Bank’s £8m for ex-Farepak customers as it faces up to ‘moral responsibilities’
Last updated at 16:58, Friday, 13 July 2012
There could be some further relief for Cumbrians who were caught up in the collapse of Christmas hamper company Farepak.
Savers from the county were among those hit when the business went under – throwing their plans for paying for the festive season into chaos.
Now a bank has decided to make £8 million available to help former customers of Farepak after a judge suggested it should look to its morals.
Mr Justice Peter Smith had pointed the finger at Farepak’s bankers during a hearing at the High Court in London.
HBOS defended its actions last month after the judge accused it of taking a “hardball approach” and suggested the bank should “seriously consider” adding to the £2m it put into a distress fund in 2006 for Farepak’s customers.
HBOS is now part of Lloyds Banking Group, which said it has chosen to make an ex-gratia payment of £8m “in the light of recent comments from Mr Justice Smith”.
It said it emphasised that HBOS acted legally, but said the group had “wider responsibilities” to the community as well as legal and financial obligations.
Their move was welcomed by Business Secretary Vince Cable.
He said: “This increased compensation will go some way in helping those who were left considerably out of pocket by Farepak’s collapse.”
In a statement, Lloyds Banking Group said it was working to ensure that the extra money goes directly to customers.
It added: “While HBOS acted legally in its dealing with the company, as the judge himself acknowledged, we are mindful that, in acquiring HBOS in 2009, the Group took on not only its legal and financial obligations, but also wider responsibilities.
“We have a crucial role to play in supporting business and the communities in which we operate.
“In making our decision we have looked carefully at the very specific circumstances surrounding the failure of Farepak and the economic and social impact resulting from it.”
The bank said last month that its staff “acted entirely appropriately” throughout its relationship with Farepak’s parent company, European Home Retail plc, which also went into administration.
The judge spoke at a hearing in London after a Government companies’ watchdog abandoned attempts to penalise former Farepak bosses by having them barred from being company directors.
Lawyers representing the Insolvency Service – part of the department headed by Mr Cable – halted litigation after “consideration of evidence” was given.
The court heard that following the collapse, claims by customers and “agents” against Farepak amounted to about £37m.
Mr Justice Smith said in court that: “It is striking that during the whole of the period it appears, in rough and ready terms, that further investment from the bank of between £3m to £5m would have probably saved the group, but HBOS was not prepared to make it.
“It, of course, was perfectly entitled to do what it did and to continue to require the company to collect deposits, knowing full well that those depositors would not get their money back if the companies went into insolvency and knowing full well that those deposits would have benefited the bank alone.
“This is of course, in my view, completely contrary to the way in which these defendants [former Farepak bosses] conducted themselves. They did everything, as far as I can see, possible to save the group.”
In 2008, the Government pumped billions into a number of banks, including HBOS, to prevent a financial sector collapse in the wake of an economic crisis.
The judge added: “It is ironic that if the bank’s reputation for playing hardball had been repeated by the Government... HBOS would not be here and that is something else that HBOS might like to think about.”
Richard Highley, who represents former bosses at Farepak, said last month that the judge’s analysis of the firm’s downfall six years ago was a “total vindication” of directors’ conduct.
First published at 14:05, Friday, 13 July 2012
Published by http://www.cumberlandnews.co.uk
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