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We have now received Counsel’s advice regarding the potential claim against Skipton Building Society (‘Skipton’) for its refusal to honour its Guaranteed Standard Variable Rate (‘SVR’).
Skipton had guaranteed approximately 65,000 people that its SVR would not be more than 3% points above the Bank of England base rate. However as of 1st March 2010 Skipton increased its SVR to 4.95% claiming that the SVR of 3%:
“was not sustainable in the long term particularly in view of the cost of attracting retail funding. Fundamentally, it is in reaction to the impact on the UK savings market of the Bank Base Rate plummeting to such an unprecedented level of 0.5%”.
As a result of the above Skipton argue that the “exceptional circumstances” clause in borrower contracts is triggered allowing Skipton to not honour the “Guaranteed” lower rate.
Having received Counsels advice we feel that those borrowers who contracted to Skiptons Guaranteed SVR have a potential claim pursuant to the Unfair Terms in Consumer Contracts Regulations 1999.
We have been approached by over 100 people who are interested in making a claim against Skipton. We are in the process of running four test cases both with the FSA and the Office of Fair Trading and are considering issuing a Class Action claim in the High Court with a view to obtaining relief in the form of a declaration that the “exceptional circumstances” term is unfair under the 1999 Regulations and thus unenforceable, together with a claim for the sums overpaid to date by Skiptons borrowers.
We have contacted Skipton, who are represented by DLA Piper, with a Letter Before Action and expect a full response within the next 30 days.
If you have been affected by Skipton’s decision please register your interest with us by either calling us on 020 7228 2020 or by email at info@leonkaye.co.uk. We will add your details to our Skipton Action Group register and contact you as the matter progresses.
SKIPTON Building Society may have breached consumer contract regulations when it increased its standard variable mortgage rate for 64,000 borrowers, it was claimed yesterday.
Law firm Leon Kaye said it had received advice from counsel that affected customers could have a potential claim under the Unfair Terms in Consumer Contracts Regulations. Skipton said in January it was increasing its standard variable rate from 3.5 to 4.95 per cent despite a pledge that it would never be more than three points above the Bank of England base rate.
By Nicky Burridge, Press Association
Skipton Building Society may have breached consumer contract regulations when it increased its standard variable mortgage rate for 64,000 borrowers, a firm of solicitors said today.
London-based law firm Leon Kaye Solicitors said it had received advice from counsel that customers affected by the move may have a potential claim under the Unfair Terms in Consumer Contracts Regulations.
The group said it had been approached by more than 100 borrowers who were interested in making a claim against the building society.
It is considering launching a class action in the High Court, while it has also taken up the issue with City regulator the Financial Services Authority and the Office of Fair Trading.
Skipton announced in January that it was increasing its standard variable rate (SVR), the rate customers revert to when their existing mortgage comes to an end, from 3.5% to 4.95% from the beginning of this month.
The move breaks the group's pledge that its SVR will never be more than 3% above the Bank of England base rate, although it reserves the right to remove this ceiling in "exceptional circumstances".
Leon Kaye Solicitors said it had contacted Skipton, who are represented by DLA Piper, with a Letter Before Action. It expects to receive a response within the next 30 days.
The UK's fourth largest building society has around 29,000 customers on its SVR, with a further 35,000 due to revert to it in the near future. The rate hike will cost a homeowner with a typical £150,000 mortgage £124 a month, or nearly £1,500 over the course of a year.
Several other lenders have increased their SVR since interest rates have been kept on hold, though none has hiked them by the same magnitude as Skipton. A Skipton Building Society spokeswoman said: "If any legal action were taken, we would deal with it through our normal procedures."
By Jeff Salway
SKIPTON Building Society may face a legal challenge over its decision to break a guarantee linking the cost of its standard variable rate mortgage (SVR) to the Bank of England base rate, affecting tens of thousands of customers.
The UK's fourth-biggest building society angered customers last month when it removed a ceiling that meant that borrowers would never have to pay an SVR higher than three percentage points above the base rate.
Almost 30,000 of the mutual's 64,000 mortgage customers are currently on its SVR, which will rise from 3.5 to 4.95 per cent next month, even though the base rate has remained unchanged at 0.5 per cent since last March.
Skipton exercised an "exceptional market conditions" clause in mortgage contracts to increase its SVR above the guarantee level. It defined exceptional circumstances as the Bank of England base rate being less than or equal to 2.7 per cent, or where the base rate minus the average instant access savings rate was less than or equal to 2.5 per cent for three months.
But the legality of that clause is being investigated by London firm Leon Kaye Solicitors, which said the mutual's move could contravene the Unfair Contract Terms Act 1977. It said yesterday: "We are currently investigating the legality of Skipton's decision to not honour the guaranteed rate and whether the downturn in the economy would warrant a trigger of the 'exceptional circumstances' clause pursuant to the terms of the mortgage contracts."
Leon Kaye is looking at launching a test case or class action in an English court. The firm, which has previously set up action groups against Bradford & Bingley and the Royal Bank of Scotland, said it would also look into whether borrowers had a claim against Skipton with reference to the act.
Skipton said it had consulted the Financial Services Authority before announcing the move last month and that it would re-introduce the SVR ceiling in future when circumstances allowed.
Chief executive David Cutter said: "While we understand this change will be unwelcome for those borrowers who will end up paying more as a result, we hope that they will understand it is a necessary step that is in the best interests of our membership as a whole, and indeed the society itself in the long run."
By Simon Read
Skipton building society is facing a legal challenge over its decision to ignore a mortgage rate guarantee.
The society – which has just over 100,000 borrowers – will increase its standard variable rate (SVR) from 3.5 per cent to 4.95 per cent from 1 March, leaving borrowers on a typical £150,000 mortgage needing to find around an extra £1,500 a year.
Skipton is not the only lender to announce increases in SVR – six others have done so while the base rate has remained at 0.5 per cent. But it is the only one to break a pledge to borrowers that the rate would never be more than 3 per cent higher than base rate. When announcing the increase, the society claimed it was responding to "exceptional market conditions". Skipton's chief executive David Cutter said: "It is a necessary step".
But the law firm Leon Kaye Solicitors claimed the move may be illegal if the economic downturn is not judged enough to trigger Skipton's get-out clause. The lawyers said: "These 'exceptional circumstances' clauses are normally submitted into contracts to ensure that the lender has an element of control if things turn bad. However, such clauses can fall foul of the Unfair Contract Terms Act 1977."
Leon Kaye has asked Skipton borrowers to contact them if they think they have a claim against the society, but the case could be short-lived, said Melanie Bien, a director of the independent mortgage broker Savills Private Finance. "It all hinges on the definition of 'exceptional circumstances'," she said. "I would have thought this law firm will struggle to successfully challenge Skipton." However, Ms Bien accused Skipton of not treating customers fairly. "Lenders shouldn't offer the guarantee if they can't stick to it."
The Skipton said it had received no approach from the law firm.
By Tanya Powley
A law firm is investigating the legality of Skipton Building Society’s decision to hike its standard variable rate (SVR) to 4.95 per cent last month.
Last month the UK’s fourth-biggest mutual backtracked on its guarantee to existing customers that they would never have to pay more than 3 per cent over the Bank of England base rate.
The lender said it reserved the right to remove its SVR ceiling under “exceptional circumstances” and this was included prominently within the terms and conditions of the mortgage offer.
The society defined “exceptional circumstances” as either when the bank base rate is less than or equal to 2.7 per cent or when bank rate minus the UK average branch instant access savings rate is less than or equal to 2.5 per cent for each of the three proceeding months.
London-based law firm Leon Kaye Solicitors believes Skipton’s clause could fall foul of the Unfair Contract Terms Act 1977.
A statement on the law firm’s website says: “We are currently investigating the legality of Skipton’s decision to not honour the guaranteed rate and whether the downturn in the economy would warrant a trigger of the “exceptional circumstances” clause pursuant to the terms of the mortgage contracts.”
Leon Kaye says it will also look at borrowers’ rights regarding these clauses under the Unfair Contract Terms Act 1977 to see if borrowers have a claim against Skipton.
The law firm has previously set up action groups against Bradford & Bingley and Royal Bank of Scotland.
”We are not aware of any formal challenge being made but if one was to arise we would deal with it through our normal procedures,” says Tracy Fletcher of Skipton.
Skipton Building Society may face a legal challenge over its plans to hike its standard variable rate mortgage for 64,000 borrowers.
The UK's fourth biggest building society announced last month that it was increasing its standard variable rate (SVR), the rate customers revert to when their existing mortgage comes to an end, from 3.5% to 4.95% from the beginning of March.
The move breaks the group's pledge that its SVR will never be more than 3% above the Bank of England base rate, although it said it reserved the right to remove this ceiling in "exceptional circumstances".
But London-based law firm Leon Kaye Solicitors is investigating the legality of the move under the Unfair Contract Terms Act 1977.
It is also looking at whether the downturn in the economy is enough to trigger the "exceptional circumstances" clause.
The group said: "These 'exceptional circumstances' clauses are normally submitted into contracts to ensure that the lender has an element of control if things turn bad. However, such clauses can fall foul of the Unfair Contract Terms Act 1977.
It has already been contacted by around 100 Skipton mortgage customers, and is considering launching a test case or class action in the county court.
It may also take the issue to the Financial Ombudsman Service and trading standards.
Leon Kaye has previously represented policyholders of Equitable Life and is currently representing shareholders of both Bradford & Bingley and Royal Bank of Scotland.
But Skipton said it had consulted with regulator the Financial Services Authority before it announced the move.
By John Collingridge
SKIPTON Building Society could face legal action over its decision to increase mortgage rates for 64,000 borrowers.
The mutual last month revealed plans to raise its standard variable rate, which will result in bigger monthly payments for tens of thousands of mortgage customers.
The UK's fourth biggest building society blamed "exceptional market conditions" for its decision to raise the rate from 3.5 to 4.95 per cent, despite a guarantee to lenders. The move will see typical monthly payments on a £100,000 mortgage increase by £121 or 1,254 a year.
London law firm Leon Kay Solicitors said it is investigating whether there is a legal case against the mutual.
Some 29,000 borrowers will be affected when the new rate comes into effect on March 1. A further 35,000 borrowers are due to revert to the standard variable rate in the future.
Despite the Bank of England base rate standing at just 0.5 per cent, Skipton scrapped a guarantee to borrowers on the standard rate that they would never have to pay more than three per cent above the base rate.
The law firm said the mutual could have breached the Unfair Contract Terms Act 1977 and it was looking at the legality of the move.
A Skipton spokeswoman said: "We are not aware of any formal challenge being made but if it was to arise we would deal with it through our normal procedures."
Leon Kaye is also working for shareholders of failed bank Bradford & Bingley.
By Jeff Prestridge
SKIPTON Building Society could face a legal challenge over its controversial decision last month to tear up an interest rate guarantee given to 64,000 borrowers.
The move would heap further pressure on chief executive David Cutter, looking to stabilise the society’s financial position after the disastrous acquisition last year of rival Scarborough.
London law firm Leon Kaye has confirmed it is ‘investigating’ the legality of the move which saw the mutual scrap a guarantee that had assured borrowers on its standard variable rate that they would never have to pay more than three percentage points above base rate.
The guarantee was in literature given to borrowers before they took out loans.
Skipton’s SVR will jump from 3.5 per cent to 4.95 per cent next month.
Leon Kaye, which mounted a successful legal challenge on behalf of Equitable Life policyholders, has been contacted by more than 100 Skipton borrowers. Senior partner Leon Kaye said he was still waiting for Counsel’s opinion on the best way to proceed. He said that any action would probably be based on the Society’s breach of the Unfair Contract Terms Act 1977.
Despite problems with Scarborough’s loan book, Skipton’s results to be announced on Wednesday will be buoyed by the £40 million profit made on last December’s sale of credit reference agency subsidiary Callcredit.
By Nina Montagu-Smith
A FIRM of solicitors has said it will investigate the legality of Skipton building society’s controversial decision to break a guarantee to keep its standard variable mortgage rate within three percentage points of Bank rate.
Last month, Skipton raised its SVR to 4.95%, despite the fact that Bank rate has not moved from 0.5% in 11 months. The society used an “exceptional circumstances” clause in its terms and conditions to make the change.
Leon Kaye Solicitors, a London law firm, said it would investigate the legality of this clause. In a statement, the firm said: “These ‘exceptional circumstances’ clauses are normally submitted into contracts to ensure that the lender has an element of control if things turn bad. However such clauses can fall foul of the Unfair Contract Terms Act 1977.”
Tracy Fletcher, from Skipton, said: “We are not aware of any formal challenge being made but if one was to arise we would deal with it through our normal procedures.” She added that anyone subject to the SVR will be able to transfer their mortgage without any early redemption penalty.
David Hollingworth, from mortgage adviser L&C, said: “The SVR hike was terrible news ... but Skipton did talk to the regulator before doing it — they have not done this lightly.”
By John Collingridge City Reporter
Angry shareholders who claim they were wilfully misled into participating in The Royal Bank of Scotland's £12bn rights issue plan to sue the bank. RBS Action Group, comprising private investors, intends to file a class action lawsuit against the bank arguing it failed to make shareholders fully aware of its financial predicament when urging them to subscribe to its fundraising.
Michael Lamoureux, who founded the group, invested £12,000 in the rights issue, but has seen his stake plunge from about £100,000 to £4,000.
He said: "We feel that the bank has conned us out of billions. We were deliberately misled by RBS through the statements made by RBS both before the rights issue and by the statements made in the rights issue prospectus."
Solicitors Leon Kaye are acting for the group and will file a detailed claim letter in coming weeks. RBS received more than 95 per cent shareholder support for its £12bn rights issue – then a record sum raised by a UK company – arguing it was needed to rebuild its tattered balance sheet, stretched by the acquisition of Dutch bank ABN Amro. But the demise of US investment bank Lehman Brothers and the collapse of confidence in the banking sector forced RBS to seek state aid, and the Government now holds more than 70 per cent of its equity.
With RBS's share price down more than 90 per cent on a year ago, many small investors' stakes have been reduced to virtually nothing. An RBS spokesman said: "We are aware of a number of class actions against RBS, which we will of course defend.
"It would be inappropriate to comment further at this stage in the process."
HBOS workers are set to get a bigger cut of Lloyds Banking Group’s bonus pool than their Lloyds TSB counterparts, despite the fact that it was their firm that pushed the combined bank £10 billion into the red.
Lloyds TSB and HBOS each employ about 70,000 and the two merged in January. Although Lloyds TSB made a profit last year, sources say HBOS’s staff may end up with the majority of the combined bank’s £8 million bonus pool. Lloyds declined to comment but one executive denied the claims.
Lloyds workers are seething at their reduced bonuses and in a bid to get them increased, unions will this week meet with UK Financial Investments (UKFI), the Treasury agency. Also, it is thought Lloyds may announce next month how many jobs will be lost as a result of the HBOS deal.
Meanwhile, angry Lloyds investors have appointed lawyers at Charles Russell as they prepare to sue bank management for acquiring HBOS without, they claim, enough due diligence.
Investors are also set to sue the former directors of Royal Bank of Scotland for misleading them about the health of the bank. The RBS Action Group has hired Leon Kaye solicitors to represent them.
Elsewhere, it is understood that Bradford & Bingley could end up being folded into the “bad bank” that will be spun off from Northern Rock.
About 150 Bradford & Bingley shareholders attended the public meeting in Bingley on the 7th March.
The main purpose of the meeting was to explain to shareholders what the shareholders action group had done to date, and what we expect to do going forward. But it was also an opportunity for shareholders to ask questions and much of the meeting, which lasted about 2 hours, was taken up with answering those questions.
The speakers at the meeting were as follows
Leon Kaye, senior partner of Leon Kaye solicitors, who are pursuing a possible legal action against the B&B board and the company on behalf of those shareholders who took up the rights issue.
Roger Lawson. Communications Director of the UK Shareholders Association, who explained how UKSA was organised and how the Bradford & Bingley Shareholder Action Group was organised. He also explained what UKSA had done on similar campaigns (such as that for the Northern Rock shareholders), what had already been done for B&B shareholders and what it was planned to do.
Philip Davies, MP for Shipley, who has been very active in promoting the interests of B&B employees and shareholders. He explained the issues associated with the nationalisation of B&B and what he had done to try and find out the reasons for it.
David Blundell, Chairman of the B&B Shareholders Action Group. He covered the events leading up to nationalisation and his view as to why the company was nationalised.
It is hoped to provide a more extensive report on this meeting in due course.
See http://www.uksa.org.uk/B&B_Meeting.htm for further details
Bradford & Bingley shareholders are pressing ahead with legal action against the stricken bank after a commercial barrister said they had a strong case for compensation.
About 1,200 investors have so far joined forces to lodge a class action case after forking out cash during the bank’s £400m fund-raising, just before it collapsed last summer. B&B shareholders were asked to stump up money under the trouble-hit rights issue in an attempt to bolster the bank’s ailing balance sheet.
The former building society said at the time that the cash plea would reinforce its position as one of the UK’s “better capitalised” banks – but only a month later B&B was nationalised, with the savings and branch business sold to Santander, the owner of Abbey.
The Bradford & Bingley Rights Issue Action Group believes that investors were misled by the bank’s rights issue literature and, with the help of legal representative Leon Kaye, is to submit a claim letter by the end of the month after expert opinion said that the case was a strong one.
Mr Kaye, senior partner of London-based Leon Kaye Solicitors, said the case would be made against the relevant B&B directors and the bank, now owned by the Government
Bradford & Bingley was Britain's biggest buy-to-let lender but it struggled to attract financing after the wholesale markets seized up in he autumn of 2007. Its rescue rights issue had to be relaunched repeatedly.
Meanwhile former shareholders in Northern Rock, the other bank nationalised by the Government last year, are still waiting to hear whether they will receive compensation. An independent valuer was appointed to determine what value, if any, the shares had at the time the bank was taken into state ownership.
BRADFORD & Bingley shareholders are pressing ahead with legal action against the stricken bank and its directors after a commercial barrister said they had a strong case for compensation.
About 1,200 investors have so far joined forces to lodge a class-action case after backing the bank’s £400 million fundraising just before it collapsed.
B&B shareholders were asked last summer to stump up money under the trouble-hit rights issue in an attempt to bolster its balance sheet.
The former building society said at the time the cash call would reinforce its position as one of the UK’s“better-capitalised” banks but a month later it was nationalised and its savings business sold to Abbey-owner Santander.
The Bradford & Bingley Rights Issue Action Group believes investors were misled on its financial situation in the rights-issue literature.
Legal representative Leon Kaye said it planned to submit a claim this month after expert opinion from a commercial barrister. He added: “The bank and its loan book was in a bad way and this was not spelt out to investors.”
Legal moves have been launched to win compensation on behalf of 1,200 Bradford & Bingley shareholders who invested in the business when it was seeking to raise an extra £400 million through a rights issue. The action is being taken by London solicitor Leon Kaye on behalf of 1,200 members of the Bradford & Bingley Rights Issue Action Group – a separate body to the Bradford & Bingley Shareholders’ Action Group.
B&B’s directors had problems with the rights issue which went through several revisions before being approved at a meeting of shareholders in Sheffield in August. Following the meeting, the then chairman Rod Kent said the funding would make it one of the best capitalised banks on the high street. Around six weeks later the Government stepped in to rescue the bank which had seen its shares decimated in the stock market turmoil affecting the financial sector. It nationalised B&B’s mortgage business and sold the savings arm to Santander Abbey for £613 million.
Mr Kaye said he had counsel’s written opinion that those who took up the rights issue and believe they were misled by the company have a strong case. He has prepared a detailed claim letter which will be served individually on those who were directors of B&B at the time of the rights issue, as well as the company itself, effectively the Government. The action is aimed at winning full compensation for those who supported the rights issue which Mr Kaye said would total £1 million. The group is co-operating with lobbying organisation the UK Shareholders Action Group, which includes the B&B Shareholders Action Group, chaired by Leeds businessman David Blundell.
The B&BSAG is open to all B&B shareholders, including those who did not participate in the rights issue.
Mr Blundell welcomed the legal steps being taken by Mr Kaye. He said: “I was one of those who took up the rights issue in the belief that Bradford & Bingley would eventually see its way through its troubles on the back of assurances by the senior management and the board.” Mr Blundell said the group is planning a meeting in Bingley in March to raise the profile of the campaign.
An invitation has been issued for a minister to attend and Shipley MP, Philip Davies hopes to be present. The Financial Services Authority has announced a consultation on moves to ensure savers who lose money when a bank fails receive compensation within a week.
Anyone wanting to join the group can email uksa@uksa.org.uk. Shareholders can get in touch with the rights issue action group at www.leonkaye.co.uk/bradfordandbingley.html
Investors in Bradford & Bingley are suing the government over the September nationalisation of the ailing mortgage lender.
Around 1,200 shareholders have lodged a class action lawsuit in a bid to claw back some of the £400million they pumped into the bank just months before it collapsed.
The shareholders will argue that they were misinformed over the state of the bank's true financial situation during a twice revised rights issue this summer.
At the time, the bank maintained that the cash injection would turn it into one of Britain's 'better capitalised' lenders. However, only a month later B&B fell into state hands amidst growing fears that its reserves would be eaten away in a prolonged property meltdown. The Bradford & Bingley Rights Issue Action Group is taking its action against B&B directors and the taxpayer-owned bank. Legal experts say the shareholders stand a better chance of receiving compensation than Northern Rock investors. B&B wasn't technically insolvent when it was nationalised, unlike the Rock, they said.
Angry Bradford & Bingley shareholders are mounting a legal case against the bank and its directors to claim damages following the collapse of the mortgage lender last year. The case relates to the bungled £400m rights issue to which many shareholders subscribed in the belief it would bail out the troubled bank and put it back on an even keel. But just a month later, B&B's mortgage operations were nationalised and its savings business was sold to Spanish bank Santander.
The Bradford & Bingley Rights Issue Action Group represents 1,200 small shareholders who believe they were misled about the bank's financial situation. Solicitors Leon Kaye, who are acting on behalf of the action group, are to submit a lengthy claim letter before the end of January having received counsel's opinion that the shareholders have a strong case. Senior partner Leon Kaye said the group has received written opinion from an experienced commercial barrister that the shareholders are on strong ground.
The case will be made against both the former directors and Bradford & Bingley itself, which is now in Government ownership. Mr Kaye said the action group is confident that its claim will be successful and shareholders will be entitled to 100 per cent of their money back.
"Shareholders were misled," said Mr Kaye. "Many were unsophisticated investors who relied on the contents of the prospectus."
Last July private equity firm Texas Pacific walked away from a £179m rescue investment in B&B at the last minute following an adverse report by credit rating agency Moody's.
"Notwithstanding this report, Bradford & Bingley revamped the prospectus and went ahead regardless," said Mr Kaye. "The information that Moody's had access to was alarming and was not properly brought to investors' attention. These small investors who invested tens of millions of pounds were not told the true facts."
Hundreds of thousands of investors took up the rights issue, buying some 28 per cent of the shares. The action group maintains that shareholders should have been provided with all appropriate information leading to the Moody's downgrade and the serious risks arising out of this.
"It is not considered that the shareholders received this information," said Mr Kaye. "We believe the rights issue proceeded in a rapidly developing financial and banking crisis and that it was wholly inappropriate in the known circumstances to seek further investment from members of the public."
The action group is working in co-operation with influential investor lobby group the UK Shareholders Association (UKSA). Communications director for the UKSA Roger Lawson said:
"Bradford & Bingley shareholders are dissatisfied that they were asked to subscribe to the rights issue on misleading grounds only a short time before nationalisation."
Shareholders can contact the Bradford & Bingley Rights Issue Action Group at www.leonkaye.co.uk/bradfordandbingley.html
Many of B&B's one million small investors received shares in the bank when it demutualised in 2000. The majority are based in Yorkshire and Lancashire. The Lancashire connection dates back to B&B's takeover of Hyde Building Society in 1981. Last month the Yorkshire Post revealed that a separate lobby group called The B&B Action Group is demanding a public inquiry into the bank's nationalisation.
The B&B Action Group, which represents 2,000 small shareholders, is calling on the Government to explain why B&B was nationalised just weeks after the board said the bank was "completely viable as an independent entity".
BBAG chairman David Blundell said small shareholders are furious that the Government has bailed out the big banks, but failed to step in to save B&B and Northern Rock.
"Many shareholders are demanding to know why the Government is throwing money at big banks in Scotland and London, yet small banks like B&B and Northern Rock whose roots are based in the North of England have been disadvantaged," said Mr Blundell.
The BBAG is to hold a public meeting in Bradford early next month.
Bradford & Bingley shareholders are pressing ahead with legal action against the stricken bank and its directors after a commercial barrister said they had a strong case for compensation.
Around 1,200 investors have so far joined forces to lodge a class action case after forking out cash during the bank's £400 million fundraising just before it collapsed.
B&B shareholders were asked last summer to stump up money under the trouble-hit rights issue in an attempt to bolster the bank's ailing balance sheet.
The former building society said at the time the cash plea would reinforce its position as one of the UK's "better capitalised" banks - but only a month later B&B was nationalised, with the savings and branch business sold to Abbey-owner Santander.
The Bradford & Bingley Rights Issue Action Group believes investors were misled on the bank's financial situation in the rights issue literature.
And, with the help of legal representative Leon Kaye, the action group is now set to submit a claim letter before the end of the month after expert opinion from a commercial barrister that the case is on strong ground.
Mr Kaye, senior partner of London-based Leon Kaye Solicitors, said the case will be made against the relevant B&B directors and the bank, now owned by the Government.
Investors in Rage, the collapsed computer games group, have increased the pressure on the company's advisers by highlighting
a series of fund raisings with a US bond fund, GEM Global High Yield Fund.
Private investors claim the transactions, the latest of which was March 2002, are further evidence that Rage was
in need of cash before a controversial £5.5m share placing and open offer in May 2002. The offer document for the
May share issue contains a loss forecast for the full year to June 2002 of £3.2m-£9.1m.
One investor said: "At the interim stage in December they made a £5.4m loss. So if they had any hope of meeting
the more optimistic end of their range the company would have had to trade profitably in the second half. If that
was likely to happen why did they need to raise cash from investors such as GEM in March?"
A shareholder action group has been formed to demand compensation from Rage's advisors, including Teather & Greenwood,
the company's broker, and BDO Stoy Hayward, its auditor.
Shareholders
who lost everything in the collapse of Rage Software are preparing to sue the company's stockbroker, Teather & Greenwood
and its auditor, BDO Stoy Hayward.
An action group has been formed led by Leon Kaye, a veteran of numerous investor action groups including those that
have pursued Equitable Life, Resort Hotels and split capital investment trust companies.
The shareholders have engaged lawyers and have written to solicitors representing Teather & Greenwood and BDO Stoy
Hayward demanding compensation.
Mr Kaye said: "We will certainly be issuing a writ in due course if we don't receive compensation."
Rage was a computer game software company that developed titles including games based on the Rocky character, played
in the films by Sylvester Stallone and a football game endorsed by England footballer David Beckham.
The action group claims that 8,000 private investors were misled by a prospectus that was issued by the company inviting
them to submit to a placing and open offer to raise up to £5.5m.
On page 30 of the document, which was issued in May 2002, there is a profit and loss forecast for the full year ending
in June 2002. That said the loss on ordinary activities before taxation and goodwill amortisation and impairment
would be no less than £3.2m and no more than £9.1m.
The action group claims that such a wide range was misleading as the company already knew by then what the full-year
loss was going to be. It eventually came in at the top of that range.
The group claims to have 500 members and Mr Kaye said it would be securing outside funding from a no-win, no-fee
financier to support its legal claim.
Teather & Greenwood last night said until it actually received a writ, it did not want to ay anything. However it
is understood that it strongly refutes any wrongdoing.
A spokeswoman for BDO Stoy Hayward said: "We haven't received a writ and we don't see any basis to what they
are saying. If we do receive a writ we will defend it vigorously."
An
action group representing 500 aggrieved small shareholders in collapsed computer games group Rage is preparing
to sue broker Teather & Greenwood and accountants BDO Stoy Hayward.
Solicitors Leon Kaye have consulted counsel and believe they have a case to demand compensation from the two City
firms because for their role in a £5 million capital-raising by Rage. About 7000 mostly small punters lost everything
when Rage went bust just eight months after tapping them for fresh capital in May 2002.
"The intention is that we will be issuing a writ," said Leon Kaye, principal of the eponymous firm, which specialises
in class actions and has gained several big City scalps in the past. "We believe we have a very strong case." The
aim is to sue both Teather and Stoy Hayward as well as the former Rage directors.
At the time of the capital-raising Rage claimed that the £5 million sought would be enough to see the company through
its problems, a promise that proved unfounded.
They also issued a forecast that losses for that year would be around £3.2 million to £9.1 million. Kaye alleges
this was deliberately misleading because by then the directors and their advisors knew that the loss would be at
the very top of that range. "Investors were misled," said Kaye, who has also been attempting to force Teather
to disgorge the names of its own private clients who bought into the Rage capital-raising.
About £2.5 million in the new share issue was contributed by T&G clients. But their identities were concealed behind
nominee accounts.
Small shareholder Nick Polzone of Whetstone invested £3000 in Rage shares. "It's an outrage. I'm a financial
advisor and just to sell anyone an insurance policy you have to dot the i's and cross all the t's. These guys have
engaged in corporate theft," he alleged.
Rage was for some time a huge favourite with small investors as it signed up big names like David Beckham and former
SAS hard man and author Andy McNab to lend their names to its computer games. But it was swamped by costs as it attempted
to transform itself from pure developer to full publisher and receivers were called in in January.
Kaye has notched up several compensation coups on behalf of investor group, including actions against Guinness Mahon
in 1996, Resort Hotels in 1999 and Equitable Life in 2001.
A Stoy Hayward spokeswoman said: "There is no basis to the claim and we intend to defend it very vigorously." Teather
said it had followed all the rules and relied on figures provided by the directors and Stoy Hayward.
The world of split level investments - once considered a safe repository for pension nest eggs - is about to be assailed by the lawyer whose legal challenge helped to bring Equitable Life to its knees.
London solicitor Leon Kaye has set up an action group for victims of the trusts including pensioners who have lost a large slice of their retirement cash. Split level investment trusts offer different classes of shares with varying risk and reward profiles tailored to investor needs. They were often sold as minimal risk investments producing high income, but some have lost up to 98% of their value over the past year. Some dividends have been reduced sharply.
Many funds launched in 2000 invested heavily in other split level trusts, an arrangement of cross holdings which became known as the "magic circle". When share prices fell, the circle turned vicious. Aberdeen, BFS and Exeter were among the main promoters of these trusts.
"We were first consulted by clients whose independent financial advisers sold Aberdeen Progressive Growth, a unit trust whose funds go into investment trusts including large slices into split trusts also managed by Aberdeen," Mr Kaye said. "The literature says the risk to capital is low but these units have lost half their value over the past year. That led to inquiries from other split level investors who lost money. We have also written to shareholders in the worst hit funds."
Mr Kaye has decided not to take on IFAs but go for the fund managers whose material the advisers passed on to private investors. He will allege breach of contract and misrepresentation as well as mis-selling.
The government is considering regulating the embattled split capital investment trust sector, where many private investors have each lost thousands of pounds in what they were told were low-risk investments. Lord McIntosh of Haringey, the government�s deputy chief whip in the House of Lords, said the government was concerned about a sector that is in danger of collapse from a complex web of cross-shareholdings and debt.
Split capital trusts currently fall through gaps in the regulatory system and are not fully supervised by the Financial Services Authority, the chief City regulator. But Lord McIntosh, who speaks on Treasury matters, said yesterday: "The coverage of the FSA is progressively increasing. This could include split capital trusts if necessary. If we find existing powers are not enough and that there is potential for abuse, then we are prepared to consider amending the regulated activities order."
Regulation by the FSA could mean closer scrutiny of the sector, where a close-knit "magic circle" of split managers invest in each other's trusts. The FSA is looking into allegations that these cross-shareholdings were used as a way of boosting share prices by buying each other's shares.
Split capital investment trust companies have been sold to tens of thousands of investors as a method of achieving a high income or as a tax-efficient way of planning for long term expenses, such as school fees. Such trusts are collective investment vehicles with more than one class of share - some paying income, others paying a pre-determined capital sum at a preset date.
However, some took on high levels of debt. When stock markets fell, the impact of falling stocks was magnified through the trusts that invested in each other. Share prices of trusts have fallen in some cases by more than 70 per cent. About 40 trusts have now cut or suspended dividends and some have breached banking covenants. Quilter Global Enhanced Income this month became the first trust to declare itself insolvent and asked for its shares to be suspended.
The FSA is examining allegations of mis-selling across the sector. However, concern is mounting that investment trusts are not fully regulated by the FSA and that shareholders who bought into trusts without independent investment advice lie outside the FSA�s protection and compensation schemes.
An action group has been set up by Leon Kaye, a London-based solicitor, to fight for compensation for shareholders, who in some cases have lost 98 per cent of their money.
Political pressure has been building for the government to take a look at potential abuses in the sector. Lord Newby, Liberal Democrat Treasury spokesman, has been among those pressing the government to regulate splits.
Split capital investment trust managers could be facing legal action, with a solicitor investigating whether investors have a claim for mis-selling.
Leon Kaye, of London law firm Leon Kaye Solicitors, is trawling prospectuses of both unit trusts exposed to split caps and the trusts themselves to see if the risk levels of the products were clearly explained to investors.
Many people bought zero dividend preference shares - for school fees planning, for example - in the belief that the products were low risk. As yet, no zero has ever failed to pay out the predicted amount at the set date.
However, the cross-holding of some split caps in other split trusts, coupled with their high gearing, has sent the values of some of these investments plummeting as stock markets have fallen.
A number of trusts run by Aberdeen Asset Management, BFS, Gartmore and Jupiter, among others, have recently run into difficulties. Framlington 2nd Dual is seeking shareholder approval to buy back 14.99 pc of its issued ordinary income shares and its zero shares, it said on Thursday.
Mr Kaye is already working on behalf of a handful of clients, and hopes that others will come forward. He said: "We are investigating the whole issue of risk and whether these products can fairly be described as low risk. We want to build a head of steam to get a case. One gets a feeling for these things, and the feeling is there is something wrong here."
Lord Newby, the Liberal Democrat Treasury spokesman, asked in the House of Lords last week whether investors in splits could be entitled to compensation for mis-selling. He backed Mr Kaye's actions. He said: "I would support any reasonable action to get redress for those people."
The Financial Services Authority is already investigating whether there was collusion between investment trusts to prop up prices in the sector by cross-investing in each other�s funds. Aberdeen said on Thursday that the group was performing ahead of budget expectations, although sales of retail funds have fallen 45pc in the five months from October compared with the previous year. It is waiving fees on certain splits which will result in a reduction of annual fee income of £2m compared to budget.