Lloyds drops plans to appeal ruling over Linklaters’ HBoS advice

Disclosure on the bank’s legal battle with 6,000 of its shareholders over the 2008 acquisition has begun and is expected to conclude next spring.

Following the disclosure the claimants, represented by Harcus Sinclair, will examine how Linklaters advised the bank on its circular to shareholders before they voted on the HBoS deal.

The claimants allege the bank deliberately kept them in the dark about £12bn of financial lifelines made by the Bank of England to HBoS and about its alleged manipulation of the Libor rate when asked to approve the takeover.

Documents outlining Linklaters’ advice on the circular and acquisition could reveal whether both parties withheld information from shareholders.

The claimants, made up of 300 corporate entities and around 5,700 private investors, claim they lost approximately £400m through the acquisition.

Following the deal, the enlarged Lloyds Banking Group had to be bailed out by the taxpayer to the tune of £20bn.

Lloyds, represented by Herbert Smith Freehills (HSF), previously refused to release its correspondence with Linklaters as well as between the bank’s directors and HM Treasury, the Bank of England, the Federal Reserve and the Financial Conduct Authority (FCA).

News of the start of the disclosure process follows a series of judgments handed down by Mr Justice Nugee on Friday (13 November).

Nugee J declined to strike out a number of summary judgment applications made by the defendants relating to claims of Libor manipulation and allegations by the claimants relating to the bank’s £22.5bn recapitalisation.

The rulings mean Lloyds will have to disclose further documents relating to both Libor and the recapitalisation.

HSF partner Damien Byrne-Hill has been engaged by Lloyds and five of its former directors to defend the claim, instructing Brick Court’s Helen Davies QC and Tony Singla.

The claimants have turned to Harcus Sinclair partner Damon Parker in the claim against Sir Victor Blank, Eric Daniels, Timothy Tookey, Helen Weir, George Tate and Lloyds Banking Group. The claimants’ case is funded by litigation funder Therium.

Parker has instructed a hefty roster of silks including XXIV Old Buildings’ Alan Steinfeld QC and Stuart Adair, Radcliffe Chambers’ Jeremy Cousins QC, who brought the case over from closing 11 Stone Buildings, Henderson Chambers’ Oliver Campbell QC and Hailsham Chambers’ Alexander Hutton QC.

The issue of whether senior management at Lloyds and other banks knew about Libor rigging will become a key argument in this and numerous other cases currently being brought against banks in the London courts alleging interest rate manipulation.

Libor manipulation cases against Lloyds currently going before the High Court include one brought by Wingate Associates chief executive Gary Hartland, who was one of the first people to sue a bank over the sale of an interest rate swap linked to Libor. The case against Barclays settled in 2014.

The HBoS case has not yet been listed for trial. At the next hearing on 24 February lawyers will submit arguments relating to the value of HBoS at the time of the sale.

Lloyds Bank 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.”

Linklaters declined to comment.