HBOS faces £77m US court action

BRITAIN'S fourth-biggest bank, HBOS, is being hauled before the US courts today to fend off a claim from more than 55,000 account holders who allege they have been cheated out of shares worth £77m.

In an unprecedented class action, tens of thousands of overseas-based Halifax account holders are claiming that the former building society cheated them out of an offer of free shares when Halifax demutualised and became a bank in June 1997.

It merged with Bank of Scotland in 2001 in a £28bn deal to form HBOS, with Halifax chairman Lord Stevenson taking up the same role in the combined group.

Both Halifax and HBOS are named in the suit, led by Californian-based lawyers Lerach Coughlin Stoia & Robbins, America's biggest class-action specialists.

Halifax offered 200 free shares in the bank to all of its account holders as part of the incentive to vote in favour of demutualisation, but the lawsuit alleges the transfer document and various 'fraudulent' mailouts misled non-UK-based clients about their rights to receive stock.

Those Halifax shares converted into the same number of HBOS shares when the bank merged with BoS, meaning the 55,000 overseas Halifax account holders reckon they are owed a combined £77m based on the current price of HBOS stock.

The action is also asking for a jury trial which, if successful, could mean punitive damages against the bank increase the final bill by tenfold.

Mark Solomon, at Lerach Coughlin, said: 'Stevenson enjoys a reputation of integrity and of being one who likes to do the right thing, but has been sadly lacking in this case.

'There has been no effort whatsoever to pay claims in the class action except for an unusual flurry of claims which have settled in the various small-claim courts throughout England since the US action was filed last June.'

HBOS has hired Wall Street legal giant Sullivan & Cromwell to fight its corner in the New Jersey Superior Court, claiming the case should be thrown out for coming under the wrong jurisdiction.

The bank also said: 'The plaintiffs' principal point is apparently that they were not encouraged by Halifax to submit a false address in the UK in order to pretend that they qualified for free shares.'

The lawsuit was filed in June last year on the last day possible under America's six-year cut-off rule for launching claims, shortly after initial plans to start a UK group action co-ordinated by Stephen Alexander, of Marble Arch firm Class Law, were shelved.