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Lloyds shareholders demand release of HBOS takeover documents at high court Lloyds shareholders demand release of HBOS takeover documents at high court
(about 5 hours later)
Lloyds shareholders involved in a £350m legal battle over the company’s takeover of Halifax Bank of Scotland (HBOS) have gone to the high court to try to obtain secret documents relating to the deal. Lloyds shareholders involved in a £350m legal battle over the company’s takeover of Halifax Bank of Scotland (HBOS) have gone to the high court in an attempt to obtain secret documents relating to the deal.
The 6,000 claimants, who all held Lloyds TSB stock at the time of the acquisition, claim they were kept in the dark when they were asked to approve the takeover.The 6,000 claimants, who all held Lloyds TSB stock at the time of the acquisition, claim they were kept in the dark when they were asked to approve the takeover.
Following the deal, the enlarged Lloyds Banking Group had to be rescued by UK taxpayers. The Treasury still owns nearly 15% of the business.Following the deal, the enlarged Lloyds Banking Group had to be rescued by UK taxpayers. The Treasury still owns nearly 15% of the business.
Lawyers representing the claimants are seeking the disclosure of advice provided to Lloyds by the law firm Linklaters ahead of the publication of a circular to shareholders in November 2008, before a meeting called to seek their approval of the deal.Lawyers representing the claimants are seeking the disclosure of advice provided to Lloyds by the law firm Linklaters ahead of the publication of a circular to shareholders in November 2008, before a meeting called to seek their approval of the deal.
Related: Bank of England and FCA's report on failure of HBOS suffers further delaysRelated: Bank of England and FCA's report on failure of HBOS suffers further delays
The investors say they were not told about lifelines worth £25.65bn and $18bn (£12bn) provided by the Bank of England and the US Federal Reserve to HBOS, and a £10bn loan facility from Lloyds.The investors say they were not told about lifelines worth £25.65bn and $18bn (£12bn) provided by the Bank of England and the US Federal Reserve to HBOS, and a £10bn loan facility from Lloyds.
The court heard that more than 99% of Lloyds shareholders voted to approve the takeover, among them some of those making claims on Wednesday.The court heard that more than 99% of Lloyds shareholders voted to approve the takeover, among them some of those making claims on Wednesday.
Alan Steinfeld QC, representing the investors, said: “Some of them voted for. Some of them voted against. Alan Steinfeld QC, representing the investors, said: “Some of them voted for, some of them voted against. But their common complaint is that shareholders were not given the information they should have been given when deciding how to vote.”
“But their common complaint is that shareholders were not given the information they should have been given when deciding how to vote.”
The claimants allege that there were breaches of duty to shareholders in recommending the acquisition and providing information about the proposed deal and the financial circumstances of HBOS.The claimants allege that there were breaches of duty to shareholders in recommending the acquisition and providing information about the proposed deal and the financial circumstances of HBOS.
They are asking Mr Justice Nugee to set a timetable for the disclosure of emails and other documents, including the legal advice provided to Lloyds regarding the contents of the circular.They are asking Mr Justice Nugee to set a timetable for the disclosure of emails and other documents, including the legal advice provided to Lloyds regarding the contents of the circular.
Their argument revolves around whether the advice was privileged, as the bank claims.Their argument revolves around whether the advice was privileged, as the bank claims.
The claimants say that as shareholders, they are entitled to see it and the only exception would be if the advice were provided in anticipation of potential legal action against the bank.The claimants say that as shareholders, they are entitled to see it and the only exception would be if the advice were provided in anticipation of potential legal action against the bank.
Steinfeld said: “There is absolutely no basis for the contention that in this case any of the advice is privileged, and certainly there could not have been any contemplation of litigation until the circular was issued.”Steinfeld said: “There is absolutely no basis for the contention that in this case any of the advice is privileged, and certainly there could not have been any contemplation of litigation until the circular was issued.”
But Helen Davies, for Lloyds, said it was “a significant transaction which by its nature may be one in relation to which shareholders may have a variety of different views, including opposing views”. But Helen Davies QC, representing Lloyds, said it was “a significant transaction which by its nature may be one in relation to which shareholders may have a variety of different views, including opposing views”.
She pointed to an analyst meeting on the day in September 2008 when the deal was announced.She pointed to an analyst meeting on the day in September 2008 when the deal was announced.
Related: Lloyds v RBS - two banks with different problemsRelated: Lloyds v RBS - two banks with different problems
Davis said the then chairman Sir Victor Blank was asked whether shareholders would be happy taking on HBOS when its mortgage book had arrears of £7bn.Davis said the then chairman Sir Victor Blank was asked whether shareholders would be happy taking on HBOS when its mortgage book had arrears of £7bn.
The court heard that he told the meeting the bank would not have gone for the deal unless it thought shareholders “would regard it as a very worthy exercise”.The court heard that he told the meeting the bank would not have gone for the deal unless it thought shareholders “would regard it as a very worthy exercise”.
Lawyers are also seeking the disclosure of communications between directors and the Treasury, the Bank of England, the Federal Reserve and officials from the then regulator, the Financial Services Authority.Lawyers are also seeking the disclosure of communications between directors and the Treasury, the Bank of England, the Federal Reserve and officials from the then regulator, the Financial Services Authority.
A Freedom of Information request relating to the case has been turned down.A Freedom of Information request relating to the case has been turned down.
Claimants include about 5,700 private shareholders as well as pension funds and other large investment funds based in the UK, Europe, the US, Canada and Asia.Claimants include about 5,700 private shareholders as well as pension funds and other large investment funds based in the UK, Europe, the US, Canada and Asia.
Lawyers at Harcus Sinclair say it is one of the largest claims brought against a UK bank and its directors arising from the financial crisis.Lawyers at Harcus Sinclair say it is one of the largest claims brought against a UK bank and its directors arising from the financial crisis.
The claimants argue that the value of their shares was reduced through the “gross overvaluation” of HBOS in the deal.The claimants argue that the value of their shares was reduced through the “gross overvaluation” of HBOS in the deal.
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.”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.”