Collyer Bristow has defeated a £50m professional negligence claim that threatened the financial stability of the firm.
The High Court this morning handed down judgment in the Innovator One trial, rejecting all claims against the firm and two former partners. Allegations of conspiracy, dishonest assistance, and negligence were made against the firm during a 16-week trial in the High Court.
Ruling, Mr Justice Hamblen rejected the group action put forward by 555 claimants, who were advised by Enyo Law partner Michael Green and Four New Square’s John Powell QC.
The case was pivotal for Collyer Bristow, which is currently in dispute with insurance brokers Lockton International over whether the latter would indemnify the claim should the ruling go against it (3 October 2011).
At the heart of the Innovator One dispute were allegations that the firm was in breach of financial services regulation when it advised on products that were promoted as tax efficient investment schemes relating to technology products – the Innovator Schemes. The majority of the tax relief claimed was disallowed by HMRC and extensive class action litigation ensued.
The group action was considered to be the largest funded case of 2008, with £5m worth of litigation funding from Allianz ProzessFinanz and after-the-event insurance covered by QBE and Brit Insurance (22 June 2009).
In a 277-page judgment Hamblen J said that despite documentation relating to the Innovator schemes giving control to the investors, the schemes were not operated in this way and therefore constituted collective investment schemes (CIS) under the Financial Services and Markets Act (FSMA). Consequently, the Innovator Schemes had been unauthorised CISs from the outset.
The judge rejected allegations that Collyer Bristow and its lawyers had been in breach of the FSMA as it was held that they had not “operated” the CISs. The “operator” of a CIS, for FSMA purposes, was held to be “the person responsible for the management of the property as a whole”. The firm received subscription money and paid out disbursements, but did not manage the funds.
The claimants further argued that, having established that the schemes were CISs, they were entitled to recovery of the sums they had invested from all individuals and entities, including Collyer Bristow.
The judge rejected the allegation, stating that the firm had no contractual or trust relationship with individual subscribers.
Commenting on the judgment, Collyer Bristow senior partner John Saner said: “This decision comes at the end of a lengthy and difficult legal process and I’m delighted that our firm has been totally exonerated. The comprehensive judgment handed down today shows that these claims should never have been brought.”
Enyo Law partner Michael Green instructed Four New Square’s John Powell QC to lead Graham Chapman, Shail Patel of the same set.
Beachcroft partner Julian Miller instructed Four New Square’s Justin Fenwick QC and Ben Hubble QC to lead Brendan McGurk of Monckton Chambers.
Byrne & Partners partner Nicola Boulton instructed Four New Square’s Sue Carr QC for John Bailey.
Kingsley Napley partner Sophia Purkis instructed Blackstone Chambers’ Andrew George.