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Lloyds appeals against £3.5m Foundation funding ruling

Mary Craig, CEO, Lloyds TSB Foundation for Scotland
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Lloyds appeals against £3.5m Foundation funding ruling

Finance | Jonathan Last | 14 Feb 2012

The Lloyds Banking Group has confirmed that it is appealing to London’s Supreme Court against the judgment ordering it to pay £3.5m to the Lloyds TSB Foundation for Scotland.

The Foundation originally lost a court battle over the same amount last year – after it received £38,920 from its main benefactor for 2010, significantly less than it believed it was owed from the Banking Group – but that decision was later rescinded on appeal. Now the Group is fighting against that ruling.

Under the terms of a covenant, the Foundation is entitled to a share of one per cent of Lloyds Banking Group's pre-tax profits on an annual basis. The Group’s argument for paying out the lesser sum was that due to its merger with Halifax Bank of Scotland its accounts included £11.2bn of ineligible ‘negative goodwill’*, leaving no actual pre-tax profit for the Foundation to take a percentage of.

Lloyds TSB Foundation for Scotland has called the move “ill-judged, oppressive and unnecessary”, and has urged its benefactor to rethink the decision.

Speaking after hearing the news, Mary Craig OBE, chief executive of the Foundation, said: “To have had a judgement in favour of our position with regard to the monies due to the Foundation from Lloyds Banking Group only to have them appeal at this late stage is extremely disappointing. Charities have had their hopes raised that we would be back in funds this year and this decision puts paid to that.

“Questions must now be asked as to why a major institution of its size, owned in part by the taxpayer, feels the need to pursue a charitable organisation in this way. Three judges ruled unequivocally in favour of the Foundation at the end of 2011. Despite that, today we now find ourselves back in limbo as Lloyds Banking Group seeks to tie us up in court action for at least another year, with additional legal costs and more time wasting.

“But worse still, this shameful turn of events means that monies due to us will be held back for a third year until this further appeal is heard and decided – and that is money we should be awarding to Scotland’s hard-pressed charities, now and in the future.”

The Supreme Court has yet to announce when it will hear this latest appeal case.

*Negative goodwill occurs when the price paid for an acquisition is less than the fair value of its net assets.

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