rbs McEwan trust logoRoyal Bank of Scotland is to be sued over an alleged mis-sold interest rate swap after a judge ordered administrators to stop blocking an attempt by the owners of a failed business to seek compensation.

The High Court ruling paves the way for others whose businesses have been put into administration to pursue claims where administrators will not.

Banks had paid out £482m in redress to 3,400 customers by the end of February after regulators found “serious failings” in the way the products were sold. Some 96 per cent of products examined were mis-sold.

The banks are reviewing more than 10,000 clients treated as “unsophisticated” and possibly eligible for compensation.

The swaps were designed to protect against a rise in borrowing costs. Many businesses were saddled with high costs after interest rates plunged to record lows in 2009.

RBS sold almost half the swaps in existence.

Michael and Diane Hockin’s London and Westcountry Estates was among 8,000 businesses treated as big enough to have assessed the risks and therefore not eligible for a review triggered by the Financial Conduct Authority, the regulator.

The Plymouth-based property empire was put into administration in 2012. Mr Hockin contends that the swap product on a £57m loan left them with crippling interest rates and was responsible for the company’s collapse.

Mr Justice Le Poidevin awarded them costs.

The legal action was taken against administrators EY, which had refused to grant the Hockins a deed of assignment to sue the bank. They had offered to pay EY and give it a percentage of any compensation to pass on to creditors.

The couple, who have spent £180,000 in legal fees, want the administration process to be suspended while they pursue their compensation claim.

Several businesses and MPs have questioned the links between administrators and the banks. Austin Mitchell, MP for Great Grimsby, has attacked a law that allows advisers appointed by banks to turn round companies to recommend administration, which increases their fees.

Lawrence Tomlinson, the businessman who authored a critical report on RBS’s treatment of small businesses, said that almost every accountant and financial adviser was conflicted because they relied on banks for much of their business.

Alison Loveday of Berg Solicitors, who acted for the Hockins, said the ruling could be a precedent. “It is the first time I have seen a judge force an administrator in this way.” She said many administrators did not want to “bite the hand that feeds” by pursuing claims against banks.

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

RBS 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.

By Andrew Bounds

 http://www.ft.com/cms/s/0/155a133c-b047-11e3-b0d0-00144feab7de.html?siteedition=uk#axzz2wXLJ9vKa