fixed percentage of your damages as repayment for taking that risk.  Getting angry that you think the amount is unfair after you are awarded damages is in itself unfair.  It is going to cost you more than you would have paid on an hourly billing rate.  Think that through when you instruct a firm.

Because a law firm has to take a gamble on your case succeeding, and receive nothing if you lose, then most good law firms will charge you to review your case to determine its strengths.  There are obviously some cases that will not charge you a review fee.  In my experience they tend to be firms that stack cases up high, run them through a conveyor belt process and as every case has the same arguments and little detail they tend to lose substantially more cases than other law firms.  So, when weighing up your case, are you prepared to lose your case or get a lower settlement simply to avoid a £2,000 + VAT review fee?  That review fee is there to help you and allow a firm to decide if it is willing to invest time in your case.

RBS’s Report Shows That They Did Wrong

When the Lawrence Tomlinson report came out, everyone assumed RBS would be annihilated by the FCA, the regulator.  The shocking treatment of GRG customers was in the news.  Suddenly your decade old argument was being discussed on the front page of every newspaper.  So, most SMEs wanted to wait for the report. The FCA’s report took two years.  They refused to release the whole report because it would be damaging to RBS.  They revealed all of the issues in which RBS had been exonerated, but were less detailed about how they had found RBS wanting.

To SME businesses who had lived through the nightmare of being in GRG, and especially to those SME businesses that lost an entire lifetime’s work to GRG, this was difficult.  To us lawyers that have worked on GRG cases, we were horrified.  How could the FCA have been able to clear GRG on the majority of allegations?  It simply did not fit with what we had actually seen.

The FCA continues to refuse to issue the report.  George Kerevan, a former SNP MP and former member of the Treasury Select Committee, is now vying to become FCA chairman with a vow to release the full report on his first day.  We hope he gets the position.

As part of the FCA findings, they did find that the fees imposed by GRG were not fair.  Particularly the Property Participation Fee Agreements were very unfair.  RBS was ordered to look at every single GRG case and automatically refund those fees.  So, SMEs elected to continue to wait, because they wanted those fees back.  No point instructing a lawyer.  Largely all of those fees have now been refunded.

So that leaves the GRG Complaints’ Process.  Many SME businesses have taken the decision that they do not want to pay large fees to law firms, because they did that on IRHPs and anyone could have won those settlements.  So, we are seeing many SME businesses undertaking the review themselves.  Whilst we understand the need to keep costs down, this article is a intended to show you why a saving on legal fees will cost you untold amounts of money.

As noted above, very few SME businesses have a great understanding of the law as it applies.  We have seen some businessmen who were at the forefront of the IRHP issues and who really helped bring it to the fore.  I went to a conference and was horrified to hear them get things wrong on the law.  I heard many SME businesses stand up and again get the law wrong.  I am aware that people were handing out legal advice in the forums and basically saying that the lawyers all got it wrong.  I was one of dozens of lawyers who were consulted by one such SME business owner.  He had dozens of SMEs in his group.  He told every single lawyer they did not know the law and were wrong.  His case went to the High Court and, like he was told, he lost his case.  He still maintains we have the law wrong and he was right.

It is true that there are law firms out there that got things wrong.  We have seen advice given to SMEs that simply was wrong on the law.  We also saw some law firms push substantial numbers of cases through on a conveyor belt process where their submissions to the banks were pro-forma pre-written sections copied/pasted into a letter and did not deal with the unique individual facts of the case.  Largely those cases got nothing or alternative products.

So, it is very true that you can do the GRG review yourself.  And then you can appeal it yourself.  It is usually at that stage that many SME owners realise that they actually might need a lawyer.  You must remember that at that stage:

1. You have already set out in writing the “facts” of your case. It is therefore not possible for those facts to be presented in a better light, nor can the narrative be changed largely from how you presented your case.  You are stuck for the most part with what you put in your complaint.
2. After your appeal is up, you only have FOS or Court. FOS has a limit of £150,000.  It is possible to take a lost case and resurrect it at FOS, but if you are looking for £1 million in damages, then you lost that ability in the review if you are time barred.  Court is expensive, and many GRG cases are now time barred.
3. Every error and mistake and every comment and statement you made in the review will be used by RBS in your next move. Having made errors in a statement you may have fatally undermined your entire case.

It is therefore vital that you consider very carefully what it is that you want.  If you want £10,000 and an apology, then yes, few law firms will be able to help you as the cost of that complaint would far outweigh the result.

If you are looking for £35 million, a law firm will be able to tell you whether your claim is viable and whether your £35 million is realistic.  It is far better to make a £2 million case that is solid than make a weak £35 million case and lose the entire case.  That is because if you have over-exaggerated your losses, then the genuine losses will get drown by the unsupportable and unevidenced, and there is a very good chance you would end up with nothing or very little.  A £2 million case that is convincingly evidenced and argued will be a better result than nothing.  Only a very experienced litigator can advise you on this.  Those without such experience, or those that run case through the conveyor-belt process, will not likely appreciate this and push your case through, seeing only the £35million figure and not the rules of evidence that apply.

Finally, using an experienced lawyer means that the facts and evidence are all packaged up and a convincing legally based argument put forward.  A lawyer who takes on thousands of cases all of which have no fees is likely to push them all through on a conveyor-belt process with the knowledge that a large percentage will be lost but more won, and over-all the lawyers earns.  That does not help the people with a very nuanced claim that needed the minute detail examining to show what the case is.  That is why most of the very good lawyers will charge you a fee to review.  If you have a good case, it will be seen on the review and the arguments formulated properly.  The case then goes on a CFA because the lawyer is confident the case has legs.  Any law firm that pushes complex cases through on a conveyor belt will have a large loss rate.  Lawyers like me who take the time to detail a case and evidence it usually have a near perfect result.  I am personally very proud of my success rate.  I lost two IRHP cases, both because they were time barred and we could not get around the time bar, and both were too large to go in the FCA review.

So you instruct a law firm, what is necessary?

The review is simply your opportunity of explaining to RBS why their treatment of you in GRG was wrong and that damages flow from this.  Sounds easy?  Yes, it is.  But the crucial factor you need to understand when drafting it is:

1. A bank has no obligation to give you a loan. So, if your loan came to an end and you went into GRG because you could not pay it back is seen as fair by the FCA, the FOS and the Courts.
2. If you are genuinely outside of the loan agreement, such as having an LTV rate of 90% and cannot inject cash to bring it down, then the Bank has a duty to its shareholders to put you in to GRG;
3. If you are in genuine default and cannot remedy it, RBS was under a duty to its shareholders to put you in GRG.

I hope you can see from this that the complaint that you were in GRG does not in and of itself warrant a claim in damages.  It is the minute facts that are very important.  It is the knowledge of what governs your relationship with the bank that allows a good claim to be made.  Simply saying you were in GRG and as such did not agree with the increased margin is unlikely to warrant a positive response.

If you want to instruct Muldoon Britton to look at your GRG case (or in fact any dispute with a bank) please contact our Manchester office today: 0161 826 6922.