The Commercial Court has given some recent insight into what goes on behind the scenes at a poor financial advice firm – Liberty Partnership Ltd v Tancred  EWHC 2707 (Comm)
Mr & Mrs Tancred ran GD Tancred Financial Services Ltd for many years and, in 2007, sold it to Liberty Partnership Ltd. After the sale a number of complaints arose from past business costing Liberty quite dearly.
When selling the business the Tancreds had to make warranties and assurances regarding the work they had done as this can affect the new owners. These are fairly ordinary warranties in this type of transaction and for a well run business do not present any major issue.
However, Mr & Mrs Tancred are alleged to have been less than forthcoming regarding complaints and regulatory compliance issues they had faced. This has had consequences for Liberty and would have affected the sale price.
The case heard so far is a preliminary issue to decide if the case has been brought inside the time limits. Liberty had to prove that the Tancreds wilfully concealed (or were otherwise fraudulent or dishonest) in respect of each matter complained of in order for the time limits not to apply and the claim to be brought. This is an ordinary feature of English law designed to ensure that the dishonest and fraudulent cannot rely upon a time bar arising out of their dishonesty or fraud. It is accepted that the standard of proof is unchanged from the ordinary civil standard but that there is a reluctance to find dishonesty without clear evidence. So the court determined that the important questions it had to answer were:
- “Whether there was wilful concealment of the FSA letter dated 24 June 2005 and the letter in response dated 4 July 2005.
- Whether there was wilful concealment of the true extent of Ms McKenna’s involvement in the Company’s pension transfer transactions.
- Whether there was wilful concealment of breaches of a warranty stating that 360 Services had assumed compliance of all income drawdown products sold by the Company.
- Whether there was wilful concealment of a failure to comply with an FSA requirement that the Company should send a letter “in a form… signed off by an external compliance consultant, and to the satisfaction of the FSA, to all existing income withdrawal customers…”
- Whether there was wilful concealment of complaints alleged by the Claimant to have been made before the SPA by customers surnamed Aldous, Fox, Holling, Isaacs, Johnson, Smith and Vickers.
- Whether there was wilful concealment of matters which eventually gave rise to complaints made after the SPA by customers surnamed Allen, Bloodworth, Clarke, Drury, Holloway, Hornsby, Lingard, Smalley, Smith, Trout, Upex, Vesty and Vickers.
- Whether any claims which I may find to have been wilfully concealed under the various issues just identified will not only be outside the contractual limitation period (by reason of the wilful concealment) but will also entitle the Claimant to pursue other similar claims.”
This does mean that the court has to hear the substance of the case, that is whether or not the Tancreds are in breach of the sale agreement, but that a swathe of key findings have been made regarding what occurred. Ultimately the court allowed iii through v to proceed to full trial.
From a consumer perspective the exploration of how the Tancreds ran their business improperly is most useful. It is far from uncommon to see allegations that what the paper file provided by an advisor says against what the consumer says occurred. Mr Tancred was referred to by the judge (at paragraph 137) as a fast-talking salesman who failed to recognise that complaints were upheld because they were his fault and the FSA and consultants had identified problems with how he acted. The judge acknowledged (at paragraph 155) Mr Tancred’s utter incomprehension of his own fallability and noted the Mr Tancred would have wrongly rejected complaints which were later upheld by the FOS.
This type of fast-talking salesman is, fortunately, not too common these days. However, that kind of approach has in the past caused significant losses for clients. The lack of proper complaints handling has left many people feeling unable to do anything – when in fact the duty on a firm is to address the complaint and consider it properly, and then to signpost the FOS.
The complaints where Mr Tancred was wholly failing to acknowledge his culpability or the possibility he was wrong could not proceed as the court could not find he wilfully concealed something he did not acknowledge.
However when it came to consider the obligation for a pension transfer specialist to approve any pension transfer advice (point iii); and the later involvement of compliance consultants in relation to income drawdown advice (point iv) there was good objective evidence from the external parties which contradicted the Tancred’s case and the judge found that there had been deliberate concealment.
With both of these external consultants Mr Tancred was obliged to have them approve specialist types of advice. The judge found that whilst some cases were certainly sent to be approved that none of them actually received approval from the external consultant. Furthermore that a lump sum cheque was produced very late as if to pay the pension consultant for approving advice – when the Tancreds were claiming that individual payments had been made by cheque for each case. This was particularly unimpressive as it was found to be a step to create a false paper trail.
The other issue which will proceed is that the Tancreds were required to write to all their income drawdown clients in terms ordered by the FSA to tell them that they could rearrange their drawdown arrangements at no cost. Liberty brought several witnesses who were supposed to receive this letter – none of them had done.
Ultimately, the judge was compelled to find that where he could not discern wilful concealment that the claims were outside the time limit. Therefore the trial will be about the pension transfer consultant, the compliance consultants and the FSA disciplinary action mailshot
This is a particularly egregious example of misbehaviour but, shows that fast acting clients who pressed their complaints to the Financial Ombudsman did obtain effective redress.
If you are unsure about a complaint it is vital to get good advice from an experienced financial services and pensions barrister quickly to protect your position.