lloyds hbos fraud scheme review compensation high court litigation

Lloyds HBOS compensation review scheme: What did HBOS do wrong? HBOS litigation claim?

The Lloyds Banking Group HBOS compensation review scheme is due to reopen following Sir Ross Cranston’s report that Lloyds’ original customer review had ‘serious shortcomings’ while the All-Party Parliamentary Group (“APPG”) have submitted a complaint to the SRA against Herbert Smith Freehills, Lloyds’ legal advisers during the review.

The Lloyds Banking Group HBOS compensation review scheme is due to reopen following Sir Ross Cranston’s report that Lloyds’ original customer review had ‘serious shortcomings’ while the All-Party Parliamentary Group (“APPG”) have submitted a complaint to the SRA against Herbert Smith Freehills, Lloyds’ legal advisers during the review.

What is the HBOS fraud review compensation scheme?

Stated in the submissions as “one of the biggest frauds in English banking history“, the complaint concerns large-scale fraud which took place at Lloyds HBOS Reading branch estimated to have caused losses of around £1 billion.

Six people, including directors of HBOS’ Impaired Assets Division in Reading, were sentenced to jail in January 2017 for defrauding and forcing vulnerable businesses customers into distress between 2003 and 2007 by referring the companies into a restructuring and turnaround unit. This led to excessive fees, charges and debts which the companies could not handle. The solicitors firm, Herbert Smith Freehills (HSF) was instructed by Lloyds to assist with the review of compensation for fraud victims.

This was intended to be an independent review carried out by Professor Russel Griggs. Lloyds denied any liability for fraud and it appeared from the review scheme findings that Lloyds was the only victim of the fraud to have suffered financial loss and that all the business failures and all of the suffering were of Lloyds customers were due to their own making.

Shortcomings in inadequate HBOS review scheme

Following widespread public and Parliamentary concern about the review, a former High Court judge, Sir Ross Cranston investigated and published a report stating that there were “serious shortcomings” in the review process.

Professor Griggs was placed in an impossible position and his appearance of independence was undermined by the way the process was structured.

Were you a victim of the HBOS Reading fraud scheme?

Sir Cranston found that the review process, which involved 1919 victims of the fraud, had been unsatisfactory and this has led to Lloyds being forced to set up another review (to be carried out under former High Court Judges Sir David Foskett or Dame Linda Dobbs) to examine the extent to which it may itself be said to have covered up the Reading scandal since the time it acquired HBOS.

Sir Cranston has recommended that an independent body (‘the Panel’) be set up to reassess the direct and consequential losses suffered by victims of the HBOS fraud.

HBOS complaint or litigation claim?

If your business was a victim of the HBOS fraud scheme you may be entitled to have your complaint reassessed. Our specialist litigation team (who successfully assisted clients in the FCA IRHP review and RBS GRG complaints process) can be instructed to assist you in the review once the Panel has published its methodology and procedure.

The legal basis for claims is as follows:

  1. Breach of contractual terms specific to each case;
  2. Breach of an implied duty of good faith whereby contracting parties have a duty of good faith under which they are obliged to treat each other honestly and responsibly;
  3. Breach of fiduciary duties by directors including where the bank forces appointment of a director or otherwise acts as shadow director;
  4. Unlawful means conspiracy where two or more parties agree to use unlawful means to injure the business customer causing the business damage;
  5. Misrepresentation where HBOS make a false statement of fact to a customer, which induces the customer to enter into a contract;
  6. Negligence in the form of a failure to treat HBOS customers with proper care and attention.

Victims of HBOS should consider legal action promptly on their specific cases.  If businesses fail to do so then their legal rights will become time-barred by the Limitation Act 1980, resulting in the complete loss of any legal right to compensation.

Legal rights can be preserved by urgently instructing solicitors to agree a carefully negotiated standstill agreement or by issuing protective legal proceedings.

Protecting Legal Rights against Lloyds HBOS

It is an absolute must that victims of Lloyds HBOS or other bank’s support units protect their legal rights.  This is a sensible course of action when a business is facing a high value dispute with a major bank.  If the bank refuses to offer reasonable redress following a complaints process, customers may well find they are time-barred from commencing legal action and their high value claim is now worthless.

Legal rights can be protected by taking urgent legal advice and by instructing specialist HBOS solicitors to issue a protective claim form or by instructing HBOS litigation solicitors to prepare and agree a carefully written standstill agreement.

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