Collyer Bristow's future looks secure as it defeats Innovator One claim
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.”
Claimant lawyers:
Enyo Law partner Michael Green instructed Four New Square’s John Powell QC to lead Graham Chapman, Shail Patel of the same set.
Defendant lawyers:
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.
Berwin Leighton Paisner partner Graham Shear instructed 3 Verulam Buildings’ Angharad Start.
Segens Blount Petre partner Jane Golledge instructed Nigel Meares of 11 Stone Buildings.
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Readers' comments (13)
Anonymous | 18-May-2012 1:09 pm
Looks like a comprehensive defeat, which must cast doubt on Green and Enyo's judgement. Collyer Bristow's costs must also be significant. Who will have to fork out for those?
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Anonymous | 18-May-2012 4:18 pm
@1.09…that’s somewhat harsh and a little naive. Litigation is won and lost on regular basis and all top litigation departments experience defeat. There might be an appeal?
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Anonymous | 18-May-2012 5:51 pm
Yes it's only one defeat but it's a bad one for Enyo. They managed to persuade a third party funder to pump £5m into this case, presumably on the basis of what they considered to be good prospects of success.
It will be more difficult for Enyo to persuade that third party funder (or indeed another third party funder) to back future cases. For a boutique litigation practice that is a real problem - if your USP is that, unlike full service firms, you will take work on a contingency/full CFA/partial CFA basis but you can't secure third party funding to provide cashflow, it presents a problem.
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Martin | 18-May-2012 6:48 pm
Wouldn’t third party funders have done a lot of dd themselves, especially with £5m on the line? Would seem to indicate they thought it a good case also
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Anonymous | 18-May-2012 6:54 pm
Would that be five years work for not very much for Enyo then. Bad judgement or not it makes for lean times
Lets hope there's a compensating Big One in the pipeline
Of course they'll appeal ; no choice surely
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Anonymous | 18-May-2012 10:34 pm
There might indeed be an appeal, if a funder has a lot of money to waste.
The judgment speaks for itself:
http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWHC/Comm/2012/1321.html&query=innovatorone&method=boolean
Wonder if the Claimants have read it. Bet the funders have.
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Anonymous | 19-May-2012 9:20 am
1.09 - Enyo instigated the claim - so this doesn't apply. If it was a difficult claim they should never have let it get to a trial.
The comparison with a top litigation department is, well, naive.
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Anonymous | 20-May-2012 11:32 am
Enyo also lost the Ackerman case against BLP. They were on a CFA on that case too. Their cashflow must have taken a real pummeling
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Anonymous | 21-May-2012 5:40 pm
@9:20 - I suspect one of the reasons why the case got to trial (and then to judgment) was the insurance dispute referred to in the article. I understand the various layers of CB's PI cover may not have been written "back to back" (ie with the same policy wording, especially as regards aggregation of claims). Accordingly, the primary layer was saying it was a single claim (ie only one lot of £2m) and excess layer was saying it was multiple claims. Based on the wording for their particular layer, both could have been correct. Which means there was probably not enough cash to be put on the table on behalf of CB to make the case go away. Had there not been a cover dispute, methinks enough would have been offered to see the case settle. Agree with those comments above about this result having a very negative impact on Enyo's bottom line.
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Jon | 22-May-2012 0:29 am
The adverse findings are largely factual, so an appeal looks pointless. One of my friends took part in this scheme and was consistently told the case was a winner - not only before but during and after trial. I don't know what trial the lawyers were watching but evidently not the same one as the judge. This case really does raise questions. This isn't a case of the investors "wanting their day in court". They didn't. What they wanted, well certainly what my friend wanted, was some of his money back. One has to question why the lawyers took what was clearly always a bad case to the nth degree.
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