His Honour inquired if anybody else wanted to oppose the Order and, noting there seemed to be no opposition, he would make the Order for a compulsory winding-up. He said he would also make an Order to appoint the provisional liquidator and an Official Receiver as the company can not pay its debts.

Finally, after 7 months of pointless prevarication, Kaupthing Singer Friedlander (IOM) Ltd was, this morning (Wed 27^th May), officially placed in liquidation, at Douglas Court House; and an ‘official receiver’ appointed.

Deputy Deemster Andrew Corlett granted the Order sought in the joint winding-up petition of the ‘company’ and the Financial Supervision Commission (FSC), having first listened to a number of submissions by advocates representing some of the different parties involved in the affair.

Mr Clucas, representing KSF (IOM), suggested to his Honour a few housekeeping issues should be addressed before the substantive matter was finalized; and his Honour agreed a few “loose ends” should be dealt with first.

Turning to Seth Caine, representing the provisional liquidator, Michael Simpson, his Honour inquired about the last minute change of votes, in respect of the Scheme of Arrangement (SoA).

Mr Caine replied there had been a few amended votes submitted after the scheme meetings; and a number of complaints had also been submitted regarding the receipt of voting papers.

His Honour noted that the court had also received numerous complaints.

Mr Caine then produced a summary sheet of the votes showing the results, with and without the votes received after the scheme meetings, and the revised votes; but explained, even if they included the additional and revised votes, the overall result would remain the same. That is to say the SoA would still have been defeated in two of the three classes.

So there would have been no change to the result, his Honour inquired by way of clarification; and Mr Caine confirmed this was correct.

Mr Caine mentioned correspondence from two people, who were not depositors but believed to be representing their parents, who had claimed their parents had not been able to vote; but they had been unable to confirm whether the parents had voted or not.

A further handful of less than 20 depositors also complained but they had all submitted proxies; so as far as Mr Caine was concerned they had not been disenfranchised.

His Honour put to Mr Caine some people appeared to be getting hard copies of the papers some days after they should have received them.

Mr Simpson countered this by saying some depositors as faraway as Japan had received the papers in plenty of time; and they couldn’t account for all the “vagaries” of the various postal systems.

His Honour suggested there may have been some depositors in remote places with no access to computers; and wondered how they could have got and returned forms.

Mr Caine admitted they had no idea how many depositors would have been in that situation; and that all he could say was that he knew people in some pretty far flung places did receive them – so he couldn’t explain why some others did not.

Mr Caine said an affidavit had been submitted by James Ferris (of PWC) which dealt with the issue of the voting; and his Honour said as the matter was of considerable concern, Mr Caine ought to summarize it for the record.

Mr Caine ran through the salient points, including depositors in places such as South Africa and Botswana, had their papers faxed or emailed because of concerns over the security of the post, fraud and personal security of the depositor; especially where they may not wish the authorities to know they had money held outside the country. (Yes, he really said this – Ed).

He explained an Excel spread sheet, with 11,274 entries, was compiled; but the company, contracted to print and post the papers, printed 11,602 address labels, so he was sure, as he could be, they hadn’t missed anybody out. The scheme papers were printed on the 24^th April 2009, and of the ones posted only 42 were returned, not at this address. He added, in respect of the returned packs, they could only send them to the address they had on record.

An employee of the print company confirmed the number printed and posted; which were divided into three categories: UK including IOM and Channel Islands; European area and, thirdly, the rest of the world. The UK post, of 5000+ was sent via Royal Mail and the remainder was sent via Pitney Bowes; and apparently they reported no problems.

His Honour then pointed out subsequent to that ‘posting’ a letter, dated 12^th May 2009, was sent, without the approval of the court, regarding the change to the financial figures.

Mr Caine acknowledged it had not received the approval of the court but for “expediency” it had been sent out to assist creditors.

His Honour sought confirmation it was regarding the ability to ‘revise’ a vote if a depositor wished to do so, having received the new information; and that the revised vote would be take into account at the sanction hearing.

Mr Caine confirmed this to be the case; but as no application was being made to sanction the SoA today, it didn’t matter.

His Honour then asked if anybody else present had any comment on the “integrity of the voting”; but nobody did.

Mr Caine was then invited to run through Mr Simpson’s affidavit, which, essentially, dealt with the arrangements for the scheme meetings, a report of the meetings and the results. In summary, he said the SoA failed to gain sufficient support in classes 2 & 3.

His Honour remarked there was one very ‘large’ creditor in class 3, who he suggested was effectively able to “scupper the entire scheme”; but then added it was perhaps “speculation”.

However, it was pretty obvious he had, like other observers, noted the ‘elephant in the room’; which seems to have escaped the attention of the Treasury etc when they were running up vast costs in preparing and promoting their, clearly doomed from the start, SoA.

His Honour passed over the costs issue for moment, saying he would return to that matter later, and deal first with the actual winding-up petition from October 2008; albeit he noted a subsequent petition had added a bit more precision.

Mr Caine ventured that although it was perhaps slightly presumptuous, in advance of the granting of the Order and the official appointment of Mr Simpson and Mr Spratt, they had done some preparation work in order to save time later.

His Honour did not appear to be troubled by this and turned to Mr Clucas to address the court on the current position of the company.

Referring to the petition, and the supporting affidavits of Mr Weldon (FSC) and Mr Doherty [MD, KSF (IOM)] he ran through a brief history of events since October 2008; leading to the statement, “the company is unable to pay debts when they fall due” so the situation, in essence, remains the same. Therefore, they were seeking an Order, today, to wind-up the company; subject to any objections.

Mr Wild, representing the FSC, said he could confirm what Mr Clucas had just said, and they were now effectively putting the petition forward again, with the supporting affidavits of Simpson and Doherty; and also sought a winding-up Order.

Mr Chambers QC, representing the Depositors Action Group, concurred and invited his Honour to make the Order.

His Honour inquired if anybody else wanted to oppose the Order and, noting there seemed to be no opposition, he would make the Order for a compulsory winding-up.

He said he would also make an Order to appoint the provisional liquidator and an Official Receiver as the company can not pay its debts.

Mr Caine suggested it may be beneficial to preserve some of the powers of the provisional liquidator, as explained in an affidavit from Mr Simpson, dated 22^nd May 2009, so work could continue pending the outcome of the creditors’ meeting.

Mr Caine pointed out meetings were normally called within 4 weeks, as required by the Companies Act, but given the wide spread of creditors more time should be allowed to call and prepare for the meeting. It was suggested 6 weeks should be allowed. He emphasized there would be no prejudice to creditors, by this extra time, if all the powers were granted to the provisional liquidator so he “could crack on” and avoid any “hiatus or delay”.

His Honour appeared content and clarified the first creditors’ meeting would either confirm the appointment of Simpson and Spratt as liquidators or determine alternative liquidators; and the formation of a Committee of Inspection.

Mr Caine confirmed this was so, although he said the court makes the official appointment.

It was then confirmed how voting papers, for those creditors who will be unable to attend in person, will be sent; and this includes electronically, simply to save time.

If depositors were unable to return the proof of debt in time, Mr Caine said they would consider accepting any previous document sent so the depositor was not “shut out” from the voting.

They wanted to retain some of the powers, he explained, so any action could be brought or defended, during the period to the creditors meeting; especially as the provisional liquidator is already involved in some litigation.

It would also allow them to continue to operate, or appoint people, in other jurisdictions, if they needed to sell assets; and so they could also declare and pay a dividend. Mr Caine said the provisional liquidator is holding a considerable amount of money and was keen to make a payout.

His Honour wondered if what was being proposed was under the Act or the ‘rules’; to which Mr Caine said it effectively made no difference, but it was under the rules.

His Honour, having looked again at his papers, stated he now saw what he meant.

Mr Caine reiterated what was being proposed was for the benefit of the creditors as it enable certain work to be done in advance of the creditors’ meeting.

His Honour noted the ‘River Plate case’ was cited as the authority for what was being proposed.

Mr Caine confirmed this, and said they were also seeking to assist the manager of the Depositors Compensation Scheme, but in respect of the ‘Statement of Affairs’ which has to be produced, they were seeking the leave of the court to produce a version with the names “redacted to protect the anonymity of creditors”.

Mr Caine said they also needed to deal with the list of contributors; but there is only one he explained, the holding company.

“It will be a short list”, remarked His Honour.

By dealing with all these matters together, Mr Caine said they hoped to be able to send out everything they needed to in “one fell swoop”.

He then repeated Mr Simpson is “anxious to make a dividend payment as-soon-as-possible”.

In respect of the ability to sell property, it was clarified this was to help deal with the issue of set-off; and they had asked, for the avoidance of doubt, this power to be specifically included.

His Honour inquired if anybody had any comments or an objection to the relief sought, and again nobody had.

A quick discussion was held on the River Plate case, which Mr Caine said was the best they had to help with this situation; before His Honour checked with all the advocates present they were content.

All were content and His Honour said he would make a consolidated Order; to which Mr Clucas helpfully said he had already prepared a draft; albeit with a number of typos.

He did a quick canter through it, with the odd point being clarified, and it was agreed, with a couple of amendments, it would be served on all noticed parties.

All that was left to resolve was the issue of costs, and this is where proceedings became a bit livelier.

Mr Chambers said he had prepared a short skeleton argument to support DAG’s claim for costs, at which point Mr Gough, representing the Treasury, immediately interjected he had only received notice of it on Tuesday afternoon. He went on to claim it was not ‘normal’ some of the relief sought as he claimed it was seeking Treasury to pay some of their costs.

Mr Gough complained some more, stating the CEO was off-island and he needed time to take instructions and prepare a response; and wanted until Friday to do so. They could perhaps come for half a day next week to hear the issue of costs; and he was sure it would be interesting to hear some of the arguments.

His Honour was unimpressed and said the Treasury should have expected DAG to claim costs, and he did not want to increase the already considerable costs.

However, Mr Gough gained some support from Mr Clucas and Mr Caine, and although Mr Chambers opposed an adjournment, His Honour very reluctantly agreed to adjourn this one issue until 15^th June 2009.

Mr Chambers said he would do his best to get back from South America in time, where he was involved in arbitration.

His Honour closed the hearing by making it clear he would not allow the hearing to exceed half a day under any circumstances.

After the hearing the Manx Herald spoke to Mr Simpson and Mr Ferris to try and clarify the size of the first dividend payment.

He wouldn’t be drawn beyond saying it will be at least 14.5p in the £. He said he hopes it will be more, but it will depend on the payout from London, expected in June, the exchange rate, the number of claimants and the return of other deposits etc.

DAG members have said they believe it should be more, and also expect to receive at least one more dividend before the end of the year.

They are also considering their options in regards to their support or not for Mr Simpson to continue as liquidator.