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A High Court judge has dismissed a lawsuit brought against RBS by the former chief executive of a software company who claimed the bank had conspired to push the business into administration.
The case was brought by Neil Mitchell, the former chief executive of Torex Retail, who alleged that the software company was bought for a knock-down price of £204m by US fund Cerberus in 2007 after RBS colluded to rig a “sham” auction. RBS was one of its lenders and led the sale.
Mr Mitchell, who claimed to have acted as a whistleblower over financial irregularities, made a number of allegations including wrongful dismissal from Torex, which was sold by RBS and went into liquidation in 2010.
He had been seeking lost earnings and damages in one of the first of a series of cases brought by small businesses against RBS’s Global Restructuring Group.
Mr Mitchell alleged that the sale undervalued the company and that it was procured by an unlawful-means conspiracy between RBS and Cerberus, resulting in Torex being placed into administration and liquidation. He also said that his claim for unfair dismissal under whistleblowing laws was stymied by the sale.
Co-defendants RBS and Cerberus and administrator KPMG denied wrongdoing and earlier this year sought to have a High Court judge strike out the claim before it could proceed to trial.
On Friday Judge Malcolm Davis-White QC ordered that Mr Mitchell’s legal proceedings should come to an end because the allegations did not have a real prospect of success at trial.
He said in his ruling that he agreed with the defendants that the “alleged conspiracy…makes little sense.”
“Having been taken through the details of the relevant bidding process, I am satisfied that there is no reasonable prospect of establishing that the bidding process was a sham, as it would have had to have been for the alleged conspiracy to have operated successfully,” the judge said.
RBS welcomed the ruling. It said in a statement: “We have consistently maintained, over a number of years, that Mr Mitchell’s claims are without merit. We are pleased that the court has reached that same view and has rejected the claims in their entirety.”
Cerberus did not respond to requests for comment.
Mr Mitchell said on Friday he would appeal the ruling and was determined to press ahead to full trial. “This interim hearing was unfairly conducted as a mini-trial without the benefits of disclosure, my eight witnesses, whistleblowers or me giving testimony,” he said in a statement. “I am now considering all options, and more actions will undoubtedly follow for clearly I will be appealing the decision of the judgement..”
The outcome of Mr Mitchell’s lawsuit will be closely watched as dozens of businesses claim that RBS also pushed them prematurely into administration to profit from their distress. RBS has denied the claims.
Last year RBS announced that it had set aside £400m as compensation for failings in how small-business customers were handled in its now-defunct Global Restructuring Group (GRG) unit.