By Farhana Khanom, solicitor in the commercial litigation team at London law firm Seddons
Harold Tillman, the former owner of high street fashion label Jaeger issued legal proceedings against Lloyds Bank earlier this year, accusing it of contributing to the collapse of the business in 2012. The case has now been stayed and it is understood that the parties are now in negotiations with the aim of reaching of an out of court settlement.
Tillman, a fashion entrepreneur who has owned large scale clothing distributors such as Honorbilt and suit wholesaler BMB, bought struggling Jaeger in 2003 for £1. Despite losses of £12m during the first year of his ownership, he is credited with reviving the 128 year old business into one which had revenues of £94m and turning a profit of £1m by the 2011 year end.
Despite a long period of recovery under his leadership, the brand began to fail as it suffered stiff competition from other high street brands and falling sales.
In 2012, Jaeger owed Lloyds more than £16 million. As Jaeger’s major creditor, Lloyds decided to sell off this debt to private equity group Better Capital LLP for £19.5 million. This was only “fractionally more” than the level of debt in the business, according to a source. Tillman claims that Lloyds failed to give him time to settle the debt following the difficult trading period in 2012. Lloyds however stated that Jaeger had been “under clear financial pressure, with a very clear risk that the business would fail in 2012”.
This sale gave Better Capital control of Jaeger and it swiftly decided to put the business into administration and its debts were called in. Some of these were owed by Aquascutum, another fashion brand bought by Tillman in 2009, which was itself placed into administration and its assets were sold as a result. Better Capital, in Tillman’s opinion, “never had a clue” about the fashion industry and were ill-suited to owning Jaeger. Better Capital restructured the business and it managed to continue trading until April 2017 when it collapsed into administration for the second time.
In April 2017, Edinburgh Woollen Mill confirmed the acquisition of the Jaeger brand. It is understood that the acquisition included the purchase of Jaeger’s debt and the brand name but not the main company. This apparently left Better Capital £62 million out of pocket.
Claim against Lloyds
Tillman launched proceedings in May this year, alleging that Lloyds acted unfairly in its sale of the business in 2012 to Better Capital. He states that he was given no warning of the sale. At the time, Tillman was in the final stages of negotiating the sale of Aquascutum in Europe. Had he been given the opportunity to see this through, it would have raised around £10 million. This would have enabled Aquascutum to pay its debts to Jaeger who in turn would have settled a large chunk of its debt to Lloyds.
Tillman states that Lloyds were fully aware of this potential sale however they decided to sell the debt without doing proper due diligence on the prospects of the sale. Tillman states “the bank has a duty of care, but I was never given the opportunity to finance the debt myself”.
Lloyds dismissed Tillman’s claims of poor treatment stating that “Whenever a customer is in financial difficulty, the Group tries to support the customer to place it on a sounder financial footing. Better Capital was brought into this transaction by the board of Jaeger. The sale of Jaeger was consented by the board of Jaeger”. Lloyds confirmed that any litigation if commenced would be “contested vigorously”.
Tillman launched proceedings against Lloyds in May 2018 however to prevent a lengthy and costly legal battle, the parties have agreed a 3 month stay in proceedings to explore the possibility of an out of court settlement.
The stay essentially halts the legal process enabling the parties to negotiate and try to settle the dispute without needing a lengthy trial. Such a move is generally encouraged by the courts as a settlement is normally beneficial to all parties involved. Negotiations can take place though correspondence (normally between the parties’ respective lawyers) or mediation. Mediation is a flexible and confidential way to resolve a dispute, in which a neutral party (normally a trained mediator) will help the parties to try and agree the terms of settlement. The parties however remain in control of the process and the decision as to whether they enter a settlement or not and on what terms.
Generally, the terms of settlement are confidential, so it is unlikely that we will know the terms should Tillman and Lloyds indeed reach a settlement during this time. If the stay is unsuccessful, it will be lifted by the court and the claim will continue through the court process.
Separately, it is reported that Tillman has issued a legal claim against Better Capital and its involvement in the deal by Lloyds to sell Jaeger’s debt in 2012.