John Michael Sharp and the other Claimants listed in the GLO Register v Sir Maurice Victor Blank
| Jurisdiction | England & Wales |
| Judge | Sir Alastair Norris |
| Judgment Date | 15 November 2019 |
| Neutral Citation | [2019] EWHC 3096 (Ch) |
| Court | Chancery Division |
| Docket Number | Case Nos: HC-2014-002092 HC-2014-001387 HC-2014-001388 HC-2014-001389 HC-2015-000103 HC-2015-000105 |
| Date | 15 November 2019 |
[2019] EWHC 3096 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Sir Alastair Norris
Case Nos: HC-2014-002092
HC-2014-001010
HC-2014-001387
HC-2014-001388
HC-2014-001389
HC-2015-000103
HC-2015-000105
Richard Hill QC, Sebastian Isaac, Jack Rivett and Lara Hassell-Hart (instructed by Harcus Sinclair UK Limited) for the Claimants
Helen Davies QC, Tony Singla and Kyle Lawson (instructed by Herbert Smith Freehills LLP) for the Defendants
Hearing dates: 17–20, 23–27, 30–31 October 2017; 1–2, 6–9, 13–17,20, 22–23, 27, 29–30 November 2017, 1, 11–15, 18–21 December 2017, 12, 16–19, 22–26, 29–31 January 2018, 1–2, 5–6, 8, 28 February 2018, 1–2 and 5 March 2018
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
INDEX:
| The task in hand | 1 |
| The landscape in broad strokes | 8 |
| The claim in outline . | 29 |
| The legal basis for the claim | 41 |
| The factual witnesses . | 43 |
| The expert witnesses | 59 |
| The facts: the emerging financial crisis before the summer of 2008 | 76 |
| Initial discussions on an acquisition in Summer 2008 | 91 |
| Initial discussions: emerging themes | 101 |
| The sudden turn of events | 127 |
| Assessing the proposed transaction following the Lehman's collapse | 135 |
| The settlement of terms | 157 |
| Due diligence continues | 161 |
| The offer | 164 |
| The Announcement | 184 |
| Key external events following the Announcement | 192 |
| Key internal events following the Announcement and preceding the recapitalisation | 199 |
| Interbank dealings | 200 |
| Due diligence | 254 |
| Government support for Lloyds and HBOS | 275 |
| Knowledge of ELA | 294 |
| The Recapitalisation | 306 |
| The Revised Announcement | 338 |
| Key external events following the Revised Announcement and before 29 October 2008 | 362 |
| Key internal events following the Revised Announcement down to (and just after) the 24 October 2008 Board meeting | 389 |
| The Board Meeting on 24 October 2008 | 416 |
| Events between the Board Meetings of 24 and 29 October 2008 . | 434 |
| The Board Meeting of 29 October 2008 | 472 |
| Events of 31 October 2008 | 505 |
| A digression: a Scottish counterbid | 506 |
| The Circular | 513 |
| The “Away-day” | 541 |
| Events before the EGM | 547 |
| The Extraordinary General Meeting | 552 |
| The descending gloom | 560 |
| The board meeting of 13 February 2009 | 585 |
| Further capital raising | 595 |
| Two other streams | 605 |
| A retrospective | 608 |
| The recommendation case: the pleaded case | 611 |
| The recommendation case: the law | 617 |
| The recommendation case: key holding | 661 |
| The recommendation case: opinion evidence | 664 |
| The recommendation case: the “irrationality” argument | 671 |
| The recommendation case: absence of value | 679 |
| The recommendation case: inadequate due diligence | 693 |
| The recommendation case: impairments | 699 |
| The recommendation case: funding | 747 |
| The recommendation case: restructuring | 751 |
| The recommendation case: the “standalone” comparator | 761 |
| The recommendation case: a summing up | 764 |
| The disclosure case: main themes | 767 |
| The issue before the shareholders . | 782 |
| The allegations made | 784 |
| The relevant core allegations | 792 |
| A beneficial transaction | 794 |
| The £7bn additional capital requirement | 806 |
| The £10bn net negative capital adjustment | 815 |
| The adequacy of working capital | 836 |
| Funding and the ELA | 844 |
| Material contracts | 862 |
| Restructuring | 877 |
| Federal Reserve funding | 880 |
| Breaches of the sufficient information duty | 886 |
| The consequences of not disclosing ELA or the Lloyds Repo | 891 |
| Causation | 893 |
| Termination | 894 |
| Collapse | 900 |
| Rejection | 944 |
| The result | 965 |
| Damages | 967 |
| Remoteness | 970 |
| Overpayment | 973 |
| Diminution | 981 |
The task in hand
This is not the outcome of a public enquiry into the reverse takeover by Lloyds TSB Group plc (“Lloyds”) of HBOS plc (“HBOS”) at the start of the great credit crunch in 2008. It is a judgment following the trial of specific allegations made by a group of Lloyds shareholders (or former shareholders) who seek to make each of five former directors of Lloyds personally liable to pay some £385 million to that group for alleged carelessness or breach of fiduciary duty (or more accurately “equitable” duty). It has not been my task to investigate or to seek to answer all questions that arise from the takeover.
Nor am I required to make an overall assessment of whether in the light of a decade of financial tumult, hesitant recovery and historic claims the takeover was ultimately justified. Some shareholders (especially those who, perhaps because they were members of an employees' share scheme as about 98% of employees were, had put all their eggs in one basket) have emphasised that for them it has been a personal financial catastrophe: and so, it has been. That can only elicit sympathy for the small investor. It has provoked amongst some of those who entrusted their entire nest-egg to an investment in Lloyds a level of distress such that it caused one retired clergymen to write to the Chairman of Lloyds and say in as Christian terms as was possible, that the Chairman was a mountebank and a blaggard. Members of Lloyds' management have, on the other hand, emphasised that what has emerged from the turmoil is the largest and best capitalised bank on the High Street, notwithstanding the enormous challenges subsequently presented by at least £18bn-worth (and continuing) of claims arising from PPI miss-selling and other such activities (which activities themselves had produced the high dividends which made shares in Lloyds so attractive to investors like the Claimants before 2008). But even management must (and does) acknowledge that matters did not turn out as intended because the bank faced “things that were unanticipated but which the real world delivered” (as Mr Truett Tate put it during the trial).
Knowing what has happened is, of course, a positive disadvantage when trying to assess activities undertaken and assessments made in 2008: and the legal representatives of the Claimants have done their best to avoid the perils of hindsight. But it is right to articulate what the dangers are, and how different is the process of retrospective forensic examination from that of the actual contemporaneous decision-making in the real world.
In the courtroom attention is focused upon one element of a complex picture. Emphasis is placed upon particular voices in what was at the time a cacophony competing for attention. Reliance is placed upon a careful selection from amongst those documents that have survived and from amongst the conversations and debates that are noted or recorded (for the unrecorded maybe forgotten or misremembered). Those documents themselves may not disclose the nuances apparent to the contemporary recipient, and are now read and understood in the light of knowledge that the actual recipient lacked at the time. The mere existence of a document frequently does not establish who saw it and in what circumstances so that one cannot tell whether the scrutiny and analysis to which it is subjected by the Court process bears any relationship to how it would have been received and treated at the time. The case management process identifies the issues and excludes all that is irrelevant to those issues, whereas real-life is a confusion of competing considerations amongst which the eventually important considerations lie. Recollections are coloured by this process and by the challenges to that process of recall presented by knowing what eventuated: recollection and reconstruction (to the extent that they can ever be separated) become completely undifferentiated. What might have seemed unimportant at the time emerges as significant once the whole narrative is known, and the knowledge of what did in fact occur exerts a subtle pressure to think that at the time it must have been seen as a real possibility. Changes in culture brought about by the response of the market or of the supervisory authorities to the consequences of unfolding events present particular difficulties for retrospective assessments.
It is becoming customary, in commercial cases where the events in question lie (as the events with which I am concerned do) perhaps a decade in the past, as part of a judicial self-direction to compare the apparent reliability of the documentary record with the apparent fallibility of human memory. Reference is frequently made to cases such as Onassis v Vergottis [1968] 2 Ll.Rep 403 and Gestmin SGPS [2013] EWHC 3560, and to the extra-judicial observations of Lord Bingham on the role of the judge as juror. I have endeavoured to give proper weight to that guidance; but have seen it as my obligation to base my findings on the impression that the entirety of the evidence has made upon me, without putting a pre-determined value on any particular element of it. Sometimes it is not easy to explain.
...
To continue reading
Request your trial
-
Anthony John Wright and Geoffrey Paul Rowley (Liquidators of BHS Group Ltd, SHB Realisations Ltd, Davenbush Ltd and Lowland Homes Ltd (All (in Liquidation)) v Dominic Joseph Andrew Chappell
...that he also told them that they needed to find a capital injection or sell the business.” 484 Mr Lightman relied on Sharp v Blank [2019] EWHC 3096 (Ch) where Sir Alastair Norris stated that in general a director who takes and acts upon expert advice “has gone a long way towards performing......
-
The Official Receiver v Sunetra Atkinson
...passage was adopted by Romer J in Re City Equitable Fire Insurance Co. Ltd [1925] Ch 407 at 430 and by Norris J in Sharp v Blank [2019] EWHC 3096 (Ch) at 858 However, the directors' ability to delegate, and more generally to rely on staff members, is subject to qualification. Norris J ref......
-
Henderson & Jones Ltd v David Jason Ross
...functions.” The assessment of reasonableness is a fact sensitive exercise. 408 . According to Sir Alastair Norris in Sharp v Blank [2019] EWHC 3096 (Ch) at [629] in the context of the duty of reasonable skill, care and diligence under s.174(1), “… a director who takes and then acts upon ex......
-
ClientEarth v Shell Plc
...decision falls outside the range of decisions reasonably available to the Directors at the time (see e.g. Sharp v Blank and others [2019] EWHC 3096 (Ch) per Sir Alastair Norris at [631], applying this principle in a case to which the duties codified in CA 2006 apply). I agree with Shell's ......
-
High Court Refuses Permission For Climate-change Activist Shareholder To Bring Derivative Action On Behalf Of Shell Plc Against Its Directors
...the decision falls outside the range of decisions reasonably available to the Directors at the time (as per Sharp v Blank & Ors [2019] EWHC 3096 (Ch)). Relevance of a shareholder's motivation, good and the views of other shareholders. Although the court was considering whether a prima facie......
-
2020 Summer review M&A legal and market developments
...However, these non-disclosures did not cause any loss to the claimants, and so their claims failed. (Sharp & Ors v Blank & Ors [2019] EWHC 3096 (Ch))112020 Summer reviewGood faith A number of recent cases have looked again at contractual duties of good faith and the relationship between con......
-
Reviewing Directors’ Business Judgements: Views from the Field
...Securities International Securities Ltd v. Raven [2013]EWHC 3147 (Comm); Allen v. Bernhard [2019] EWHC 2885 (Ch); Sharp v. Blank[2019] EWHC 3096 (Ch).654© 2020 The Author. Journal of Law and Society © 2020 Cardiff UniversityLaw More thought, as one director put it, that judges did not have ......