Judge dismisses claim
Lloyds shareholders lose £385m legal battle over HBOS deal
Lloyds welcomed the decision (pic: Terry Murden)
A group of Lloyds shareholders have lost a legal claim against the bank over its acquisition of rival HBOS at the height of the financial crash.
A judge dismissed the £385m High Court case brought by 5,803 former Lloyds TSB shareholders who claimed they had been “mugged” by the 2009 deal.
They alleged the merger had gone through without Lloyds revealing the dire financial circumstances of HBOS which had been formed through the merger of Halifax bank and Bank of Scotland.
In 2009 Lloyds was forced to accept a bail-out from the taxpayer as the banking sector was engulfed in a sea of debt and scandal.
The claimants sought to make five Lloyds directors, including then-chairman Sir Victor Blank and former CEO Eric Daniels, personally liable for the damages.
But Judge Alastair Norris said he was not convinced that “failures to provide sufficient information were in fact causative of any loss”.
He said HBOS’ s financial circumstances should have been shared to ensure shareholders had a “fair, candid and rounded view” of the transaction, but even if they had received it, he felt the outcome would have been the same.
“The majority who approved the acquisition did not do so under some misapprehension of the position,” he said in his ruling.
“They knew the course recommended unanimously by the board. They knew the risks identified by the board. They knew that the board assessed the chance of advantage as outweighing the risk inherent in the transaction.”
Lloyds said it welcomed the decision as the best for shareholders as a whole.
Damon Parker, founder and partner of law firm Harcus Parker, who represents 300 institutions as well as individual shareholders in the case, said: “Our clients are deeply disappointed by today’s judgment,
“They wish to assess their options and will be considering whether to appeal.”
The shareholders’ case revolved around a claim that HBOS had received a covert loan from the Bank of England, known as “Emergency Liquidity Assistance”, totalling £25.65bn. After announcing the intended acquisition, Lloyds had secretly loaned HBOS a further £10bn. HBOS had also received covert financial support from the US Federal Reserve, then totalling $14.5bn (£11bn).
Lawyers for Lloyds argued that the case was “entirely devoid of merit”, and “fundamentally flawed”.
A Lloyds Banking Group spokeswoman said: “The group welcomes the court’s decision. Throughout this process, the group has sought to act in the interests of our shareholders as a whole.”