Investors join race to sue Lloyds bank
A FlooD of City institutions are poised to join a multi-billion pound lawsuit against lloyds and its former directors over the emergency takeover of HBoS during the banking crisis in 2008.
Investment industry sources said a rush to take part is underway because City firms believe they could be sued by their clients if they do not sign up to a claim that proves successful.
the gathering momentum behind the lawsuit raises the prospect that key figures behind the HBoS deal, including former Prime Minister Gordon Brown, could be called to give evidence.
law firm Harcus Sinclair ltd will argue that lloyds and former directors, including chief executive Eric Daniels and chairman Sir Victor Blank, breached their ‘fiduciary duty’ to shareholders.
the accusation hinges on the suggestion that shareholders were not fully informed of the rotten state of HBoS’ finances when the deal was put to them.
Investors have until November 19 to join the claim. Some 220 investors, which include some of london’s biggest investment institutions, have already added their names to the suit.
Potential new claims could also emerge from foreign sovereign wealth funds, which invest cash on behalf of governments.
In a letter detailed in court filings, Harcus Sinclair ltd warned firms that ignoring the case means ‘you may be liable to investors who you do not inform’ about the proceedings.
A similar fear was behind a flurry of late entries to join a case against Royal Bank of Scotland, when the spectre of legal action eventually persuaded legal & General, Prudential, Aviva, Standard life and USS to take part.
While the RBS suit revolves around information given to shareholders ahead of the bank’s £12bn cash call in 2008, the claim against lloyds is different.
Harcus Sinclair ltd is set to argue that directors breached their duty to shareholders by failing to disclose that HBoS was receiving emergency support from the Bank of England and US Federal Reserve.
It will also allege that lloyds itself lent HBoS some £10bn to keep it afloat during takeover talks, without informing shareholders.
Harcus Sinclair ltd will say that directors must have been aware that HBoS, valued in the deal at some £5.9bn, was fundamentally worthless.
the takeover, widely believed to have been triggered by a cocktail party chat between Gordon Brown and Sir Victor Blank, led to a huge depreciation in the value of lloyds’ shares.
lloyds has already said it will battle the claim and has until December 5 to issue its defence.
Damon Parker, director of Harcus Sinclair ltd, said: ‘these proceedings are about compensating those shareholders, many of which were pension funds or pensioners, for the losses they suffered, and shining a light on exactly what happened at the time.’
A spokesman for lloyds said: ‘ the Group’s position remains that we do not consider there to be any legal basis to these claims and we will robustly contest this legal action.’