Dibb Lupton Broomhead is intensifying its work for the action group representing investors who lost money with crashed financial adviser Knight Williams.
The firm has recruited leading insolvency practitioner Neil Cooper, partner at accountants Robson Rhodes, and is formulating a strategy to help win compensation for what is thought to be £8 million in losses among more than 400, largely retired, investors.
Neil Micklethwaite, Dibbs' litigation chief who is leading the pro bono team, said he “cannot discount the possibility” of suing Knight Williams' individual directors.
“We will look to assess what legal rights and claims they have against all parties,” said Micklethwaite. However, he and Cooper said that lengthy and costly litigation would not be the best option for the investors because so many are of retirement age.
The directors put their company into voluntary liquidation this summer after the Securities and Investments Board (SIB) and its accountants Ernst & Young indicated that at least £3 million in compensation was payable to some investors.
The best option, he said, was “to get the Investors Compensation Scheme or a special levy organised by SIB and the Treasury to pay out the investors after some analysis of their individual cases”. This would require analysing original ICS reasons for not paying out to certain investors.
Micklethwaite shared a press platform last week with Cooper, Knight Williams investors action group chair Kenneth Jordan, and Jordan's MP Sir Anthony Knight, who has led a cross-party group of MPs in their call for action on the investors' behalf.
Cooper said his firm was “delighted” to offer its pro bono services to the case. Just because there was a loss it did not mean there is a claim, he said, but added: “There has been enough finding here from one body or another to give rise to the belief that these investors do have claims, so the issue becomes one of quantum and timing.”
Micklethwaite described a three-point “initial work plan” between Dibbs and Robson Rhodes:
Get to the core of the problem by categorising rule breaches which have occurred in Knight Williams' sale of products, ie the foundation or suggestion that compensation should be payable to the investors, as established by SIB and Ernst & Young (on SIB's behalf) in the past. The regulators are restricted in their ability to give information on this to Dibbs and Robson Rhodes, so they have to do the ground-work themselves. This includes “identifying the regulatory failures” in the past two years in order to “put pressure into the system” and to identify why the ICS rejected some claims. The Dibbs team will have to convince regulators that all investors have a case.
The team will also have to identify what private rights of actions some of the investors may have against various companies or their principals. “It is not our wish to find a solution through litigation,” said Micklethwaite.
To investigate the £15 million sale of part of the Knight Williams business to merchant bank Singer & Friedlander and look at where the purchase consideration for the sale of those assets went. This will enable the Dibbs team to see if it can assist liquidators Arthur Andersen (advised by Denton Hall) in any claims it may have to cover any part of that money to the benefit of liquidation. At the same time, to try to put together the investor group's claim as creditors to the liquidation.
Cooper said the investors' case would be influential as a possible precedent. “Wherever there are cases like this, where regulatory systems are found wanting, those systems improve…they are still forming.”