Lloyds TSB Foundation for Scotland begins legal action
Andy Ricketts, Third Sector Online
The charitable body claims its covenant with Lloyds Banking Group should have yielded funding of more than £3.5m in 2010 rather than £38,920
The Lloyds TSB Foundation for Scotland has started legal action to recover about £3.5m it claims it is owed by the Lloyds Banking Group.
The foundation has been in a long-running dispute with the banking group over its decision to cut the percentage of profits it gives to the four UK foundations because of the massive losses filed by the group after the banking collapse in 2008.
The Foundation for Scotland was unable to agree a new funding settlement with the group and was told in February that it would not receive any more funding from the bank once the existing covenant expired in nine years’ time.
The foundation announced yesterday that it had filed a complaint with the Court of Session because it said the group had changed the way it interpreted the covenant between the two organisations.
The foundation received £38,920 for 2010 under the agreement but says it should have been given more than £3.5m.
Mary Craig, chief executive of Lloyds TSB Foundation for Scotland, said the group had come up with a new way of interpreting the covenant calculation to "their distinct advantage and our significant disadvantage".
Craig said: "Despite the fact that they should use their publicly stated statutory pre-tax profits of £1.042bn for the last financial year as the basis of the calculation, they haven’t. Instead, they have tried to interpret the covenant calculation in a way that means they are only liable to pay us the de minimis amount this year."
A spokesman for Lloyds Banking Group said he disagreed with the foundation’s interpretation but said it would be inappropriate to comment further on the litigation.
"We proposed a solution earlier this year that would have provided substantial funding and long-term support for Scotland’s charities at a time of great uncertainty for the third sector, but this was rejected by the Lloyds TSB Foundation for Scotland," he said.