Legal row looms for Rock valuation

BDO Stoy Hayward’s work valuing Northern Rock is facing a New Year roadblock after shareholders secured a court date for a legal battle, hoping to redraw the terms of the engagement.

A powerful group of shareholders, led by fund managers SRM Global and RAB Capital, will now face the government at the Royal Courts of Justice on 12 January.

Roger Lawson of the UK Shareholders Association said: ‘[The shareholders] go to court on 12 January. We will be contesting the legality of the government’s approach to the compensation scheme order, which we believe are not compatible with humans rights legislation.’

BDO valuation partner Andrew Caldwell must submit a price for Northern Rock which strips out the government’s £25bn bailout package. The terms also require the bank to be treated as a business in administration, and not as a going concern.

This caused anger among shareholders, leading to the court action, but BDO’s efforts to attach a price to the remains of Northern Rock may be dealt a serious blow if they have to start again under new terms.

Caldwell is yet to inform shareholders about how he intends to proceed, Lawson said.

‘I don’t know what he’s going to say in his terms of reference. It’s going to be very hard to come up with a value under the current framework for the valuation.’

Lawson predicted there would be more legal battles next year, because neither side was likely to back down, adding to the hefty court bills.

‘Whoever wins the judicial review, there will be appeals and the government will be running up more bills at the taxpayers’ expense. The legal costs of this case are absolutely astronomical.’

BDO has been paid a flat fee of £4.5m to conduct the valuation, but the Treasury has said that there will be more funds available to fight any legal cases brought in response to the result.

A BDO spokeswoman would only say that it was impossible to determine the timescale for the valuation.