Treasury Not To Be Liable for Depositors' Costs

In a hard fought argument in the High court it was held that the Isle of Man Treasury, for whom GOUGH Advocates acted (Alan Gough), should not be liable to pay or contribute to the costs of the vocal Depositors Action Group (DAG") - a body of depositors who opposed the Treasury promoted Scheme of Arrangement for the insolvent Kaupthing Singer & Friedlander (Isle of Man) Limited ("KSF IOM").

In a long running case since KSFIOM was placed in Provisional Liquidation by the Court in October 2008, Treasury retained GOUGH Advocates to advise generally on liquidation matters and in particular, to promote a Scheme of arrangement ("the Scheme") designed to give a more advantageous return to depositors.

The Scheme was supported by the majority of creditors but opposed by DAG.   The Court found favour with the Scheme and, despite opposition from DAG, allowed it to go to a statutory vote of creditors, thereby leaving it in the hands of the creditors to decide the method by which the bank would be wound down and its assets distributed.

The Scheme did not however survive the vote and was rejected.

DAG brought an application to the Court seeking its legal costs from Treasury.     Treasury contended that it had acted in good faith in attempting to give the creditors a choice (which by their vote they exercised) and should not be penalised for doing the "right thing" in the interests of both the creditors and the Isle of Man's financial reputation.

After legal argument, the Court upheld the Treasury's argument and DAG's legal costs were ordered to be paid out of the assets of KSFIOM, albeit as a pre-preferential debt.

Alan Gough had the conduct of the Treasury case throughout the complicated proceedings and was greatly assisted by Mark Holligon and leading experts in the filed of insolvency, including Mr. Gabriel Moss QC, Mr. Richard Hacker QC and Tom Smith of South Square Chambers.


Article posted: 23/07/2009