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THE 850 pensioners of collapsed company Belling, victims of an alleged fraud by former solicitor Charles Deacon, will only benefit from £600,000 in Law Society compensation rather than the £2.25 million claimed.
The society's decision to pay anything out at all will be some relief to the pensioners and Law Debenture Trust, which handles their fund.
The payment, including legal fees, comes after the society twice decided not to meet the claim from Law Debenture, and after a subsequent High Court decision to grant leave for Law Debenture to apply for judicial review.
The society says it "accepted that the Belling Pension Fund suffered a loss in consequence of the dishonesty of Mr Deacon" and so had a discretion to make a grant. But it argues that the fund's original trustees "were also responsible for the loss, which would not have occurred had they not wrongfully removed the fund's money".
In a letter to Law Debenture from the society, it explains in detail a catalogue of errors by the original trustees whom it considers were "acting in breach of trust...[and]...had been grossly negligent".
The compensation committee accordingly chose to reduce its payout to the Belling pension fund as a contribution to its losses.
The roots of the case lie in an arrangement by Belling trustees in 1991 to transfer
$3.5 million from the fund in order to pay one year's interest required up front to secure a
$50 million loan, in favour of the Belling company, from Global Prospect Funding.
The trustees' gross negligence arises from their failing to take legal advice on a transaction which they were in fact not entitled to carry out. They carried out no company search on Global and had no personal knowledge of Deacon, who was acting for Global.
The committee concluded that "the trustees' wrongful acts were a substantial factor contributing to the loss".
Law Debenture says it welcomes the society's change of heart. However, it says it must look at the impact of the £600,000 on the financial position of the fund. Law Debenture may pursue other avenues of recourse with other Belling players.