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Dispute Resolution Blog

New Fund for Bank Claims

Posted on May 01, 2012 by Cat Maclean  | 0 Comments

Restitution (noun): 

  • 1. The act of giving back to the rightful owner something lost or stolen. 
  • 2. The paying of compensation for loss or injury. 
  • 3 The return of an object or system to its original shape or position.

Restitution is a newly-created fund which has been set up to assist the growing numbers of aggrieved business owners who wish to take legal action against banks and other financial  institutions.

It is the culmination of a project on which we have been working for some time in an effort to provide greater assistance to clients who as business owners  consider themselves to have been victims of unethical practice by lenders.  The fund, which is principally being brokered by two high net worth private investors,  has been deliberately set up to operate separately from MBM, to provide an independent and impartial view. However, it is intended that, at least initially, each application will be submitted by MBM, as we have a substantial number of claimants keen to be considered for funding. The decision on whether or not to take on a case will be dependent on the estimated costing and, of course, the balance of probability of a successful outcome either in or out of court. Restitution will be assisted in this decision by a senior QC who will sit on the board.

We believe this is an exciting and innovative commercial project which also offers hope to business owners who believe they have been badly let down by their commercial lenders. This sense of grievance has accelerated sharply since 2008 when the banks abruptly reversed their previous liberal lending policies and began calling in loans or refused to complete loan applications that had already been agreed in principle.

We are also involved in a number of cases related to the potential mis-selling of complicated financial hedging instruments such as interest rate swaps and we anticipate  a significant number of similar complaints that have yet to surface.

So what prompted us to set up such a Claims Funding Company? In large part it was a moral imperative – we have come across many distressing situations in which business owners have been badly let down by banks over lending, in some instances leading to company closures and family breakdowns. We hope Restitution may open up a route to justice for at least some of these people.

Restitution is however first and foremost a commercial concept, which will base each decision strictly on financial and legal merits. It will be within the remit of Restitution to consider assisting any type of company with a complaint against its bank but most submissions are expected to come from the property and hotel and leisure sectors, which until the credit crunch of 2008 were the most heavily geared in terms of bank lending.

Although operating in Scotland and appealing mainly to a Scottish client base, Restitution may also fund litigation which would take place in the English civil courts.

Many business owners with a good legal, as well as moral, case against banks have  been deterred from taking action, partly  by cost concerns – the banks have huge  pockets - but also by the sheer size of these institutions and the apprehension they naturally feel about taking one of them on in court. This situation is compounded by the fact that ‘class actions’ (i.e. cases of a similar nature) cannot be taken jointly against a single defender in Scotland, as is permitted in England.

With the financial cushion that Restitution may be in a position to provide, perhaps a law suit against a major bank may seem less daunting.

For more information about restitution please do not hesitate to contact me.

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