2016 Updates

06 DECEMBER 2016

Interest

Further to my previous updates on this matter, I can confirm that the Court hearing took place as scheduled on 16 November 2016. A copy of the Court Order is attached. The timetable was agreed and there will be a further hearing on Thursday 23 March 2017, following which there will be a further update.

>Interest

20 OCTOBER 2016

Interest

There was a Court hearing on 12 October 2016, the purpose of which was to enable the Deemster to give further directions on the process for determining the calculation of interest. Pursuant to paragraph 3 of the Order of Court dated 8 July 2016, a creditor applied to be made a party to the Application to the Court. As a result, at the hearing the Court formally added him as Third Defendant to the Application, and then adjourned the Application until 16 November 2016 for further directions to be given. I should emphasise that “Defendant” is purely a procedural title and does not imply any wrongdoing. The Court could not give directions at the hearing in the absence of the creditor, once he had been made a party. However, in order to expedite matters the Court has directed that the Defendants shall endeavour to agree a draft timetable leading to the hearing of the application, which is to be filed with the Court by 28 October 2016, with a view to the Court approving the draft timetable at the hearing on 16 November 2016.

I have attached two witness statements of mine whereby I submitted to the Court the correspondence received from creditors who expressed a view on the calculation of interest. I also attach the witness statement of Mike Fayle on behalf of the manager of the Depositors Compensation Scheme.

>Witness Statement of Mike Simpson 29 September 2016.pdf

 >Witness Statement of Mike Simpson 12 October 2016.pdf

 >Witness Statement of Mike Fayle 10 October 2016.pdf

9 AUGUST 2016

Letter to Unsecured Creditors

 >Letter to Unsecured Creditors

Today I have sent a letter to unsecured creditors advising them of progress in the process to determine how interest should be calculated in situations where there is a surplus in an insolvency after the proven claims of unsecured creditors have been paid in full. I applied to Court for directions on this process on 22 June 2016 and an Order was made on 8 July 2016 (Attached).

 >Court Order

In the Order the Court specified that notice of an Application should be sent by post to the last known physical address of each admitted unsecured creditor or where the admitted unsecured creditor had requested e-mail correspondence only, to the last known e-mail address.

Set out below is a copy of the Application made to the Isle of Man High Court for guidance as to the method to be applied by the Liquidator when calculating the interest to be paid to creditors of the Bank from the limited surplus that remains now that creditors have been paid the full amount of their proofs of debt. The following points should be noted:-

1. Creditors who had their outstanding interest up to 8th October 2008 capped at 5% will receive the balance of their interest due up to that date;

2. With regard to interest to be paid for the period from 8th October 2008 onwards, this is likely to be a small sum for each creditor, as the remaining surplus is quite small;

3. The Application to the Manx High Court seeks a preliminary direction, at this stage, as to whether Section 248 of the Companies Act 1931 continues to apply to the liquidation of the Bank. Once that issue has been decided by the Manx High Court, the Liquidator will return to the Court for more detailed directions as to how interest should be calculated, either under Section 248 or otherwise, depending upon the Court’s decision upon this point;

4. Accordingly, at this stage, the Application only relates to the issue of whether Section 248 will continue to apply to the liquidation of the Bank, and directions as to the calculation of interest in detail will be given by the Court at a later date, if necessary.

5. The reasons for which the Court’s guidance as to whether Section 248 still applies to the liquidation of the Bank are set out in the Skeleton Argument lodged with the Court, a copy of which is set out on a separate page on this website.

The letter also refers to the other matters that were contained in the Court Order, and included as enclosures the Application Notice and my Witness Statement. (Attached). The letter was approved by the Court on 15 July 2016.

 >Application Notice

 >Witness Statement of Mike Simpson

The Order also specified that a copy of the Skeleton Argument (with Authorities) made in connection with the application should be published on this website (See separate update on this website also dated 9 August 2016).

9 AUGUST 2016

Skeleton Argument of Michael Simpson as Liquidator of Kaupthing Singer & Friedlander (Isle of Man) Limited (in Liquidation) in connection with his application to Court dated 22 June 2016

 Skeleton Argument of Michael Simpson as Liquidator of Kaupthing Singer & Friedlander (Isle of Man)

Index to the Skeleton Argument Authorities

 Index to the Skeleton Argument of Michael Simpson as Liquidator of Kaupthing Singer & Friedlander (Isle of Man)

Authorities

 1. Sections 162 to 342 and Schedule 2 of the Isle of Man Companies Act 1931.PDF

 2. Sections 21 to 23 of the Isle of Man Bankruptcy Code 1892.PDF

 3. Sections 316 to 317 of the English Companies Act 1948.PDF

 4. Rule 78 of the Isle of Man Companies (Winding-up) Rules 1934.PDF

 5. Section 4 and the Schedule to the Isle of Man Judicature Act 1903.PDF

 6. Section 14 of the Isle of Man Judicature Act 1883.PDF

 7. Sections 30 to 66 of the English Bankruptcy Act 1914.PDF

 8. Rule 100 of the English Companies (Winding-up) Rules 1949.PDF

 9. Section 10 of the English Supreme Court of Judicature Act 1875.PDF

 10. Section 25 of the English Supreme Court of Judicature Act 1873.PDF

 11. Roderick P. Kay [CHP 2010_66] (3rd August 2010).PDF

 12. Re Parent Trust and Finance Co Limited [1936] 1 All ER 641.PDF

 13. Re Amalgamated Investment and Property Co. Ltd [1985] Ch.349.PDF

 14. Re Rolls-Royce Co. Ltd [1974] 1 WLR 1584.PDF

 15. Re Fine Industrial Commodities Ltd [1956] Ch. 256.PDF

 16. Re Line Bros Ltd [1984] BCLC 215.PDF

 17. Re Lehman Brothers International (Europe) [2015] B.C.C. 431.PDF

 18. Islington Metal & Plating Works Limited [1984] 1 WLR 14 (2).PDF

 19. Section 207 and Schedule 6 of the English Companies Consolidation Act 1908.PDF

 20. Section 59 and Schedule 5 of the Isle of Man High Court Act 1991.PDF

 21. Paragraph 1215 of Halsbury_s Laws (Vol.5) (2nd Edition).PDF

 22. Farrell v Alexander [1976] 3 W.L.R 145.PDF

 23. Sections 211 to 212 of Bennion on Statutory Interpretation (6th Edition) [2013].PDF

 24. Grey v IRC [1960] A.C. 1.PDF 25. Re Smurthwaite [1994] 1 All ER 898.PDF

 25. Re Smurthwaite [1994] 1 All ER 898.PDF

5 AUGUST 2016

Report to Creditors

Attached is a Report to Creditors for the period from 10 January 2016 to 9 July 2016.

> Report to Creditors

25 JULY 2016

Cash Position

Attached is the summary of cash balances held at 30 June 2016.

 >Cash Position

Cash balances increased by approximately £1.3 million during the quarter. Loan repayments, interest and other income totalled £1.0 million. The cash element of the parental guarantee claim was £297,000. Catch up dividend distributions totalled £46,000. Other liquidation expenses totalled £31,000.

Loan Book

Attached is the summary of the loan book position at 30 June 2016.

 >Loan Book

During the quarter to June 2016, one facility was redeemed in full and one in part realising £0.9 million overall. The loan tables shown have been converted to Sterling using exchange rates as at 30 June 2016.

Interest

Isle of Man legislation is unclear about how interest should be calculated in situations where there is a surplus in an insolvency after the proven claims of unsecured creditors have been paid in full. I have applied to Court for directions and expect to make a further announcement on this website shortly about the process for determining the appropriate method of calculation.

21 APRIL 2016

Cash Position

Attached is the summary of cash balances held at 31 March 2016.

 >Cash Position

Cash balances decreased by approximately £0.4 million during the quarter. Loan repayments, interest and other income totalled £70,000. Catch up dividend distributions totalled £89,000. Liquidators’ fees were approximately £324,000 and other liquidation expenses totalled £64,000.

Loan Book

Attached is the summary of the loan book position at 31 March 2016.

 >Loan Book

During the quarter to March 2016, there were no repayments to any of the outstanding facilities.

The loan tables shown have been converted to Sterling using exchange rates as at 31 March 2016.

Parental Guarantee claim

KSF, in the early stages of the liquidation, submitted a claim against Kaupthing under the Parental Guarantee. The claim was a shortfall claim, meaning that as the shortfall for creditors in KSF has been reduced by the recovery of assets, the value of the claim has fallen. The value of the claim has now been agreed at £3.2m.

Kaupthing have now agreed a composition with their creditors, whereby creditors will get 30% of the value of their agreed claims. They will get this as follows:

Cash 8.3%
Shares in Kaupthing 0.5%
Kaupthing convertible notes 21.2%

Accordingly we should shortly receive cash, shares and notes with a total face value of £960k. The intention is that the shares and notes will then be sold in the short term in order to realise value for creditors.

10 FEBRUARY 2016

Report to Creditors

Attached is a Report to Creditors for the period from 10 July 2015 to 9 January 2016.

 >Report to Creditors

21 JANUARY 2016

Cash Position

Attached is the summary of cash balances held at 31 December 2015.

Cash balances decreased by approximately £44,000 during the quarter. Loan repayments, interest and other income totalled £212,000. Catch up dividend distributions totalled £130,000. Other liquidation expenses totalled £126,000.

 >Cash Position

Loan Book

Attached is the summary of the loan book position at 31 December 2015.

During the quarter to December 2015, £120,000 was received in full and final settlement of a facility, and approximately £453,000 was written off, after a lengthy legal process.

The loan tables shown have been converted to Sterling using exchange rates as at 31 December 2015.

 >Loan Book