A 73-year-old pensioner challenging the Bank of Ireland (BOI) over attempts to raid his savings could face a £500,000 bill if he pursues the case in the High Court.
Glasgow resident Albert Kempster is being used as a test case for more than 2,000 people, mostly retirees, who face losing nearly the entire value of bonds issued by the old Bristol & West Building Society. These permanent interest-bearing shares (Pibs), which pay out 13.375 per cent every year, are generally used by people with small savings to top up their pension pots.
However, the BOI, which bought Bristol & West in 1997, will not waive its right to pursue legal costs should Mr Kempster lose his case, making it financially almost impossible for him to get his day in court. Mr Kempster's pension is just £230 a month, which he supplements with a £1,800 annual Pibs payout.
The BOI is represented by international legal giant Allen & Overy, which would be expected to cost a six-figure sum to hire in a case such as this. One legal expert said that "at least" half a million pounds was a reasonable assumption.
Mr Kempster is being represented on a "no win, no fee" basis by a legal team led by Brown Rudnick. The firm believes that these are exceptional circumstances and that if the BOI does not agree to waive the right to pursue legal costs there is a denial of access to justice.
The BOI has asked pensioners and investors owning £75m of Pibs to hand them over for just 20 per cent of their face value or risk losing virtually everything as part of wider ¤2.6bn restructuring. Bondholders are challenging the decision, arguing that the scheme is "coercive" and unfair. Should the majority of Pibs-holders accept the plan, those who voted "no" will get just 1p for every £1,000 they own. A "no" vote risks losing everything, in effect cornering people into saying "yes".
Mr Kempster's legal team emailed the Financial Services Authority on Friday to demand that the watchdog intervene. The letter said: "The Bank of Ireland has confirmed that it may seek the financial ruin of our proposed test claimant, a 73-year-old pensioner in the event that he be brave enough to ask the court to consider the legality of the tender that he is being coerced into agreeing."
John Hemming, a Pibs-holder and Liberal Democrat MP, said: "The Bank of Ireland clearly doesn't care who it tramples on. It's not right."
The BOI is one-third owned by the Irish state, which wants to push through the restructuring to help bring stability to the country's financial system.
Allen & Overy banking and finance litigation group partner Andrew Denny declined to comment.Reuse content