Sympathy but no compensation for Northern Rock investors
The high court has rejected a judicial review application by Northern Rock shareholders.
The court dismissed the application for a full judicial hearing into claims the government was unfair in its plan to compensate former shareholders in the nationalised bank.
David Greene, partner at Edwin Coe, who acted for the shareholders, said: “For the small shareholders it was clearly disappointing not to succeed but they felt vindicated that the court concluded that they had raised issues of public importance since it made no order for costs against those shareholders and found that there were ‘compelling reasons’ why the matter should be allowed to proceed to the Court of Appeal. The shareholders are considering an appeal.”
The Treasury took over the shares when the bank was nationalised in February 2008, and claimed the bank should not be valued as a going concern as it would have failed without state intervention.
However, shareholders contested this, claiming the basis of valuation was unfair, that Northern Rock was a going concern at the date of nationalisation, with a strong mortgage book and an excess of assets over liabilities. They claim the assessment of their compensation was unfair and incompatible with their rights under Art 1 of the First Protocol to the European Convention on Human Rights.
The case, SRM Global Master Fund Lp and Ors v The Commissioners of HM Treasury [2009] EWHC 227 (Admin) was brought by two investment companies and some 150,000 private shareholders who held up to a quarter of bank shares.
Dismissing the application, Lord Justice Stanley Burnton said: “… we have some sympathy for the position of the former long-term shareholders of Northern Rock, who doubtless believed that they had an investment in a reliable bank. Ultimately, however, they entrusted their investment to the hands of the management of the company. As it turned out, their business plan was flawed and could not survive the unprecedented circumstances of the latter part of 2007.” (See Law reports p 279).
