Lawyer in Lloyds shareholder action asks judge to send "firm message" to bank after "colossal risk" of HBOS acquisition

Jasper Jolly
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Lloyds TSB Merges With HBOS
Lloyds and HBOS merged in the aftermath of the collapse of Lehman Brothers (Source: Getty)

Lawyers acting for Lloyds Banking Group investors in a £550m legal action over its handling of the 2008 purchase of HBOS today asked the judge in the case to send a “firm message” over the lender’s “duties to its shareholders”.

The High Court heard closing arguments from Richard Hill QC, who is representing around 6,000 shareholders from the time of the merger.

The court today heard that “the directors were exposing their own shareholders to colossal risk” in proposing they vote through the acquisition, Hill said.

Read more: Former FSA chief denies trying to push Lloyds into HBOS merger

The claimants argue Lloyds and five former executives did not give investors, ranging from former employees of the bank to big institutional investors, the information they needed to back the acquisition of HBOS, which was carried out at the height of the financial crisis.

The court has already heard weeks of evidence from defendants such as former chief executive Eric Daniels and former chairman Sir Victor Blank. The claimants argue the Lloyds executives should have told investors about HBOS’s use of emergency liquidity assistance from the Bank of England, which they say could have led to the rejection of the deal.

The shareholders claim damages of as much as £550m to cover losses from later share price falls when the new merged entity was forced to raise capital. Lloyds was eventually bailed out by the government, which only sold its final stake in the bank last year.

Read more: HBOS emergency funding disclosure not needed in Lloyds deal, court hears

The written closing submission from lawyers defending Lloyds entered into court today say the claims are “entirely devoid of merit”, and that even if they could find liability among the directors, they “have not proved that the Director Defendants’ wrongdoing caused them any loss.”

Hill said the fact the directors did not disclose the emergency funding was “inexcusable” and that the bank remains “wholly unapologetic”.

The shareholder circular issued by the Lloyds board was a “sales pitch” for the deal rather than a clear-sighted recommendation, the claimants’ written closing submission argued.

The court will hear three more days of closing arguments, before a judgement is reached in the coming months. The case continues.

Read more: Ex-Lloyds head knew HBOS could be nationalised, denies government pressure

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