(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 accounting practice changed requiring the unrealised gain to be moved into the profit and loss accounts. The Foundation appealed against rejection of its claim to a payment based on the published accounts.
Held: The appeal succeeded. Though the deed was charitable, its commercial context required that it be construed as a commercial document. Though the particular change in standards could not have been foreseen, changes had been, and indeed the parties had already executed one deed of variation to cater for such.
The deed referred to the group profit as shown in the audited accounts: ‘the relevant reasonable person would address how the parties had chosen to formulate the obligation in question. He would see that they had selected in clause 2(1)(a) a precise percentage of ‘Pre-Tax Profits’ as the amount to be paid for each Accounting Reference Period. He would also see that ‘Pre-Tax Profit’ was defined as ‘group profit before taxation’ (that expression appearing in the definition in inverted commas) shown in the Audited Accounts’ and would not be expected then to carry outfurther adjustments.
Judges:
Lord President, Lord Carloway, Lord Kingarth
Citations:
[2011] ScotCS CSIH – 87, 2012 GWD 5-81
Links:
Jurisdiction:
Scotland
Citing:
At Outer House – Lloyds 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 . .
Cited by:
At Inner House – 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. . .
Lists of cited by and citing cases may be incomplete.
Contract, Company
Updated: 01 November 2022; Ref: scu.460296
