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Court of Appeal upholds Northern Rock valuation


The Upper Tribunal has given judgment upholding the decision of Andrew Caldwell, the Independent Valuer of Northern Rock appointed by HM Treasury, that no compensation should be paid to former shareholders of Northern Rock, on the basis that their shares had no value as at the date Northern Rock was nationalised on 22 February 2008.

Following Northern Rock's nationalisation, the government set up a scheme under the Banking (Special Provisions) Act 2008 to determine the amount, if any, of compensation payable to shareholders upon the transfer of their shares to HM Treasury. The scheme required the appointment of an Independent Valuer to assess the value of their shares using a number of statutory assumptions, including the "withdrawal assumption" that all financial assistance provided to Northern Rock by the Bank of England and the Treasury had been withdrawn. As at the date of nationalisation, this assistance amounted to £27 billion by way of loan together with guarantees worth £29 billion.

The Independent Valuer found that had Northern Rock repaid this financial assistance by the Valuation Date, it would have had a negative net worth and its shares would have had no value. This finding was upheld by the Upper Tribunal in June 2011. Harbinger Capital Partners appealed the decision on the grounds that the Upper Tribunal (and the Valuer) had misinterpreted the withdrawal assumption and should have treated it as requiring the Valuer only to assume that the Bank of England and the Treasury had demanded repayment of their assistance, rather than having received it.

The Court of Appeal (Mummery and Beatson LJJ, Lewison LJ dissenting) dismissed the appeal, confirming that the Valuer's interpretation of the withdrawal assumption was correct. In reaching its decision, the Court took account of principles of EU State Aid law and Article 1 of the First Protocol to the European Convention on Human Rights, finding that the Valuer's interpretation was compatible with both.

The judgment is here.

The Lawyer article is here.

Mark Howard QC, Martin Chamberlain QC and Jonathan Dawid appeared for the respondent valuer, Mr Caldwell, instructed by Mayer Brown.