British pension funds preparing to sue Sir Fred Goodwin and the Royal Bank of Scotland in the American courts for hundreds of millions of pounds will have an uphill task, according to Britain’s top banking barrister.

Lord Grabiner QC, who successfully saw off the Northern Rock shareholders’ claim against the Treasury, told The Times yesterday that it was a “doubtful action” and a “very difficult argument.”

In the first place, the pension funds would have to show that they had a right to sue, he said.

“That is the first hurdle because the directors of RBS are in principle answerable to the company, and not directly to individual shareholders or investors - unless the directors had, for example, engaged with them directly as to the value of the shares."

Second, if the pension funds got over that hurdle, they would have to demonstrate a good cause of action, such as misrepresentation emanating from the board of RBS which induced them to buy RBS shares in the first place.

"It's not like buying a car and being told by the second-hand dealer during the negotiations that there's nothing wrong with it and then finding out that there is," he added.

The likelihood was that the pension funds had invested in RBS along with other investments as part of their portfolio, and that they made their own judgment as to whether RBS shares were a good investment.”

“If, in advance of buying RBS shares, they had asked Sir Fred Goodwin what he thought and he had said: "safe as houses", then that might well be actionable."

"I would be astonished if that question was ever put and even more astonished if he or the directors ever said anything of the kind."

He also raised the question as to why the class action was taking place in the American courts, if the pension funds felt that they had such a strong case in English law.

“The reason must be because they think they will get a more sympathetic hearing from a legal system that is more flexible than our own, and where the level of damages awarded by American juries is commonly higher than in England where juries have no role in civil commercial cases."

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