Lloyds TSB Foundation loses court battle with Lloyds Banking Group over £3.5m

By GARETH ROSE
Published on 23/01/2013 12:11

THE charity Lloyds TSB Foundation for Scotland has lost a bitter legal battle with its banking benefactor after a ruling at the UK’s highest court.

Lloyds Banking Group successfully appealed a previous ruling that would have seen them give the foundation £3.5 million, and will now pay just £38,920 instead.

The charity said trustees were “dismayed and bitterly disappointed” by the Supreme Court’s decision.

The verdict ends a four-year seesaw battle, with Lord Glennie finding in the bank’s favour at the Court of Session, only to be over-ruled by three appeal judges.

Lloyds appealed to the Supreme Court, which today decided in its favour.

The dispute centred upon whether the charity was entitled to 1 per cent of the bank’s pre-tax profits, under its covenant agreement.

In particular, the banking group had argued it had made an overall loss of £6.2 billion - following the ill-fated Halfax Bank of Scotland acquisition, which led to it needing a £17 billion bail out from the taxpayer - and therefore the foundation should only be entitled to a minimum payment.

In his findings, Lord Mance said the covenant agreement between the two, which had lasted for more than a quarter of a century, could not “operate on an entirely literal basis” and it was important to give “effect to the parties’ original intentions in the radically different legal and accounting context which existed by 2009”.

The other judges agreed and the foundation, which will split entirely from the bank in 2019, has run out of possible routes of appeal.

Mary Craig OBE, chief executive of the foundation, said today: “After over four years trying to resolve this situation, trustees are dismayed and bitterly disappointed by the decision by the Supreme Court, especially after the Scottish Appeal Court had ruled in our favour.

“On various occasions, Lloyds Banking Group had the opportunity to bring matters to a close, particularly when the inner house of the Court of Session vindicated the position of the foundation.

“Instead, the banking group forced the appeal to the Supreme Court and the trustees had no alternative but to participate in that appeal process.

“However, it is now time for the foundation to look forward.

“Life has moved on for us over the period of this dispute and today’s decision marks the start of a new chapter for us.

“In 2019, the formal covenant will end after the banking group invoked its right to terminate it in 2010.

“Since then, trustees have been actively considering how best to secure long term funds for the foundation, irrespective of the outcome of this court action.

“With the uncertainty caused by this dispute now behind us, we will be able to turn our full attention to detailed planning for the future.”

Lloyds meanwhile said it welcomed the decision and sought to highlight its history of making charitable donations.

“We are pleased with today’s decision from the Supreme Court,” a spokeswoman said in a statement yesterday.

“It is disappointing that we could not reach an agreement with the Lloyds TSB Foundation for Scotland at the outset as we did with the group’s other Foundations.

“We are proud of our track record as one of the largest corporate funders of charities in the UK, including Scotland.

“Lloyds Banking Group has channelled over £82m over the last 26 years to the Lloyds TSB Foundation for Scotland.

“The Bank of Scotland Foundation is now firmly established and supporting communities throughout the country. Our long term commitment remains to be one of the largest contributors to Scotland’s charities and communities.”