Herbert Smith and McGuireWoods on standby for Lloyds shareholder dispute

A shareholder group hope to appoint McGuireWoods dispute resolution partner Hardeep Nahal in their multibillion-pound lawsuit against a group of banking directors.

Providing Lloyds Action Now (LAN) acquires funding, Nahal will pursue the case against former Lloyds TSB directors for allegedly misleading investors over its merger with Halifax Bank of Scotland (HBOS) in 2008.

Herbert Smith is in line to represent Lloyds and has been handling preliminary correspondence. With the case set to be launched in the next few weeks, the group of 15 directors could yet need individual representation, depending on the wording of the final claim.

McGuireWoods would look to instruct Jeremy Cousins QC of 11 Stone Buildings with Selborne Chambers Johan Du Toit SC as junior.

If the case proceeds, it is expected to reach trial in the next two years.

It involves a claim by LAN that shareholders were not informed of a £25.4bn emergency Bank of England loan given to HBOS in October 2008 prior to its merger with Lloyds TSB in January 2009.

LAN’s members have swelled from 500 in 2010 to 8,000 now. The number includes institutions as well as retail investments and individuals who claim to have lost their life savings.

LAN claims that Lloyds’ directors failed to inform shareholders that HBOS was “in such a parlous financial shape” and that the bank would have “had to close its doors for business on 1 October 2008 had it not been for the granting of a secret loan”.

The claims are being levelled against 15 current and former directors of Lloyds, including former chairman Sir Victor Blank and former chief executive Eric Daniels.

LAN claims that Lloyds’ shareholders have lost between £1.20 and £2.80 per share since the HBOS deal, valuing the case at between £6bn and £22bn.

LAN originally instructed Winckworth Sherwood litigation head Jim Rai, with Nigel Jones QC and Paul Reed QC of Hardwicke Building as counsel.