Montagu to pay pounds 170m in B&C settlement

JOHN WILLCOCK

Financial Correspondent

Samuel Montagu, the merchant bank owned by HSBC, is to pay pounds 160m plus pounds 10m costs in an out-of-court settlement to the administrators of British & Commonwealth, the crashed financial conglomerate built up by John Gunn in the 1980s.

This represents the UK's biggest single payment on record to creditors of a bust company.

Sir William Purves, chairman of HSBC, intervened personally to engineer a settlement of the complex "Quadrex" litigation which has dragged on for seven years.

The deal clears the way for a payout by the administrators of a further pounds 227m, representing 15p in the pound to creditors of B&C Holdings and 5p in the pound to those of B&C Group Finance.

The administrators, Stephen Adamson of Ernst & Young and Peter Phillips of Buchler Phillips, are in the process of distributing a total of pounds 1.25bn.

The biggest creditor is Law Debenture Corporation, which is trustee to a number of pension fund investments. Others owed large sums include Barclays, Midland, Royal Bank of Scotland, Credit Lyonnais and Chase Manhattan.

The case concerned the aborted sale of B&C's money-broking division to Quadrex in 1987.

Mr Gunn, now no longer connected with B&C, agreed to sell the money-broking side to Qaudrex, then run by American entrepreneur Gary Klesch. Following the collapse of stockmarkets in October 1987 Quadrex pulled out of the deal, and B&C then sued the company and the adviser on the deal, Samuel Montagu. B&C claimed that the merchant bank had underwritten the deal, while the bank denied this.

B&C then lost pounds 500m over the disastrous acquisition of Atlantic Computers - still the subject of litigation. B&C went into administration in 1990 with debts of pounds 1bn. Mr Phillips was appointed co-administrator and took over the legal case against Hill Samuel. Quadrex had since collapsed, leaving nothing to sue.

Yesterday's settlement was welcomed by Mr Phillips as "brilliant news" but leaves a number of remaining problems. Mr Gunn is still facing disqualification proceedings as a director by the Department of Trade and Industry. And the administrators are fighting a pounds 150m legal claim by the Inland Revenue concerning the sale of Telerate by B&C in 1985.

The administrators are also suing BZW, the investment bank owned by Barclays, and Spicer & Oppenheim, an accountancy firm now part of Touche Ross, for well over pounds 600m.