RBS case faces fresh delay as settlement talks drag on

The prospect of an imminent settlement in an investor legal action against Royal Bank of Scotland (LSE: RBS.L - news) has faded after a judge agreed to adjourn the case for two weeks.

RBS had looked close to an estimated £200m out-of-court deal after making a last ditch offer to the claimants in the case just before a trial was due to begin.

A settlement would stave off the prospect of former boss Fred Goodwin giving evidence in open court on the case, which centres on an ill-fated 2008 rights issue.

The judge, Mr Justice Hildyard, on Monday allowed the start of proceedings to be delayed to see if discussions could lead to an agreement.

On Tuesday, the High Court was told that the majority of investors were willing to settle.

But a day later Jonathan Nash QC, representing the group, said both sides had agreed to ask for an adjournment until 7 June - which was agreed by the judge.

Mr Nash said that "progress towards a settlement remains good" and it was still hoped that a "final compromise of the claims made in these proceedings" would be reached.

A further hearing would still take place this Thursday to update the judge on progress.

An agreement could bring an end to years of pursuit over the £12bn rights issue launched by Mr Goodwin just months before the lender needed rescuing by British taxpayers.

The RBS offer this week represents the latest in a string of last-ditch efforts by the bank to avoid the lead-up to its 2008 cash call being played out in public.

Investors allege that RBS, under Mr Goodwin's leadership, misled them about the state of the bank's finances when it raised billions of pounds from them just months before it had to be rescued.

Mr Goodwin, along with Sir Tom McKillop, the former RBS chairman, are named alongside the state-backed bank as defendants in the case.

The Government continues to own more than 70% of the bank, and there is little prospect of it ever recouping the money it paid to avert its outright collapse.