Hotel group in £118m lawsuit against Lloyds over alleged mistreatment

Luxury chain Macdonald Hotels is suing the Scottish subsidiary of Lloyds Bank, claiming it was “seriously wronged’ by the lender, which resulted in it losing out on millions of pounds.

Chairman and founder Donald Macdonald issued legal proceedings against the Bank of Scotland, now part of the Lloyds Banking Group, in May 2023.

Macdonald was also a non-executive director of Lloyds TSB Scotland, now TSB Bank, from 2003 until 2013, but was never a director of Bank of Scotland.

The claim alleges the group was forced to sell several hotels at below-market rates following pressure from the bank to reduce its borrowings.

The case, which has since been re-amended, focuses on the sale of The Randolph Hotel, The Old England Hotel, The Marine Hotel and Botley Park.

According to court filings seen by City AM, it is alleged that Bank of Scotland “forced” the group into the transactions to dispose of “prime assets and therefore diminishing the value of the businesses”.

The Bank of Scotland has been a subsidiary of Lloyds Banking Group since 19 January 2009, when it was acquired by Lloyds TSB, following the recession.

The claim stated that the bank commenced a strategy after the merger of “aggressively reducing the size of its commercial loan book”, including by requiring borrowers, such as the group, “to pay down debt by selling assets”.

For the group, it alleges that the bank “single-mindedly pursued this deleverage strategy in its own interests with a reckless disregard for the foreseeable and permanent damage it would and did cause to the value of their company’s business.”

Macdonald’s lawyers at Enyo Law claim that the company has suffered losses of between £101.9m and £118.5m, plus interest.

While the bank’s lawyers at Herbert Smith Freehills stated that the Bank of Scotland “did not act in breach of duty as alleged or at all”.

It added that in any event, as regards the alleged losses in respect of Botley Park, it is averred that any such losses would be “too remote to be recoverable in damages” from the bank.

This case proceeds to trial at the Rolls Building of the High Court tomorrow, which will run for six or seven weeks.

A spokesperson for Macdonald Hotels said: “Macdonald Hotels Ltd believes that it has been seriously wronged by Lloyds Bank since it took over The Bank of Scotland in 2009. It is enormously regrettable that we were left with no option other than to start proceedings on 25 October 2017 and ultimately trust this matter to the court in the forthcoming trial.”

While, a Lloyds Banking Group spokesperson said: “We do not believe that the claim has any merit, and dispute Macdonald Hotels Limited’s claim.”