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December 6, 2010

The Body vs the bank

By Spear's

As nights draw in and darkness reaches its fullest power, a single candle of good news shines a bright light. And when Elle Macpherson is holding that candle, we’re talking solar

As nights draw in and darkness reaches its fullest power, a single candle of good news shines a bright light. And when Elle Macpherson is holding that candle, we’re talking solar.

The good news is that Elle’s clever lawyers at Speechly Bircham (with whom Spear’s has hosted seminars) have rescued her affairs after a skid over a treacherous icy patch. For Elle was collaterally damaged by the collapse of one of the Iceland banks: she had taken out a mortgage from Kaupthing for a house in London, and had used – as is perfectly regular, her lawyer Charles Gothard says – a nominee company, so her purchase would be anonymous. In return, KSF had asked for security, which she deposited in her own name.

Now, when a bank collapses one person’s deposits are regularly set-off against their borrowings, as a simple way of working out whether they owe the bank or the bank owes them, and Elle believed that this would happen for her. However, because a person was the depositor but a company was the borrower, the liquidators refused to do this.

After a plucky battle in an Isle of Man courtroom, involving the summoning of eighteenth-century laws as no precedent existed for such a case, the Body was victorious: because she was the beneficiary of the company, it was equivalent to it having been bought in her name.


 
Charles says that while this might seem recondite, it is now more relevant to HNWs than ever – five years ago, no-one dreamed of banks collapsing; now it is de rigueur for any financially-embarrassed society and there will be many more off-putting set-offs to come.

‘Spear’s readers,’ he says, ‘will have property held through nominee companies to protect their privacy and they will have offshore mortgages with deposits. If they have found themselves in a situation with the same difficulty, they can now rely on this case as a precedent.’

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