Presbyterian Mutual: Not Creditors

There's more bad news today for savers in the failed Presbyterian Mutual Society as a court decision sets back their campaign to gain access to their 'frozen' savings.

While Stormont's top team, First Minister Peter D Robinson and Deputy First Minister Martin McGuinness headed to London today to meet Prime Minister Gordon Brown to discuss the problems faced by Presbyterian Mutual Society, the High Court has ruled against savers.

The Hon. Mr Justice Deeny, sitting today in the Chancery Division of the High Court in Belfast, ruled that the shareholder members of the Presbyterian Mutual Society are "not creditors" and are therefore not entitled to receive interim payments from the administrators.

The society ran out of cash when investors withdrew money because the PMS was not covered by a Government savings guarantee, introduced at the height of the financial crisis.

This latest news will be a further blow to the DUP First Minister, who said: "Almost 10,000 people have been affected by the collapse of the Presbyterian Mutual Society.

"I am determined that their plight will not be forgotten. I and my Executive colleagues will continue to press the Prime Minister and the Treasury until a satisfactory solution to this problem is found."

This was echoed by Martin McGuinness, who said: "I believe there is a responsibility on Gordon Brown and the British government to ensure that they do not incur losses to what for many are their life savings."

However, the High Court ruling announced this morning is a negative development.

The court heard that the administrator of the Presbyterian Mutual Society (PMS) has realised approximately £20m in assets which, under the Insolvency (Northern Ireland) Order 1989, can only be distributed to creditors.

The administrator sought direction from the court as to who are the creditors of the PMS.

The court was told there are two types of investor in the PMS: shareholders and loan capital holders. The latter are undeniably creditors.

The maximum shareholding is £20,000; however those who wished to invest more heavily could hold shares to this value as well as loan capital.

The larger investors are not necessarily individuals but include trusts and Presbyterian congregations.

Those with more modest sums to invest, below £20,000, are almost all shareholders only and as such entitled to nothing.

Mr Justice Deeny said there was a lack of definition of "creditors" in the relevant legislation.

He referred to case law however and concluded that a shareholder in the PMS would only become a creditor of the Society when he or she has an entitlement to receive the sum which he has paid up on his share.

This would be at the time he or she applied to the Society to withdraw their shares. At that point they would be owed money by the PMS and would become creditors.

Mr Justice Deeny sympathised with those shareholders who have found themselves in difficult circumstances but concluded that the shareholders of the PMS who did not withdraw their shares either before the PMS imposed a 21 day notice period in October 2008 cannot be creditors.

(BMcC/GK)