3. HEBERT SMITH FREEHILLS 

 

Lawyers of choice for the denial of justice

 

Wherever there has been serious injustice, for example regarding Lloyds Banking Group’s frauds or the Post Office Horizon IT scandal, this firm of heavyweight lawyers has been closely involved. Herbert Smith Freehills (HSF) have been the lawyers of choice for organisations, which have wished to frustrate justice and to delay and minimise proper compensation for their numerous victims. The allegations made against the firm could not be more serious. 

Their clients’ misconduct has resulted in untold injustice and the role of HSF in assisting such wrongdoing must be investigated. If found guilty of systematic malpractice and abuse of legal process, the firm should be shut down and its partners held liable for large-scale compensation. If the UK legal system is to command respect, those who comprehensively and deliberately abuse it, must be held to account. 

This section focusses on Herbert Smith Freehills, whose manipulation of the legal system has been particularly egregious. However, malpractice has been widespread throughout the legal profession and has involved, for example, DLA Piper, Linklaters, Eversheds Sutherland among major law firms, TLT and Walker Morris within medium-sized ones and Burges Salmon and Michelmores among regional lawyers. Government and regulators have openly tolerated widespread abuse of the legal system and the courts and done nothing to prevent the countless miscarriages of justice which have resulted.

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The SRA’s “Principles” require that solicitors should act:
 

• in a way that upholds the constitutional principle of the rule of law, and the proper administration of justice. 
   

• in a way that upholds public trust and confidence in the solicitors’ profession and in legal services provided by authorised persons.
   

• with independence. 
   

• with honesty.
   

• with integrity.
   

• in a way that encourages equality, diversity and inclusion.
   

• in the best interests of each client.

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We allege that Herbert Smith Freehills has violated the first five of the SRA’s Principles.
HERBERT SMITH FREEHILLS – “undermining public confidence in the legal profession”

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The serious allegations against Herbert Smith Freehills

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• HSF has routinely disregarded its higher duties as officers of the court, which involve responsibility for the proper administration of justice. This requirement is fundamental to correct observance of the rule of law. Instead, the firm prioritised the commercial interests of major clients including Royal Bank of Scotland (RBS), the Post Office and Lloyds Banking Group (LBG). This has been entirely unethical and wrong.        
                                                     

• In conjunction with its major clients, HSF has run cases for costs and its own very substantial fees. From the outset, its objective has been to exhaust opponents’ financial resources and price them out of obtaining justice. This should have been stopped by presiding judges, but it has not been. This strategy has been deeply improper.  
                                                        

• Having acted for the Post Office over its appeal against the verdict of the Common Issues trial, HSF was too conflicted either to act as mediators in the major Bates vs Post Office case or to oversee and administer the Post Office’s Historic Shortfall Scheme. These appointments should not have been allowed but they went ahead nevertheless.                                                        

• Given its earlier role acting for Lloyds Banking Group over the Turnbull report, the firm was too conflicted to act as the solicitors for either the Griggs or the Dobbs reviews of the HBoS Reading fraud. HSF should not have acted under these conflicts of interest but once again, it simply chose to disregard them.            
                                                         

• At the instigation of its major clients, HSF’s roles in respect of the Post Office’s Historic Shortfall Scheme (HSS) and the Griggs Review of the HBoS Reading fraud have been to minimise the compensation paid to long-standing victims of wrongdoing and criminality. HSF is continuing to administer the HSS and was substantially involved in the design and implementation of the Griggs review, both of which have been intentionally unjust. These roles have been significantly improper.                                      
                       

• RBS, LBG and the Post Office have been consistently obstructive regarding disclosure and their conduct has represented the antithesis of openness and transparency. Regarding such matters, they will have relied on the advice of their lawyers, HSF.                                      
                   

• As a result of its actions described in this section, Herbert Smith Freehills has undermined public confidence in the legal profession. It has done so with impunity, knowing that it would not be held to account by the Solicitors Regulation Authority (SRA). The firm has been able to act without restraints, while it has derived major financial benefits for itself at the expense of justice and the victims of serious wrongdoing. The authorities should have acted to prevent this but have consistently failed to do so.

 

 

Royal Bank of Scotland (RBS)
1. Herbert Smith Freehills acted for RBS over shareholders action regarding the 2008 rights issue (April 2013 – June 2017): Three groups of claimants took part in a £4bn lawsuit, alleging that they were misled over the state of the bank’s health in relation to its £12bn rights issue in April 2008. Six months later, RBS had to be rescued by the Government, which injected £45.5bn of taxpayer funds and took a 79% stake in the bank. HSF employed up to 160 lawyers and fee earners in discovery involving six million documents but was criticised by HHJ Hildyard in November 2015 for “unfocussed disclosure.” In acting for RBS, HSF reportedly earned fees of £129mn, a level of costs which the judge described as making ATE (After The Event) insurance “difficult, if not impossible” to obtain. Two groups of claimants settled for 41-43p per share in December 2016 and April 2017 respectively, while RBS offered 82p per share, equal to £200mn in compensation, to the remaining litigants a month later, on the evening before the trial was due to start and when the former CEO Fred Goodwin would have been required to testify. 87% of the remaining claimants accepted the offer and the trial never took place.
                                           
Post Office
2. The Post Office’s failure to disclose the Clarke Advice: The organisation received the Clarke Advice in September 2013, which indicated that there were serious flaws in the Horizon IT system and its prosecutions of 706 sub-postmasters were potentially unsafe. A prosecutor in the possession of such information has an unqualified duty in law to disclose this to defendants, especially those who may have (and in this case, have proved to have been) wrongfully convicted. As a result of its professional due diligence, HSF will have known of its client’s failure to disclose the Clarke Advice. The latter is termed second category abuse of process. It prevented any appeals taking place for eight years and violated article six of the European Convention on Human Rights (ECHR). This guarantees the right to a fair trial within a reasonable time, and the definition of a fair trial includes any appeal. HSF should have filed suspicious activity reports (SARs) with the authorities but failed to do so. The abuse of the legal system and the courts by the Post Office and HSF was particularly egregious and those involved may yet face prosecution.                                            

3. Acted for Post Office over its appeal against the Common Issues trial verdict (May 2019 – March 2021): The Common Issues judgment was handed down on 15th March 2019. Six days later, the Post Office applied to replace the judge, adjourn and re-hear the Horizon Common Issues trial under a new judge. The provision of advice by the former President of the Supreme Court, Lord Neuberger to the Post Office in respect of its recusal attempt has been described by Paul Marshall of Cornerstone Barristers as “objectionable”. On 19th May, after it had failed to halt the Horizon trial or get the judge recused, the Post Office used its new legal team of Herbert Smith Freehills in an attempt to reverse the Common Issues trial verdict at the Court of Appeal. When Post Office executives visited BEIS after losing the Common Issues trial, successful mediation was not on the agenda. Their objective was to reverse a judgment which had gone against them, stop a trial which was going badly and replace the judge, using substantial sums of taxpayers’ money. All of these attempts failed.
 

4. Acted as mediators with the sub-postmasters (28th November - 11th December 2019). The Government website states that mediation should involve the appointment of “an independent and impartial third person to help the parties talk through the issues, negotiate and come to a mutually agreeable solution.” However, HSF could never have been independent and impartial since the firm was heavily conflicted, having acted for the Post Office in its unsuccessful attempt to appeal against the Common Issues trial verdict. The appointment of HSF as mediators with the sub-postmasters should never have been permitted and was entirely improper.

Judgment in the second and main Horizon trial was due to be handed down on 16th December. However, mediation began before that on 28th November and was supposed to last for two days. Instead, it was prolonged for ten days, which was highly abnormal. On 11th December, “agreement” was announced, which involved the Post Office paying compensation of £57.7mn. Given that there were 555 claimants in Bates vs the Post Office, this sum was wholly inadequate but because of the tactics of Post Office and HSF, the claimants were running out of money. Having been improperly appointed as mediators, HSF ensured that their client offered the minimum possible compensation to the 555 sub-postmasters, despite the latter having previously won in court.                
                                       
   5. Appointed by the Post Office to oversee and manage the Historic Shortfall Scheme (May 2020) for those sub-postmasters, who had not taken part in the Bates vs Post Office case. Having been involved in the mediation with the Bates cases, this enabled HSF to exercise influence and authority over every sub-postmaster victim. Because HSF was so heavily conflicted, Rt. Hon Kevin Hollinrake MP described this as “putting the fox in charge of the hen coop.” However, the ministry responsible for the Post Office, BEIS took no action to prevent this going ahead.

Unlike the Post Office mediation scheme attempted in 2013 - 2015, the HSS excluded those sub-postmasters who had been given criminal convictions and included the Kafka-esque requirement that sub-postmasters with claims over £10,000 – the overwhelming majority – should waive all future claims against the Post Office before they knew what level of compensation they would receive. HSF has been involved in and responsible for every aspect of the Historic Shortfall Scheme and included this condition, which is unjustly designed to minimise the Post Office’s liability for compensation. 

HSF will also have known that the sub-postmasters, who have long been denied justice and proper compensation would, under the arrangements they were overseeing, be subject to tax. However, the Government only suggested that this further injustice would be rectified after Dan Neidle of Tax Policy Associates pointed this out in the Times. Had Mr Neidle not done so, the authorities and HSF would not have mentioned it.

In June, HSF was replaced by Burges Salmon, Bristol  as legal advisers to the Post Office in relation to the Horizon IT enquiry. However, the Post Office indicated, disturbingly for the long-suffering sub-postmasters, that HSF will continue to administer the Historic Shortfall Scheme (HSS). The appointment of Burges Salmon, which is said to have been the result of a tendering process, is decidedly unwelcome because the firm has long been associated with serious wrongdoing in relation to another major client of HSF, Lloyds Banking Group. 

From early 1980’s until 2010, Burges Salmon acted as the solicitors for Lloyds Recoveries, Bristol and its lawyers are accused of developing the illegal asset seizure techniques, which the bank and its professionals used. From 2008 to 2010, the SRA investigated 62 partners and staff of Burges Salmon, including its senior partner but took no enforcement action. However, there was a mass exodus from the firm and Lloyds was obliged to stop using Burges Salmon as its solicitors. In November 2017, one partner was tried for his role, with an entire team at Burges Salmon, in handling the proceeds of crime from the HBoS Reading fraud. In highly unusual circumstances, he was tried separately from the other six fraudsters, who had already been convicted and sentenced to a total of 47 years’ imprisonment and he was acquitted, despite overwhelming evidence to the contrary. Another partner of Burges Salmon has twice been investigated by the SRA and been linked with at least four serious corporate frauds.

Burges Salmon continues to act for Crown Estates, of which the current Lloyds’ chairman, Sir Robin Budenberg is also the chairman. The appointment of Burges Salmon to replace HSF and advise the Post Office over the Horizon IT enquiry also appears to have been highly inappropriate.

 

Lloyds Banking Group (LBG)                        
               
6. Acted for LBG over the FSA regulatory enquiry (2009-2010): Halifax Bank of Scotland (HBoS) refused to investigate the Reading fraud and when it finally did so, the bank’s financial crime prevention team whitewashed it. HSF will have been fully aware of the scale and importance of the wrongdoing but later endorsed Lloyds’ refusal to investigate, a decision it will have known was entirely improper.
   
7. Acted for LBG over the Thames Valley Police investigation, Operation Hornet into the HBoS Reading fraud (2010-2016) including claiming legal privilege over documents which were not entitled to be protected, supplying the police with what the latter termed “vast amounts of irrelevant information” and “briefing witnesses, prior to police interviews, on what they could say without breaching the guidelines set by the bank and its lawyers.” As the All Party Parliamentary Group for Fair Business Banking (APPG-FBB) has noted: “From 2014 at the latest – and likely earlier than that – LBG retained HSF as its legal advisers,” so it is probable that the firm advised Lloyds over every aspect of the investigation by Thames Valley Police into the fraud.
 

8. Acted for LBG in relation to the Turnbull report (May 2014): Lloyds refused to investigate the evidence contained in the report and the bank’s head of legal affairs, Andrew Whittaker, who had previously been the FSA’s legal counsel for thirteen years, stated in a letter to the FCA that having reviewed Ms Masterton’s report in conjunction with “our legal advisers” (ie. HSF), Lloyds Banking Group was not persuaded that it would be an appropriate use of time and money to investigate “in light of the outcome of the previous investigation and its evaluation of the credibility of Mrs Masterton,” clearly questioning her motives, competence and mental balance. Until senior figures including the Police & Crime Commissioner for Thames Valley, Mr Anthony Stansfeld intervened on her behalf, Lloyds was not going to compensate Ms Masterton and when she was finally compensated, she was subjected to a second non-disclosure agreement (NDA). 
 

In respect of the HBoS Reading fraud, LBG steadfastly denied knowledge and responsibility and as the APPG-FBB noted: The bank “maintained those denials, in which it engaged HSF’s active assistance, until well after the denials became untenable”, when the criminal trial finished in February 2017. The APPG-FBB continued: “Failure to give disclosure of information is a consistent theme in the conduct of LBG. It is impossible to infer that such failures were other than where legal advice had first been taken by LBG.” In short, HSF encouraged its client to lie because it knew there would be no penalty for lying.
 

Acted for LBG over the 5,800 Lloyds’ shareholders group action (Jun 2010 - Nov 2019): The major legal action was started in June 2010 and saw HSF play the case for time and its fees once again. Consequently, the trial only began seven years later in October 2017, with the verdict announced in November 2019. 

The Lloyds’ shareholders claimed that they had been “mugged” by the takeover of HBoS, which they had been. By early autumn 2008, according to the Turnbull report, HBoS was already “a gone concern” and “hopelessly insolvent”. Yet, neither the HBoS trading update on 12th December 2008, nor the Lloyds’ supplementary prospectus, dated 17th December, mentioned the £40bn hole in HBoS Corporate’s portfolio. Meanwhile, on 3rd November, HM Treasury signed off the Lloyds’ circular to shareholders and later that month, Lloyds’ Extraordinary General Meeting waved through the takeover. 

In delivering his verdict, the presiding judge, Sir Alistair Norris accepted that Lloyds’ management had failed to disclose that: 

HBoS had received a covert loan from the Bank of England - known as Emergency Liquidity Assistance, totalling £25.6bn in October 2008.

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After announcing the intended acquisition, Lloyds had secretly loaned HBoS a further £10bn.

HBoS had received covert financial support from the US Federal Reserve, amounting to US$14.5bn (£11bn).
However, he ruled that in the context of “reflective loss”, if the company (Lloyds) had itself suffered loss, the shareholders could not claim damages. 

Unusually, the judge retired immediately after delivering his surprising verdict. This would have complicated any appeal, which actually never took place. One month before the judgment, the Serious Fraud Office (SFO) wound up its seven-year investigation into LIBOR and one month afterwards, Andrew Bailey was announced as the next Governor of the Bank of England. 

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10. Appointed by Lloyds as solicitors for the Griggs review (2017-2019): In July 2020, HSF was accused by the APPG-FBB in its complaint to the SRA of being “involved at every stage in establishing and undertaking the Griggs Review,”  something which the SRA was later at pains to deny. The Griggs enquiry was supposed “to agree the scope, methodology and individual case outcomes.” At paragraph 53, the APPG-FBB stated that “the structure of the review is very likely to have been agreed by LBG in consultation with HSF – if not in fact actually devised by HSF”. It continued: “The structure of the review……was designed, whether intentionally or otherwise, so that victims could not meet the assessment criteria.”  In practice, Griggs was widely perceived not to have had ultimate control over Lloyds’ decisions, or to have been independent. In December 2018, Rt. Hon Kevin Hollinrake MP commented in a Westminster Hall debate that Lloyds Bank had used the customer review “which is supposedly there to compensate the victims, to minimise payments and perpetuate the cover-up.” He added that he knew of only four out of 76 cases, which had received payments for direct and consequential loss. It was so universally condemned that in May 2019, the former High Court judge and solicitor general Sir Ross Cranston was appointed, and again paid by Lloyds, to conduct a review of the Griggs review. 

HSF was too conflicted to have been appointed as the solicitors for the Griggs enquiry and looks to have played a critical role in the deliberately flawed scheme.
                                   
11. Appointed by Lloyds as solicitors for the Dobbs review (April 2017 – present): It has been suggested that HSF has not played an active part in the Dobbs inquiry to protect its perceived independence. However, the former judge Dame Linda Dobbs will have been assisted in the provision of necessary documentation by HSF and given their past record in relation to the RBS shareholders’ group action, the Post Office, Lloyds shareholders’ group action and the Griggs Review, it raises questions about the Dobbs inquiry’s supposed independence. A significant number of documents, which the inquiry has required to see, are likely to have been privileged and Lloyds has not committed to waive legal privilege on these, promising only to deal with requests on a case-by-case basis. The Dobbs review, which is a private and not a public enquiry and funded by Lloyds, has so far been prolonged for more than six years, when given its remit, it might reasonably have been completed within twelve months. A principal reason for the pronounced delay has been the intention of Lloyds, which has to date paid an estimated £50mn for the review, to play for time for as long as possible and in acting as it has, Lloyds will have relied on the advice of its lawyers, Herbert Smith Freehills. 
 

HSF has been at the forefront of exploiting and abusing due legal process and using every conceivable means to deny justice and proper compensation to the victims of its major clients’ widespread wrongdoing. The firm has defended the serious misconduct of major UK institutions, with a favoured strategy being to play interminably for time to exhaust their opponents’ financial resources and ability to sustain their case. HSF has aligned its own commercial interests with the objectives of its clients and deliberately neglected the higher duties it owes to the court for the proper administration of justice. The firm has done so, knowing that it would never be held to account by the Solicitors Regulation Authority (SRA).