A group of 220 investors has issued proceedings against Lloyds Banking Group and 5 of its directors arguing that they were procured into supporting the bank’s 2008 takeover of HBoS “by means of misrepresentations, omissions, concealment of material information and/or negligent advice”.
The group alleges that the named directors of Lloyds breached fiduciary and other duties owed directly to shareholders when advising them that the acquisition of HBoS and the connected Government recapitalisation of Lloyds were in their best interests.
Lloyds TSB took over HBoS for £12bn in 2008, creating a banking giant holding almost a third of the UK’s savings and mortgage market. But the enlarged bank later had to be bailed out with £20bn of taxpayer money. Lloyds is now 21 per cent state owned.
The investors claim they were not told that the bank was receiving support from the US Federal Reserve totalling $18bn. Neither were they aware that it had taken a £25bn loan from the Bank of England before voting in favour of the acquisition. It is also asserted that Lloyds secretly loaned HBoS £10bn on or about 16 September 2008 to enable it to continue trading.
The value of the claim will not be determined until the size of the claimant group is cemented later this year. However, the total value wiped off all Lloyds’ shares is estimated at £6bn. The value of the 220 claimants’ loss is around £2.5m, but the group is hoping to attract more claimants to join its case.
The investors applied for a group litigation order yesterday which will need to be confirmed by the Chancellor of the High Court before proceeding.
Alan Steinfeld and Stuart Adair are instructed by Damon Parker of Harcus Sinclair. Herbert Smith Freehills and Brick Court Chambers are representing the directors and Lloyds Banking Group.
The case has already aroused considerable press interest eg in The Lawyer.