BSC calls Lloyds payments illegal

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The Independent Online
THE BUILDING Societies Commission yesterday condemned the pounds 1.8bn cash payments proposed by Lloyds Bank to Cheltenham & Gloucester Building Society members as illegal, in the final day of the High Court hearing into the takeover, writes John Willcock.

Judgment will be handed down on Friday at the earliest, said the Vice Chancellor, Sir Donald Nicholls. It may be several weeks before it appears.

C&G brought the case against the BSC after the commission refused to sanction the Lloyds takeover.

Philip Heslop QC, for the BSC, said the payments, which would average about pounds 2,100 for each C&G member, fell foul of the 1986 Building Societies Act because they would be made by a third party rather than by the society.

The BSC claims that when the C&G's business is transferred to another body only the society may make such payments, since these are the only ones outlined by the Act.

On Tuesday, the first day of the hearing, counsel for C&G argued that because a process was not outlined by legislation did not mean that it was prohibited.

If the court gives the go- ahead to Lloyds, building societies may feel under pressure to merge or seek a buyer. If the Vice Chancellor upholds the BSC's position Lloyds will be forced to put together a new deal or withdraw.