BusinessBusiness RecoveryLegal row looms for Rock valuation

Legal row looms for Rock valuation

Northern Rock valuers BDO Stoy Hayward face roadblock after shareholders secure court date for legal challenge to the job's terms of reference

northern rock

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.

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