Lloyds TSB Foundation for Scotland v Lloyds Banking Group Plc: SC 23 Jan 2013

A predecessor bank had created a trust into which it paid a small proportion of its profits. The parties now disputed the calculation of profits when the Bank declared a loss which allowed for an unrealised gain on the acquisition of HBOS. Accounting standards had changed on the introduction of the EC Regulations, which now required any ‘gain on acquisition’ arising from a bargain purchase be recognised on the profit and loss account as of the acquisition date in line with International Financial Reporting Standards requirements. This converted a loss of over andpound;10 billion, to a profit of andpound;1 billion. The Outer House had dimissed the trustees’ claim, granting a decree of absolvitor, but the Inner House allowed the appeal. The bank now appealed.
Held: The appeal succeeded. It was necessary to construe the deed in the legal and accounting context of the time when they were made, when the deeds clearly anticipated reference only to realised gains. The alteration in accounting methods was wholly without the parties anticipations, and would have been rejected at the time.
This led to a frustration of the deed, which was to be resolved by ignoring the unrealised gain shown in the current accounts.
Though the doctrine of equitable adjustment remains part of Scots law and resort may be made to it in cases where the contract has become impossible of performance or otherwise, a Court cannot equitably adjust a contract on the basis that its performance, while not frustrated, is no longer that originally contemplated.

Lord Hope, Deputy President, Lord Mance, Lord Clarke, Lord Reed, Lord Carnwath
[2013] UKSC 3, UKSC 2012/0042
Bailii, Bailii Summary, SC Summary, SC
Companies Act 1985 230(1)
CitedPrenn v Simmonds HL 1971
Backgroun Used to Construe Commercial Contract
Commercial contracts are to be construed in the light of all the background information which could reasonably have been expected to have been available to the parties in order to ascertain what would objectively have been understood to be their . .
CitedCharter Reinsurance Co Ltd v Fagan and Others HL 24-May-1996
The re-insurers appealed against a finding that they were liable to make payment under a contract which required them to pay ‘sums actually paid.’ They said that the company having become insolvent, no payment would in fact be made.
Held: The . .
CitedBromarin Ab and Another v IMD Investments Limited CA 29-Jan-1999
Construction of share purchase agreements. . .
CitedCantiere San Rocco Sa v Clyde Shipbuilding and Engineering Co SCS 20-Jul-1922
The pursuers maintained that, in consequence of the contract having become incapable of fulfilment, they were entitled to recover the money paid by them to the defenders in terms of the contract. The defenders contended that rights acquired under . .
CitedShilliday v Smith SCS 2-Apr-1998
The phrase ‘causa data causa non secuta’ is used not to describe a remedy as such, but rather to describe one particular group of situations in which the law may provide a remedy because one party is unjustifiably enriched at the expense of the . .
CitedBank of Credit and Commerce International SA v Ali, Khan and others (No 1); BCCI v Ali HL 1-Mar-2001
Cere Needed Releasing Future Claims
A compromise agreement which appeared to claim to settle all outstanding claims between the employee and employer, did not prevent the employee later claiming for stigma losses where, at the time of the agreement, the circumstances which might lead . .
CitedDebenhams Retail Plc and Another v Sun Alliance and London Assurance Company Ltd CA 20-Jul-2005
The landlord appealed against a decision that VAT was not to be included when calculating a rent based upon the turnover in the premises, when it had been expressed to include purchase taxes.
Held: The appeal succeeded: ‘it would be wrong to . .
At Inner HouseLloyds TSB Foundation for Scotland v Lloyds Banking Group Plc SCS 29-Dec-2011
(Inner House) The bank had created a trust deed providing for a share of realised profits to be paid each year to the pursuer charitable foundation. The bank had acquired another bank leading to a substantial but unrealised gain. Regulations on . .
At Outer HouseLloyds TSB Foundation for Scotland v Lloyds Banking Group Plc SCS 17-Jun-2011
(Outer House) The bank had covenanted to provide a certain proportion of its profits to the pursuer charitable foundation. The bank had acquired another at an accounting loss, but in 2005, a change in accounting standards turned that substantial . .

Lists of cited by and citing cases may be incomplete.

Trusts, Company

Leading Case

Updated: 01 November 2021; Ref: scu.470522