PMS shareholders not creditors

When I mentioned the UK’s Treasury Committee evidence gathering at Stormont on the illegally operating Prebyterian Mutual Society [PMS], the PMS adminstrator was still waiting for a ruling on his firm’s application for a five year extension to their current contract. He appears to be still waiting for that ruling. But, in the meantime, Mr Justice Deeney has ruled that shareholders with £20,000 or less invested in the society cannot legally be classed as creditors unless they had applied to withdraw that money prior to October 2008. The ruling clarifies who is eligible to be paid first from the £20million the society has reportedly generated since it went into administration.

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  • joeCanuck

    Bad news for the small savers. Fairly typical though, the big and powerful always come out on top.

  • Drumlins Rock

    To be fair it was quite a long shot on the administrators part and the odds were against him being able to re-write the rules after the fact, good on him for at least trying to stand up for the small savers but it seems a mechanism that was introduced I guess to stop idividuals having too much say has backfired in this case, dont rule out the possibility the decision could be appealed as it raises important points of law that a higher court may choose to consider.

  • joeCanuck

    Your Da still left hanging, DR?

  • Drumlins Rock

    yup, waiting for El Gordano to ride to the rescue!

  • Rory Carr

    Think of it this way, Joe:

    A race-horse trainer spots a colt at auction that he believes has sufficient pedigree and appearance to turn into a winning racehorse. He persuades 100 investors to cough up £20k each to make the purchase price of £2m. They do so in the hope that their ivestment will pay off in a winning streak that will enhance the horse’s future reputation at stud when they will all reap the rewards for their sound judgement.

    Over and above the purchase price however there are stabling and training fees and jockey fees and veterinary bills to be paid and in order to finance these costs loans are raised to the tune of £1m, some from among existing shareholders and some from other individuals. Interest is payable on these loans and the loans themselves are for a fixed period before repayment falls due although a rollover can be negotiated.

    Alas! the colt turns out to be a dud. There are no winnings and the horse’s value slumps. It is decided to sell him trusting that his pedigree line will trump his own racing failure in the eyes of potential buyers who wish to turn him to stud. The sale realises £1m.

    There are creditors outstanding for expenses incurred and of course there is the small matter of the £im due in loans. Among these the return from the sale must be divided. As for the original investors, the shareholders..well, sorry mate, they will simply have to lump it. They gambled thinking they were assured of winning and already counting those unhatched chickens but gambling it was and beaten dockets merit no pay-out.

    Tough – but, there you go.

  • joeCanuck

    Rory,

    I agree with what you say; I lost money in investments myself.
    But it seems that some, at least, of the small fry were duped into believing they were saving like in a Credit Union. Perhaps that’s an actionable case but who could afford it unless there was a criminal act?

  • David Crookes

    Many thanks for a finely crafted piece of work, Rory. Should we taxpayers cover the PMS losses? No! If the PMS savers had all made a tremendous profit, they wouldn’t be looking to share any of that profit with us taxpayers. Life is tough. I was appalled that at a time of crisis a clergyman attempted to drop the monopoly-men of the PMS on to the political chessboard IN THE NAME OF UNIONISM.

    Let us not learn our economics from Sir Epicure Mammon and the late Archbishop Marcinkus.

  • bohereen

    exactly.
    No one is compensating me for the loss in value in my investment, my house.

  • Framer

    It was a waste of time, and more importantly, money PMS taking this case at all.

    Nothing to do with the powerful Joe, simply the words on paper which said one category of saver/investor had a different status from the other.

    If Brown and Darling can bail out everyone – beyond the £50,000 guarantee – who invested in the Icelandic bank, Landsbanki, the UK can do the same for the PMS. And should.

    Landsbanki has cost us £4,500,000,000.

    The PMS would cost us perhaps £75m but it does have assets which would in time come in towards repayment.

  • David Crookes

    I’ve got it. Ask our Great American Benefactor for the necessary £75m. That’s nothing! Twenty years’ salary for fifty new commissioners that we’ll all volunteer to do without.

  • Drumlins Rock

    David, looking at what Mr. Feeny choses to fund fund, Presbyterians come pretty low down the list.

    Joe, it was basically a “Super Credit-Union” all the terminology use was exactly the same, and as anyone knows money saved in a credit union is called “Shares” which never increase in value, but a “dividend” is paid, which in reality is interest.

    Rory, the return people expected was comparable to a good bank savings account, no-one believed it was risky, in fact you money was safer in the PMS that it would have been in Northern Rock, Drumfernline or any of the Icelandic banks, the difference is those savers can vote for Labour, we cant.

  • Rory Carr

    Yet it remains, Drumlin’s Rock, that the PMS, on behalf of its shareholders, took out loans and the repayment of these loans surely must take preference over any amelioration of loss that the shareholders suffer as a result of their investment.

    The shareholders cannot expect to be treated on the same footing and it was naive in the extreme (if not downright cheeky) of them to seek such parity of treatment.