HOWZAT

One damaging impact would be an extreme reluctance by investors to put their money into UK banks, as property rights would be regarded unsafe.

Professor Congdon said: “The key issue here is the vulnerability of property rights in banks’ equity. If the 2008 Act is valid law, the British Government - in cahoots with the Bank of England and the Financial Services Authority - can in effect steal the banks from their shareholders.” John Reynolds, dispute resolution partner with White & Case, said: “At the time, the nationalisation of Northern Rock was regarded as a one-off.

“In fact it as the blueprint for much of what followed. The case is about the fairness of the compensation scheme that the Government has imposed andn the outcome will effect not only Northern Rock shareholders, but potentially the shareholders of other banks, which are subject to state intervention, now or in the future.”

David Greene, a litigator with the law firm Edwin Coe LLP who represents some of the shareholders, said: “The shareholders do not challenge the nationalisation itself, but the statutory criteria established for the valuation process.”

Those criteria required the valuer (assessing the bank’s worth) to assume, “contrary to the facts”, that financial help provided by the Bank of England or to the Treasury had been withdrawn; that none would be provided in future and that Northern Rock could not continue as a “going concern.” But the shareholders insist that - as stated by the Treasury and Bank of England before and after nationalisation - Northern Rock was and remains a solvent institution, he said.

Yesterday the shareholders, whose representative body is the UK Shareholders Association, will mount a series of public demonstrations outside the Royal Courts of Justice and and elsewhere in London.

CASE STUDY

Dennis Grainger was an employee at Northern Rock for ten years until he retired in 2007.

Like 40 per cent of its 8000-plus employees, he took part in the company’s “share save” schemes, contributing £250 a month, the maximum possible from his salary.

He also took part in an approved profit share scheme and a share incentive plan, which with bonuses saw him acquiring a total of 7,195 shares over his ten years.

“I put my money into the company’s shares to provide for my retirement,” Mr Grainger said. “In terms of what I have lost, at one point it was worth well over £114,000 which is gone completely unless some value is attached to the Northern Rock shares.

Mr Grainger, 62, who lives with his wife Maxine at Cramlington, near Newcastle, is now head of the Northern Rock Action Group and been devoting what should have been his retirement to working forund the clock to fight the cause of his fellow shareholders.

“The reason I feel strongly is that the majority of these people were not speculators or gamblers, they were never going to touch their shares. In about 94 per cent of the cases, they received the shares when the company demutualised (floated as a public company) and knew absolutely nothing about how to buy or sell a share.”

Many of the shareholders, who were either savers in the bank or staff, were now pensioners in their sixties and seventies - some even in their 90s - and had been badly hit, some unable to pay off mortgages as they had planned, he said.

“This case is about the Governrment confiscating people’s property in an act rushed through Parliament and rigging the terms so no compensation was payable.”

“That’s why I am fighting it. It’s not the money, it’s because of the way these small shareholders, genuine people - the ordinary Joes, your grandmother, mine - who were not speculators, have been rubbished and sacrificed, and have really suffered because of the actions of a very high-handed Government.”

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