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05 NOVEMBER 08
Funds in flight – payment requests made by customers prior to the date of my appointment
At the date of my appointment as Liquidator Provisionally of Kaupthing Singer & Friedlander (Isle of Man) Limited (“the Bank”) on 9 October 2008, there were a large number of payment transactions which had been requested by customers but which had not reached their payment destination. Over the last couple of weeks we have sought to clarify the precise position in respect of these transactions. This has involved an extensive reconciliation exercise and liaison with other Banks and with the Administrators of Kaupthing Singer & Friedlander Ltd (in administration) (“Kaupthing UK”).
This identified the following different scenarios:-
a) In respect of certain of the transactions, no instructions had been issued to any of the Bank’s clearing facilities to effect an actual payment of the amount concerned.
b) In respect of some transactions, whilst instructions had been issued to the clearing facilities these had not been processed due to lack of funds in the Bank’s accounts with these facilities. This was in turn due to funds not being remitted from the Bank’s accounts with Kaupthing UK which entered into Administration on 8th October 2008.
c) In respect of the majority of sterling transactions, the Bank used its own account with its sister company, Kaupthing UK to process payment requests from its customers. We understand that although the Bank included a number of transactions in batches of entries sent to Kaupthing UK for processing by them out of the Bank’s account with them, these had in turn:-
i) either not been processed by Kaupthing UK through its own clearing facilities with RBS at the time that company entered into administration,
ii) or had been processed but not cleared before the administration appointment had the impact of freezing the Bank’s account with Kaupthing UK
d) In respect of a handful of transactions an error had been made in the information provided to the clearing bank concerned and the transaction had been “bounced” back to the Bank’s account.
We have sought legal advice in respect of how all such transactions should be treated, including obtaining an opinion from leading Counsel in the UK. This advice has confirmed that following the presentation of a petition to wind up the Bank and the suspension of the Bank’s banking licence on 8 October, I (or any Liquidator if one is appointed in due course) am unfortunately not in a position to now effect the transfers requested by customers prior to the date of petition.
There have been suggestions that some kind of trust claim or proprietary interest arises in favour of a customer in circumstances where (i) instructions were given by the customer, prior to the appointment of the Liquidator Provisionally, for a funds transfer to an account of the customer at another bank, and (ii) the inter-bank transactions required to effect such instructions were not completed (by the appropriate credit being made to the customer's account at the recipient bank) prior to my appointment. Whilst customers may wish to seek their own advice upon these points, I have sought legal advice in this regard and am advised that such suggestions are incorrect and that instructions for a funds transfer give rise to no trust claim or propriety interest.
I shall accordingly be making arrangements for letters to be sent to the customers concerned and for their accounts with the Bank to be re-credited, as at the date of the initial debit entry, with the relevant amount, including any accompanying transaction charges. Following the hearing of the petition for the formal winding up of the Bank, on 27 November 2008, if a Liquidator is appointed, customers will be contacted with regard to the process for claiming monies owed to them.
Contacts
As previously, the best way to make contact is to write to the bank or to email branch@kaupthing.com. If you need to telephone the bank, please use the main switchboard number +44 1624 699222 but we would advise that we are continuing to experience a high level of calls and as a result there may be delays in answering the phones.
Mike Simpson
Liquidator Provisionally
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