The Lloyds TSB Foundation for Scotland has won £3.5m from the Lloyds Banking Group after successfully appealing against an earlier court judgment.

Last June the charity failed to convince the Court of Session in Edinburgh that its principle benefactor, the Lloyds Banking Group, owed it a percentage of its £1bn pre-tax profits.

The Foundation received £38,920 for 2010 but said it should have received more than £3.5m.

The Banking Group had argued that because of the merger of Lloyds with Halifax Bank of Scotland, the accounts included £11.2bn for ‘negative goodwill’* which should not be counted, and so there was no pre-tax profit to take a percentage of.

The court agreed but the charity’s trustees refused to let the case rest and appealed to a higher court. At the end of last year the appeal judges overturned the decision and ordered the Bank to pay the Foundation more than £3.5m.

However, the matter may not end there. A spokeswoman for the Lloyds Banking Group said it was disappointed with the judgment and was considering whether to appeal.

Mary Craig (pictured), chief executive of the Lloyds TSB Foundation for Scotland, paid tribute to her trustees for being bold enough to appeal. She added: “But more importantly, this is great news for Scotland’s hard-pressed charities at a time when many are struggling.”

A spokesman added that the judgment also set a precedent for future payments to the Foundation, because "the kernel of the appeal was really about how the Banking Group chose to interpret the covenant".

"Having established that their interpretation was wrong, a precedent has now been set for how the covenant will be interpreted in future years.

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