Bank's assets to pay legal bill

Some depositors had opposed the scheme of arrangement

Taxpayers will not foot the legal bill of depositors in Kaupthing, Singer and Friedlander Isle of Man (KSFIOM).

The Depositors' Action Group (DAG) was seeking costs from the treasury after investors rejected the government's plan to reimburse them.

DAG's barrister had argued that because the treasury had promoted the failed scheme it should be liable for costs.

But Deputy Deemster Andrew Corlett has ruled the costs should be paid out of the assets of the collapsed bank.

The action group played a key role in opposing the scheme of arrangement - the treasury's alternative to liquidation - during High Court winding-up hearings.

I have come to the conclusion that DAG's costs should, in principle, be paid out of the assets of KSFIOM Deputy Deemster Andrew Corlett

Deputy Deemster Corlett's conclusion has been published in a reserved judgement arising from a High Court hearing last month.

"I have come to the conclusion that DAG's costs should, in principle, be paid out of the assets of KSFIOM," he said.

The judge admitted there was a strong argument the order, supported by the treasury, would "inevitably diminish the amount available to the general body of creditors".

"However, I believe I must take into account that it must surely be the case that DAG's costs will not be so significant as to make any material difference to the amount available for distribution to the general body of creditors," he added.

"Unfortunately, I was provided with no information whatsoever as to the quantum of DAG's costs but I would find it incredible if those costs were so significant as to make any such material difference."

Depositor compensation

KSFIOM was placed into liquidation in May, triggering payments under the government depositor protection scheme.

Savers are eligible to receive up to £50,000 of what they have lost, plus any other money the liquidator is able to recover.

The High Court heard that tens of millions of pounds was held in the UK and frozen by the government during the crisis that engulfed KSFIOM's Icelandic parent bank, Kaupthing.

It is not yet known how much of this money, if any, will be returned to the provisional liquidator.