Lloyds action now

[Chrissie]

I have received a letter from an organisation called Lloyds Action Now. They say they intend to take legal action against the government, the Financial Services Authority, the Bank of England, and the boards of both Lloyds TSB and HBOS, with the aim of claiming compensation for Lloyds TSB shareholders for the disastrous merger of Lloyds and HBOS.

But they want me to register with their organisation at a cost of £264.38 plus 3 pence for every Lloyds TSB share i own. That would be quite a lot of money. They say that without registering, and paying up, I would not be able to recoup any considerable rewards that their legal action is expected to result in. What should I do please?

[Teri Harman]

In my personal opinion this is a ridiculous amount of money, and may well be a case of 'throwing good money after bad'! My husband joined something similar for RBS shareholders but the amount they asked for was a simple one-off sum of, I think, £40 which we thought was worth a 'punt'.

There is no guarantee that the legal action will ever be brought, let alone be successful of it were. In the meantime Lloyds shares have at least been moving in the right direction, apart from a few blips.

[Annie Shaw]

I agree the sum of money being asked is high. That said, unless an action group can raise money it won't ever get anywhere because fighting a legal action is costly.

I don't believe that if you did not pay the money you would not benefit. It is just as likely that a successful legal action would result in compensation for all shareholders whether they were party to the action or not.

A cynic would say, don't pay and simply freeload on their coat-tails.

But as I said above, if they don't get money they won't get anywhere.

I have joined one action group in the past. The fee asked was much more modest. We lost but I never regretted handing over the cash as I felt our cause was just and although ultimately I lost even more money by paying my subscription than if I had just sat on my hands, I never regretted it.

I think you need to take a view about the chances of success of a legal action (would you just obviously be wasting your money on the fight?), how strongly you feel you should be compensated (some people feel shares are gambling and some you win, some you lose and it's a rough old world), and whether it is a price worth paying.

Alternatively, I haven't looked at the action group's aims, structure, plan etc but might they accept a smaller "donation" if you feel disinclined to hand over as much as they are asking?

[Annie Shaw]

Just remembered that we had another question about this group a while ago. The answer is here:

http://www.cashquestions.com/forum/s...ghlight=lloyds

[Jonathan Hill]

The following are replies from very well respected solicitor in this field on the same question posted on a financial adviser questions group, copied here with his permission.

Post 1. ?I would have thought it unlikely that funds would be raised for a hopeless cause.

I spend my life advising clients whether to sue (or defend) or not. It should be remembered that (a) most members of the public fail to make claims they are entitled to make and (b) civil legal actions succeed where the facts justify them.

My experience is that only about 20% of clients who I advise have good cases for significant sums actually take them forward. There is a huge reluctance to go to law, even when fully justified. Press reports of a "compensation culture" just don't reflect reality.

I doubt if a financial adviser, unaided, is qualified to offer a view on this case. I suggest you ask (a) to see the legal opinions supporting the claim, (b) for an estimate of the costs (c) what is the liability for the opposition costs (d) what is the benefit to be gained (e) who is having the conduct of this enterprise. The reputation of the solicitors and counsel will be a factor in the decision.

Personally, I would have regarded the takeover of HBOS as highly suspect. On what little I know from press reports, if there are defendants able to pay (another big question), and all other factors I have mentioned are favourable, I would go for it. ?

Post 2. Further to my posting yesterday, I have now been asked to advise on this. I read the flyer, and looked at the website.
I advised as follows:-

The flyer is short on detail. The website is more informative.
The solicitors concerned (Winckworth Sherwoods) are respectable and long established.

The counsel who are said to have advised favourably are not clearly identified, and I would prefer to know this.

The professional team put together looks competent and carefully organised overall.

I advised the following enquiries to be made
Is the contribution asked for a once and for all payment?
How is the adverse costs risk catered for?
Who is the counsel who has advised - is his opinion (or a précis) available to read?

Subject to that I said this looks like a reasonable investment.

[makethempay]

Dear shareholders,
I reply on behalf of Lloyds Action Now to the above question.

First I commend you to the FAQ section at www.lloydsactionnow.com.

It has been suggested that the sum of £270 plus 3.6p per share is too high a fee to require. This is, with great respect, not so.

Let us consider what the money collected is used for.

First there are legal formalities to be complied with. Your registration and agreement has to be properly administered; issues of anti money laundering dealt with and “Know your Client” requirements fulfilled. These are all legal requirements.

This campaign is being administered professionally, by professionals and unless this is done there is absolutely no prospect of being able to take this case to completion. The defendants will attack us on form in preference to substance and unless the administration is properly done even thinking about starting a case is a waste of time.
This is not a simple claim. We have had to work long and hard to make the progress that we have made. We have engaged specialist counsel and solicitors and to date LAN has incurred in excess of £700,000 on legal expenses. In addition expert witnesses have been engaged and have had to be paid for their advice.
Recruitments costs have been incurred with about 500,000 letters and printed material being sent out.

We are thus now able to say that most of the LTSB shareholders who had in excess of 1,000 LTSB shares has been sent a letter informing them about the case. This is important for the reasons set out below.

However, in addition to making payments to “suppliers” LAN has had to build up a “fighting fund”. We have to have enough money in cash (from contributions paid by members) or from insurance and/or funding to be able to settle any adverse costs orders that might arise. A significant sum therefore has to be collected so that LAN is able to ensure that, if we fight and lose, no member of LAN is exposed to costs risks.

The sum of £40 suggested as a joining fee would be a complete waste of time. It would produce no result and would only get those who paid it into trouble because if the case is lost and adverse costs are ordered every member will be jointly and severally liable for all of the costs. If each member were to contribute only £40 there would simply not be enough money to cover this risk and the defendants would be aware of this weakness and be able to force LAN to spend as much money as possible on costs thereby putting all members at risk personally and individually for all of the costs. That would be the end of the case.
LAN has therefore had to determine as best it can what sum each member should pay.

This is a balancing act between:-
1. how much money LAN itself has to spend on lawyers, experts, administration etc;

2. what the possible adverse costs risk is in case we lose the case;

3. how many shareholders join LAN; and

4. what the size of their shareholding is.

Compensation will be based on how many LTSB shares were held on merger (in simple terms) and thus those with many shares will be paid more than those with less; therefore the per share fee of 3.6p per share. Those with large shareholding pay more but stand to be paid more. It is a fair and reasonable structure.

Consider for a moment what anyone seeking legal advice, from top lawyers, could expect to get for a sum of £40. The answer is nothing of any use whatsoever. However by paying a joining fee of £270 and the per share fee of 3.6p a shareholder (by way of example) with 10,000 shares would pay an additional £360 (a total thus of £630), benefit from hundreds of thousands of Pounds of legal and expert advice, have their membership properly administered, checked and verified, and be protected against adverse costs risks. In return the member (with 10,000 shares) might receive compensation of about £28,000.

LAN, an association of LTSB shareholders that makes no profit, understands that it is an attractive proposition to suggest that a nominal payment would suffice but, with great respect, that is naive in the extreme.

Whether shareholders join LAN or not is a matter for them. They have been given notice of the claim and have been offered the opportunity of bringing a claim alongside many other shareholders. If they chose not to join LAN we will not advance any claims for them. If we mediate to see if a settlement can be reached between the parties we can and will only represent fully paid up LAN members.

We will have to send the defendants a list of every shareholder to whom we have sent letters and if we were successful in litigation and those who did not join seek to make a claim based on our success they will most likely have to face the consequences of being told by the court that as they had the opportunity of making a claim for a modest sum and because a multiplicity of actions cannot be permitted, they will be punished in costs – even if they are successful. In any event to make a claim as an individual would cost much more than it costs collectively on the basis of what LAN is offering.

We firmly believe that LTSB shareholders were misled and are entitled to be compensated.

In 2008 the world banking system was in trouble and banks were in serious trouble, none more so than HBoS and RBS. The government had announced special liquidity measures that all banks could access.

In addition though the Bank of England advanced £25.4 bn to HBoS by way of secret Emergency Liquidity Assistance (ELA). This was a signal that HBoS was in very, very serious trouble financially. ELA is different to the other liquidity measures being used by all banks at the time. ELA signals bankruptcy unless a loan of last resort is made. In 2007 when Northern Rock was reported to have been given ELA there was a run on the bank. Depositors demanded their money and over £4bn was withdrawn overnight.

So BoE granted ELA in complete secrecy. What’s more we believe and have been advised by specialist counsel that the ELA given constituted illegal state aid and gives rise to entitlement to compensation.

But that was not all; only a couple of weeks ago did we find out that even the USA Federal Reserve had secretly loaned HBoS US$11bn and we have asked Lloyds TSB directors to admit or deny that LTSB secretly loaned HBoS another £10bn.

LTSB shareholders were not told about any of this. Nor were the courts. We were not told about it until after we had been asked to commit to two rights issues to pump more money into Lloyds – and then we were not told about the FED loan of $11bn.

We feel aggrieved; we have been advised that our claims have merit and we intend to assert and make these claims.

We offer the opportunity to all LTSB shareholders to make claims alongside other LAN members but whether they join or not is up to them; if they chose not to join we will not make any attempt to get compensation for them.

Lloyds Action Now

[makethempay]

Dear Shareholders,

The question was asked about who are engaged as counsel.

Misrepresentation claim - Brian Doctor QC (Fountain Court Chambers) and Johan du Toit SC (Selborne Chambers)

Illegal State Aid claim - Conor Quigley QC (Serle Chambers) and Johan du Toit SC

EU Convention on Human Rights violation claim - Prof Dr Hans-Heiner Keuhne (Universities of Trier, Strassbourg, Westminster, Istanbul ao) and Johan du Toit SC.

[makethempay]

Dear Shareholders,

Yes. The payment of the Initial Joing Fee and the 3.6p per share is the only payment that will be sought.

No further payment will be sought.

If so many shareholders join that we have a surplus of cash we will refund pro rata to what was paid.

If not enough join we will take up an offer of funding where the funder pays and assumes the cost risk for a contingency percentage.

Proceedings will NOT be issued unless and until we have enough money in cash and/or funding and/or ATE litigation risk insurance.

Membership grows and we are hopefull of persuading the defendants to attempt to resolve the dispute by mediation.

If mediation is agreed we will close membership.