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Judges rule against Northern Rock shareholders

Northern Rock shareholders have lost their legal appeal against the “unlawful, unfair and manifestly disproportionate” government handling of Northern Rock.

The Court of Appeal in London upheld the government’s “zero return” scheme, which would see all the sale proceeds of the nationalised bank go to the government, with shareholders receiving nothing.

The case, brought by hedge funds SRM Global and RAB capital, and up to 200,000 private shareholders, suggested the compensation scheme was deliberately based on false criteria; namely that the taxpayers’ bail out saved the bank.

In a previous statement, the UK Shareholders Association (UKSA), said: “As the FSA, the Treasury and the Bank of England have repeatedly stated, both before and after nationalisation, Northern Rock was, and remains, a solvent institution with a strong and sound loan background.”

The government help was simply short-term liquidity assistance, according to the statement, with Northern Rock able to continue its business in “the normal way”

The UKSA believe the private sector proposals, such as Virgin, were rejected because the Government “desired to make a profit.”

But the judges rejected all arguments from the numerous legal teams, and had the government given no support, the bank would have collapsed – meaning it was reasonable to value the shares on that basis, and not the shareholder’s reported £4 per share request.

The Judges added that the shareholders had taken a commercial risk in investing their money in shares.

But, the shareholder’s have said they will continue the legal wrangle; John Wood, of SRM Global, said: “We embarked upon this legal challenge in the full expectation that it would be a lengthy process.

“We are determined to see it through to its conclusion.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .