RBS's explosive civil trial is on hold for settlement talks. Its former investors should see it through

Just as it looked as if one of the most explosive civil cases seen in Britain was going to get before a court, the shutters came down. At least for a day.

Royal Bank of Scotland (RBS), and the former investors who are suing it over its record breaking £12bn rights issue in 2008, will spend the next 24 hours chewing the fat over what I’ve been told is a substantially improved offer to settle.

Fred Goodwin, British banking’s biggest bogeyman, might not stand before a QC to answer questions over the cash call after all.

The one time shareholders are suing him, the bank, and other executives, claiming that they weren't given the true picture about its finances before buying into the rights issue. Just months later, RBS was bailed out by tax payers, wiping out most of their investments in the process. They are seeking more than £500m in damages. Interest on top of that could take the value of the claim to above £800m.

Now, the adjournment shouldn’t come as a big surprise. It’s not at all uncommon for the two sides in big civil cases to walk right up to the top of the hill, only to pause before actually reaching the summit to have a chat about things and see if there isn’t a way for them to walk back down again with a deal in their pockets.

RBS, in particular, needs this case, with all the attendant publicity, going ahead like it needs Mr Goodwin back in the boardroom.

It will serve as a huge distraction, dragging a still tarnished brand back through the mud, and defining the narrative surrounding the bank for months, and perhaps years, to come.

It will inevitably rattle some of the skeletons in the bank’s closet. And, at the end of the day, even if RBS were to win at trial, its victory would be a pyrrhic one.

The bank has settled most of the claims brought by city institutions by value (but not by number) paying out hundreds of millions of pounds without admitting liability. If it secures a resounding victory, people might very well wonder why so much taxpayers' money (we still own more than 70 per cent of the shares) was spent on those settlements. So might the Treasury Committee, when the new parliament gets down to business.

Questions have already been raised about the eye-popping sum RBS has spent on its defence (expected to hit about £125m by the end of the trial if it happens), the fact that it has been meeting Mr Goodwin’s legal costs and the tactics it has deployed.

This latest development only adds to the questions about the latter.

Left in the case are 9,000 individual investors (along with 18 institutions).

They have already lost substantial sums of money. At this stage, and with insurance in place to deal with the issue of costs, they wouldn't appear to have a lot to lose by seeing the case through.

RBS has tried to stare them down. Here’s the offer we’ve given to everyone else, take it or we’re going to trial, and you'd better have the money in place to meet our costs if you lose (they do)!

To date they have responded: Great! Let's have at it!

There will be many of them for whom the money is less important than having their day in court. They saw themselves as supportive shareholders of RBS and felt betrayed by the events at the bank. They want answers, and who can blame them?

The big litigants by value, the institutional fund managers, had already written off their losses and accepted an offer amounting to a bit above 20 per cent of the value of their claims. For them, getting some money back was just a nice bonus, but there was nothing personal in it. It's different for the little guys, although some of them aren't that little. Trevor Hemmings, the racehorse and Blackpool Tower owner, is among their number.

Perhaps RBS’s latest proposal will prove meaningful enough to make him and the other litigants think twice. Perhaps the extra money on the table will serve as a soothing balm to their wounds. Money has a habit of doing that.

And perhaps they’ll think it’s too late, and that it's worth the risk of getting nothing just to get Mr Goodwin on the stand. Not to mention finance director Guy Whittaker.

Mr Goodwin has been getting the headlines, but as the numbers man, Mr Whittaker’s testimony may be more significant.

It isn’t in RBS’s interests for this case to go ahead. But, as I've written before, it is very much in the interests of a public that still feels the bankers at the centre of the 2008 crisis and crash, and the brutal recession that followed it, were allowed by the establishment to get away with it.

The former shareholders should hold their nerve and see it through.