The Foskett Panel

Overview

Sir David Foskett has been appointed to chair the independent Re-Review Panel (also known as the Foskett Panel) to reassess the direct and consequential (‘D & C’) losses suffered by victims of the fraud committed at the ‘HBOS Impaired Assets unit based at Reading and Bishopsgate (‘IAR’)’. Sir David is joined on the independent Panel by Philippa Hill and Andrew Hildebrand.

The work of the Panel arises from the conclusions of Sir Ross Cranston’s report, known as ‘The Cranston Review’, published in December 2019. The Cranston Review concluded that the way Lloyds Bank had dealt with D & C claims in its original Customer Review was unsatisfactory and did not achieve the purpose of delivering fair and reasonable offers of compensation. He recommended that the process of assessing direct and consequential losses should be carried out again, but this time in a fair and proper manner. In a second report, published in April 2020, he suggested how the reassessment exercise might be carried out.


The Panel's Scope and Methodology Statement can be found here, and we have published guidance notes entitled ‘IAR Fraud and the Causation of Loss’ and ‘Quantifying D & C losses’.



Update from the Panel – June 2022

Introduction to the changes being made to the Re-review

In our March 2022 update, we highlighted the urgent need to speed up the Re-Review for the benefit of all Customers. We were particularly concerned about Customers who were elderly or unwell having to wait a long time for an assessment of their claim and the length of time that some parts of the process inevitably take.

As we indicated, we convened a series of meetings over the last few months at which the SME Alliance, APPG on Fair Business Banking (‘APPG’) and Lloyds Banking Group (‘LBG’) were invited to consider a range of proposals designed to speed up the Re-Review process and improve the experience for Customers. Some of these meetings were also attended by representatives of the Financial Conduct Authority.

It has taken quite some time, but we are pleased to say agreement has now been reached and that we can announce the key changes, precise details of which will be posted on our website in the coming weeks. The key changes are as follows:

Panel’s interim expedited decision on victim status and limited challenge to that by LBG

Where we are able to conclude that an individual Customer was a victim of the IAR Fraud (as defined here), a ‘Victim Status Decision’ will be issued to that effect. Where we can make such a decision, this will be a new feature in the Re-Review Process and we will not, at this stage, go on to investigate whether the victim also suffered any financial loss as a consequence of the IAR Fraud (or, if so, what the appropriate compensation should be).

Another new feature is that LBG will not be entitled to challenge the merits of the Panel’s decision on Victim Status. LBG will only be permitted to challenge the Victim Status Decision on the basis of an obvious error on the face of the decision itself.

New fixed sum award option for victims of the IAR Fraud

Where we have concluded that a Customer was a victim of the IAR Fraud, that Customer will then be offered the option of:

  1. Exiting the Re-Review at that stage and taking instead a fixed sum award, rather than awaiting our detailed analysis of the financial consequences, if any, on the Customer of the IAR Fraud; or
  2. Remaining in the Re-Review for that detailed analysis to be undertaken.

It is our experience that the analysis of any financial consequences of the IAR Fraud and assessing the appropriate level of compensation have been the most time-consuming parts of the Re-Review process, usually involving (a) consideration of a mass of financial material going back 15-20 years, from which drawing conclusions can often be extremely difficult, and (b) making judgments as to what might have happened in the absence of the fraud.

By accepting the option of the fixed sum award, the Customer will - in addition to avoiding the time it takes to conduct the detailed analysis - also avoid any uncertainty about the eventual financial outcome in their case. That uncertainty is an inherent and unavoidable feature of the Re-Review, as the Customer will only know how much (if anything) they will be awarded at the very end of the Re-Review process in their case when a Final Decision (‘FD’) is issued. Indeed we will not know that until that stage either.

The fixed sum award option will be £3 million, net of any tax payable

This means that, if a Customer accepts this option, the Customer will actually receive £3 million (personally or paid to their estate or trustee if applicable). Any tax payable on receipt of this £3 million will be covered in full by LBG. The sum would be paid shortly after all the relevant formalities (see below) are concluded.

The position of a victim of the IAR Fraud who has been made bankrupt and who chooses the fixed sum award option is more complex and this will the subject of further guidance to be published in due course.

As mentioned above, where a Customer chooses to accept the fixed sum award, no analysis of potential or actual financial losses would be carried out, and no MTD or FD would be produced either.

Acceptance by a Customer of the fixed sum award will be in full and final settlement. It will represent a final and binding conclusion to the issue of any D&C losses arising from the IAR Fraud. There will be no ‘appeal’ process after the fixed sum has been accepted.

As indicated above, this new fixed sum award does not replace a Customer’s current right to have their case considered in the Re-Review process. It is an option meaning that, where we have concluded that the Customer was a victim of the IAR Fraud, the Customer can then choose whether they wish a) to accept the fixed sum award and exit the Re-Review process or b) whether they would prefer instead to remain in the Re-Review process.

If, after we have concluded that a Customer was a victim of the IAR Fraud, the Customer chooses to remain in the Re-Review process, the Customer will then, as is the current position, go on to receive a MTD after we have completed all the work necessary to formulate our decision.

The MTD will then, as it does currently, deal with the question of:

  1. Whether the Customer suffered any financial loss in consequence of the IAR Fraud; and, if so
  2. The appropriate level of compensation (which may be more or less than the £3 million fixed sum award).

The Customer can then challenge the MTD in the normal way. LBG can also challenge the MTD in the normal way except as regards the issue of victim status, as explained above.

Please note that the fixed sum award option is a ‘one time only’ option. Once a Customer has made their decision, they cannot revisit it later.

That means, for instance, that a Customer cannot accept the fixed sum award and then change their mind at a later date or, alternatively, decline the fixed sum award and then change their mind later, such as after the Customer has received a MTD or a FD.

One month ‘Option Window’

Where we have concluded that a Customer was a victim of the IAR Fraud, the Customer will then have a one-month ‘Option Window’ from receiving the Victim Status Decision in which to notify us whether:

  1. They want to accept the fixed sum award; or
  2. They want to have their case considered further in the Re-Review process instead.

If there are exceptional circumstances that a Customer feels will prevent them from making this decision within the Option Window it will be open to the Customer to ask us to extend this period.

Independent support will be made available to Customers who are offered the fixed sum award option

One reason we have been anxious to announce in advance the availability of this option for Customers assessed to have been victims of the IAR Fraud is to give Customers who believe they are likely to fall into this category the opportunity to start considering now whether the fixed sum award option might or might not be attractive to them if they are offered it in due course.

During the Option Window, the Customer will, if they would like it, be entitled to receive additional independent professional support to help them make this decision. This will be provided at no cost to the Customer. That person will likely be an experienced independent mediator or facilitator who can spend time with the Customer, advisers and, if they want, their close family to help them address the important factors from their own perspective. Reasonable funding will also be available for both an independent financial adviser to help Customers assess their personal financial situation and for legal advice on the binding agreement that will need to be signed if the Customer chooses the fixed sum award. More details about this will be provided in due course.

Interim payments for Customers who opt to remain in the Re-Review

For Customers who decide to remain in the Re-Review, the following increased interim payments will now be available:

  • £250,000 (net of any tax payable) if we have concluded that the Customer was a victim. This payment is non-refundable, but will be set off against any final award; and
  • Where we have concluded in a MTD that losses were suffered by the Customer as a result of the IAR Fraud, a sum will then be promptly payable on the issue of the MTD. This sum will be 40% of the amount provisionally awarded in the MTD (as opposed to the current maximum interim payment available of 20%, which is only available in certain circumstances). This 40% sum will be set off against the final award.

Speeding up MTDs and professional assistance for Customers in the Re-Review

In order to reduce the time a Customer in the Re-Review has to wait to receive an MTD, some limitations will now be placed on the funding for professional support for Customers (legal and financial) during the information-gathering stage of the Re-Review in the run up to the MTD. This change is to avoid some of the duplication of work and some of the delays that we have experienced in dealing with cases so far. As is already the case, a Customer in the Re-Review process will continue to have a full opportunity to challenge a MTD as recommended by Sir Ross Cranston, with reasonable funding underwritten by LBG continuing to be available at that stage, for professional support if the Customer requires it.

Customers in the Re-Review will be entitled to an automatic pre-approved limit of £15,000 (excluding VAT) of funding for professional fees without the need to apply to Peter Hurst (‘PTH’). Any professional fees likely to be incurred above this £15,000 limit will continue to require his prior approval before being incurred in order for that additional funding to be granted.

This website has been updated to explain the changes to funding for professional fees and a copy of the updated policy and guidance note for Customers and their advisers can be found here.

The Bank will continue to pay Compensatory Interest post-MTD on Customer losses that have not been compensated through an interim payment, but a time limit will now ordinarily be imposed to encourage Customers and their advisers to assist us in issuing our FD as quickly as possible. This is for the benefit of all Customers in the Re-review.

Further details of the updated policy will be published in due course.

Cases currently under consideration

We would like to reassure those actively engaged with the Re-Review, whose cases are currently being considered by us, that this work is continuing, as well as preparatory work on other cases.

We will be contacting each Customer whose case is currently being considered to explain the transitional arrangements.

PTH will contact those Customers whose fees application is in progress to explain the position as regards the funding for their case. We would be grateful for your continued patience and forbearance while we contact all affected Customers.

We will ensure that Customers who have been through, or are currently going through, the Re-Review will not be disadvantaged by the changes.

Summary of key changes

  • In each case where the Panel conclude the Customer was a victim of the IAR Fraud for D&C loss purposes, the Panel will issue a Victim Status Decision. The Victim Status Decision will not include an assessment as to whether any financial losses were suffered.
  • LBG will not challenge the merits of the Panel’s conclusion that a Customer was a victim of the IAR Fraud.
  • A Customer concluded to have been a victim of the IAR Fraud will then have a choice between:
    1. accepting a fixed sum award of £3 million (net of all tax payable) in full and final settlement of any losses they may have suffered, and exiting the Re-review; OR
    2. continuing instead with the Re-Review and receiving a non-refundable interim payment of £250,000 (net of tax) while we then go on to assess whether the Customer has suffered any losses and to produce our MTD.
  • Where we have concluded, in our MTD, that losses were suffered by a Customer as a result of the IAR Fraud, an increased interim payment of 40% of the award proposed in the MTD will then be promptly paid to the Customer.
  • The period during which the Bank will pay Compensatory Interest on the losses not already paid out by way of an interim payment will now be limited.
  • Funding for professional assistance pre-MTD will now be more restricted. However, up to £15,000 (excluding VAT) per Customer of costs for professional fees in the Re-Review will be funded without any need for prior approval from PTH.
  • Customers whose cases or fee applications are currently in progress will be contacted directly to explain the transitional arrangements.
  • We will publish on our website full details of these changes to the Re-Review in the coming weeks.

Conclusion

If you have questions or concerns about these changes, we encourage you to contact the Customer representative groups – the SME Alliance and the APPG – who support these changes.

We will not be able to provide more information about the changes before publication of the full details. We can, however, reassure Customers that those details will be made available before any of the changes has a practical impact on them.



Video Update from Sir David Foskett – April 2021




For the FAQ videos referenced in the above update, please click here.


If you have any questions or comments in the meantime, please contact info@foskettpanel.com.