At one point His Honour even stated he had been unaware of the “lack of certainty of the DCS” and inquired of the A G if it was conceivable that the Treasury wouldn’t stand by the assurances given to Tynwald. The A G didn’t think this scenario would occur.

The long running Kaupthing Singer & Friedlander (IOM) ‘Viking bank saga’ will continue for at least another 50 days or so following the decision of Deputy Deemster Corlett to grant the Treasury a further adjournment of the winding-up petition.

Essentially he was persuaded - not so much on how good the alternative, and yet to be nailed down, ‘Scheme of Arrangement’ (SoA), will be but - by how poor a ‘safety net’ the Depositors’ Compensation Scheme (DCS) is by comparison.

It can really do the IOM no favours whatsoever by having to effectively admit that the much played on (for publicity purposes) DCS is in fact a ‘financial fig leaf’ and it isn’t really that great after all.

This is despite the A G stating, during his summing up of the Treasury’s application, that the IOM could be very “proud” of having such an asset which could provide a method of compensation; something he declared many other jurisdictions lacked.

He had in fact drawn suppressed laughter, from certain sections of the public gallery, when he had preceded this statement by stating he wished to make “abundantly clear at the outset” the Treasury would honour its obligations under the DCS if it was triggered.

What is abundantly clear to the Manx Herald, from the evidence presented this morning, is that very few people, including His Honour, real understand how the DCS is supposed to work if called upon.

At one point His Honour even stated he had been unaware of the “lack of certainty of the DCS” and inquired of the A G if it was conceivable that the Treasury wouldn’t stand by the assurances given to Tynwald. The A G didn’t think this scenario would occur.

The A G had commenced his case by informing the court that the Treasury had hauled on board a couple of big hitters, in the shape of the Mr Moss QC - who he said, in his “illustrious” career, had acquired a vast amount of experience in the field of SoA - and that great weight should be attached to his evidence; and law firm Herbert Smith.

He reiterated that the Treasury’s view remained, based on Mr Moss’s evidence, that a SoA would offer a far “more flexible and efficient management of a run-off” of the business compared to a liquidation/winding up.

He asserted that Mr Moss is of the opinion a SoA, as proposed, would not prevent action against third parties, such as the regulators and governments etc - which was a major concern raised by many of the depositors - but his Honour pointed out, to his disappointment, that how this would work had not been included in the current working draft of the SoA he had been given.

The A G agreed this was the case, but said he wished to emphasize, as the document stated on the front, it was only for illustration purposes.

The A G also went on to dismiss Mr Wright’s clients’ concern that any SoA could be stymied by the shareholders of the bank; and it was latter agreed it would be wise to seek an order to liquidate the KSF holding company as well.

A long discussion was held regarding the mechanics of notifying depositors etc in advance of any vote on a SoA, whether more than one class and vote should be held, and the risks of a legal challenge to whatever outcome was decided. Using the ‘antiquated’ 1934 Act procedures or adopting a more modern approach were debated with eventually the old way carrying the argument; but that any court hearing would be inter parte.

It was at this point that the A G explained to His Honour that the great advantage of the SoA to depositors owed £50k was that the payments were “guaranteed” by the Treasury so that they were assured they would get the £50k; to which His Honour replied that he had thought they were also “guaranteed” this amount through the DCS, but now he was being informed there is lack of certainty.

The A G explained this along the lines that under the proposed SoA the Treasury wouldn’t seek to recover the money it had paid out until depositors had received 60% of the amount owing to them; whereas, under the terms of the DCS, the Treasury, through the scheme administrator, would start recovering their money much sooner.

It appears to the Manx Herald this was a weak point for the Treasury to be making, as surely the Treasury could volunteer to forgo recovering the money in the DCS as easily as they are proposing to do in the SoA. It just seems like another feeble excuse not to bring their ‘lame’ DCS into operation.

The A G also threw into the ring, as another sop to the court, that the Treasury would ‘subordinate’ the £10m it is owed; although it was pointed out later that £8m of it probably couldn’t be counted in the same way as the £2m ‘cash’ holding, and Mr Wright said it only added 1.25p in the £ to the pot.

In finishing his part of the Treasury’s application, the A G reminded the court, and clearly for the ‘benefit’ of people ‘listening’ further a field, that £105m has been voted by Tynwald and this demonstrates the government’s support for the creditors.

Mr Gough picked up from where the A G had finished and presented Alix Partners’ evidence to the court; giving further detail on their proposals regarding the SoA.

He again reiterated that under the SoA the Treasury (taxpayers) “will go to the back of the queue” until the other creditors have received 60% of their money back. At that point the Treasury would start the recovery of their ‘stake’ and take the next dividend payout.

He also pointed out he wasn’t in court to present a SoA but an argument for a SoA; and that it could still yet be rejected at a later date.

He reminded the court it had to perform a balancing of arguments, and for him there are advantages to a SoA over a liquidation & DCS scenario.

Mr Gough rebutted His Honour’s comment - that from Mike Simpson, the Liquidator Provisional’s evidence, there seemed little difference in the timetables between the two schemes - by stating that the £105m Early Payment Scheme money was already committed; and the payment schedule was guaranteed unlike the DCS. He also added, some what wryly, that if another bank goes the DCS is likely to be compromised.

Mr Gough having completed his part in the proceedings, His Honour summed up the Treasury’s position as somewhat different to before. Whereas previously the argument had been a SoA would be more expeditious and less complex, it now seemed the argument is that it will provide guaranteed payments.

Mr Wright was then invited to put forward his point of view, which was clear from the start when he declared the Treasury proposal as “dead in the water” and urged his Honour to proceed to a winding-up order today.

He was of the opinion that sufficient money can be recovered from the liquidation process without the need for any subvention from the government and that there was no need for any more delay.

However, he did acknowledge that a failure of another bank could have an effect on the DCS but it wasn’t sufficient reason to worry; and so “enough is enough” lets get on with the winding up he exclaimed.

Other parties, including Mr Caine representing Mr Simpson, gave brief statements. Mr Caine said he remained neutral on the petition but their figures showed that liquidation would produce a payout of £226m, by the end of October 2009, compared to the £212m calculated by Alix Partners for the SoA.

He also suggested there may be other hidden additional costs in the SoA if they have to borrow money to fund payouts.

Mr Wild, appearing for the FSC, said their position remains the same in that the bank can’t pay its debt so they were not withdrawing the winding-up petition.

He then, for the benefit of the court, gave a brief explanation of certain parts of the DCS to help make how it would work more understandable - which is debatable.

He did helpfully point out that the amount of levy calculated the DCS would raise each financial year from the banks is currently £9.6m - so it can be seen it would take some time, without ‘topping-up’ from the government, to recover sufficient funds to meet the claims under the scheme.

He also pointed out a triggering of the scheme, by a bank default, isn’t automatic; which drew the exclamation from his Honour - “but it was what the scheme was set up for!”

Mr Wild admitted it was very unlikely the discretion, not to trigger the DCS, would be exercised; but went on to say there could still be some issues as to when Treasury released funds to the scheme.

However, he did partly undermine some of the asserted benefits of the SoA, in that it was claimed it was ‘superior’ compared to the DCS because the Treasury would not recover any money before the creditors received 60% of their money. In fact he said, the Treasury wouldn’t recover any money from the DCS until all the creditors had been paid their compensation in full.

Mr Wild finished by saying some of the indemnifying of a SoA would probably still need to be voted on by Tynwald, and there is no way of knowing how that vote may go.

Mr Morris, representing 6 of the large insurance companies, said their preference was for a SoA, but in doing so he hoped Treasury would be listening as, in supporting the adjournment, they wanted a better deal for their bond holders, who individually, can also be ‘small depositors’. He said they wanted to be treated equally in the EPS No 2 and a guaranteed minimum payout of 35%; although he didn’t wish this to detract from the hope of a 100% recovery. Finally, this would probably be the last occasion they would support a further adjournment.

Mr Webb was incredibly brief and to the point, saying his clients had outstanding loans and therefore they requested an immediate winding up.

Appearing for the first time, Jerry Carter, on behalf of a number of clients, said he fully supported the Treasury; especially with half the banks propped by governments and given the tendency always to look at the worst case scenario on the IOM.

Tom Maher also put in a first appearance, on behalf of Canada Life and, although supporting the Treasury, urged them to get a move on and circulate the next draft of the SoA the earlier the better.

Mr Clucas, for KSF (IOM), was also brief saying they took a neutral stance if a benefit could be obtained by the adjournment.

His Honour then invited individual parties the opportunity to speak.

Mr Roper was of the opinion the government should keep its money in its pocket as he couldn’t see that it would ensure any more of a payout than a liquidation. He also feared that the Island doesn’t have sufficient resources and experience to defend the SoA from the likely legal challenges it is likely to face sometime down the road, so it would be better going for liquidation.

Mr Talbot said he preferred the idea of a SoA over the DCS but wanted one like in the other countries; which effectively meant guaranteeing all your money.

He raised an interesting point about when the DCS could be triggered; but His Honour later addressed this point and said it was perhaps fortunate there is a discretion included in the legislation.

Mr Ennet tended to support Mr Morris’s view but also made the point if another bank fails the DCS could well be in difficulty.

Mrs Roper thought it has all gone on too long and wanted the liquidation process to commence; along with a pursuit of the self proclaimed ‘saviour of the world’ - Gordon Brown.

Mr Shilito was clear that he supported a SoA being prepared so that the creditors could vote on its merits.

In winding up, the A G said he had heard no great clamour for liquidation and that without wishing to appear presumptive, he believed Treasury had surmounted the hurdles put before them at the last court. He acknowledged that a demanding timetable had been set but he thought it is achievable, and that the issue of the date set for currency rates needed revisiting.

However, he stated a divergence from the well trodden path of liquidation was justified in this case, particularly as there are clear reputation issues for the Island involved.

Therefore, he repeated his submission at the earlier court that an adjournment be granted and a SoA be prepared.