Collyer Bristow is expected to face two major professional negligence claims next year after the Court of Appeal (CoA) ruled last week that the £50m Innovator One claim could proceed to appeal.
The firm is also facing a multi-million pound claim from the liquidators of Rangers Football Club, Cohen & Stephen, which allege that the firm was involved in a “deliberate deception” in relation to former partner Gary Withey’s role in businessman Craig Whyte’s 2011 takeover of the club.
The Innovator One claim threatened to undermine the financial stability of Collyer Bristow after it emerged that the firm was in dispute with its professional indemnity brokers, Lockton International, over whether the latter would indemnify the claim should the ruling go against it (3 October 2011).
In May, Mr Justice Hamblen threw out claims pursued by 555 claimants, in which it was alleged that the firm was in breach of financial services regulations when it advised on products that were promoted as tax-efficient investment schemes relating to technology products – the Innovator Schemes (18 May 2012). The majority of the tax relief claimed was disallowed by HMRC and extensive class action litigation ensued.
Allegations of conspiracy, dishonest assistance, and negligence were made against the firm during the 16-week trial in the High Court.
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.
Last week (4 December 2012) Lord Justices Longmore and Lloyd said the claimants’ appeal could go ahead, concluding that: “This will be an extremely burdensome appeal which will need two chancery [judges] and one commercial [judge].”
The judgment does not stipulate on what grounds the appeal has been allowed, but lawyers familiar with the case said it would most likely be related to breach of trust and breach of fiduciary duty.
Collyer Bristow said the High Court ruling was a “narrow win” for the claimants, who were represented by Enyo Law partner Michael Green and Four New Square’s John Powell QC. The firm added that the claimants had been refused leave to appeal on the ‘headline’ claims of negligence, fraud, conspiracy and dishonest assistance.
Nevertheless, the claimants are entitled to bring their claim for £50m in full.
The case was believed 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).
The firm was not represented at the written appeal stage.