Cases

Expert Evidence Limited is a specialist in dispute resolution with financial institutions and over the last few years and has been involved in cases with the following themes:

Interest Rate Swap mis-selling cases.

Expert Evidence has been involved in a number of cases involving the mis-selling of Interest Rate Swap Agreements (‘IRSAs’) both to private individuals and also small and medium sized enterprises (‘SMEs’). The IRSAs come in a whole range of different types from Collars, Caps and Fixed Rate agreements which use the derivative markets to produce the results over a fixed period of time. In the majority of cases the agreements do not match the time period of the underlying loans they were seeking to reduce the risk on. In general the agreements come under the legislation relating to investments and so the Financial Services Authority Conduct of Business Rules apply.

Internet banking and vishing attacks – dispute with bank concerning responsibility for fraudulent payments.

The concern here was the duty of care expected from banks when fraudulent payments had been made from a customer’s internet banking system after it had been compromised by external fraudsters (‘vishing‘) obtaining access to genuine profiles.
Our expert reviewed the papers and concluded it was relevant for them to discuss with their bank the level of care a bank should take when highly unusual transactions pass across a business account and the timely action the bank should take to minimize any loss.

This is becoming an increasing problem both for customers and banks. Customers need to be aware to the internal bank procedures which are aimed at reducing the risk of such frauds being successful. It is not just the customer who has responsibilities.

Tax Case – Compulsory Purchase Order.

A compulsory purchase order compensation case where the claimant sought not only the price but the Capital Gains Tax (‘CGT‘) arising on the forced sale, because in a normal sale, the tax could have been avoided. Overturning previous case law authority, the Upper Tier Tribunal agreed that in theory the CGT is claimable provided the loss is shown, i.e. the statutory roll over relief is not available and the tax could have been avoided or passed on to the purchaser.

Tax Case – Stamp duty or not? (settled)

A Professional Indemnity Insurance (‘PII‘) claim against advisers for a reclaim of stamp duty reserve tax. This can be reclaimed within 6 years if the contract fails. However, the advisers incorrectly paid stamp duty, which is harder to reclaim and has a 2 year time limit in any event. Once it became clear to the lawyers what had occurred the case was resolved.

Inappropriate actions by offshore trustees on behalf of beneficiaries.

Over the years many clients have used the facility of a trust structure usually based in an offshore location. It is important that the Trustees act in a fiduciary capacity for all the beneficiaries and frequently some of the beneficiaries believe that the Trustees have not acted appropriately. At Expert Evidence we have advised on how Trustees have undertaken their role and whether a case exists for compensation of those which have been disadvantaged. It frequently involves the investment actions taken by Trustees on the funds held in the Trust. Consideration of the investment environment and basis of the investment decisions is highly pertinent to the consideration of the evidence.

Professional Indemnity cases brought against solicitors, surveyors and independent financial advisors (‘IFAs‘).

Given the traumas of the investment markets over the 2007-2009 period, a number of clients and banks have lost substantial funds which are considered caused by the actions by professionals who have provided advice. Expert Evidence has considered a number of cases on behalf of the Banks and also Professional Indemnity insurers and determined if there is a cause for action or not. Professional advisors can include Solicitors, Surveyors, Independent Financial Advisors and Investment Managers which need to act in an appropriate fashion to avoid charges of negligence. Consideration of the investment environment and basis of the professional decisions is highly pertinent to the consideration of the evidence.

Derivative mis-selling cases.

Derivatives, including Puts , Calls, Futures, Options and complicated structures are frequently provided as a risk mitigation strategy to clients. While they may also have substantial benefits, sadly they frequently carry other risks which may result in financial loss in certain circumstances. However it is important that clients understand what they are doing and the risk associated with the investment instruments provided. In many cases this would require the clients to be sophisticated investors and it is required that the providing financial institution ensures that this duty is carried out correctly under the rules. Expert Evidence has advised on a number of cases where the clients have realised substantial losses and the determination of the appropriateness of the strategy proposed needs to be considered.

Contract for differences cases.

Contracts for Differences are much used investment instruments due to the ease of dealing, ability to gear the exposure and the favourable taxation treatment. As a result many clients have chosen to deal through this medium. However they also can have additional risks particularly as the liability under the management agreement can be very substantial. Where there have been major movements in the underlying stock market, so clients have sometimes found that the risk level has been under-estimated and returns have not met their expectations. Insider dealing and normal investment requirements for clients still apply.

A case which was brought against a firm of accountants which had been involved with a client who had taken out a multi-currency mortgage.

Multi-Currency mortgages have been popular with some clients due to the lower interest rate environment for a number of other of the international traded currencies particularly the Swiss Franc, Yen and Euro. At Expert Evidence we have been requested to provide advice on the appropriateness and suitability of the product as well as the on-going supervision of the mortgage loan during its life. Once again the products carry their own risks particularly in the area of currency exposure which clients need to appreciate and can cause significant loss.

Situation where a client had provided an order which was misinterpreted by the Investment Manager.

The relationship between a bank and their clients can take many forms and usually involves a specially appointed person to represent the financial institution with the client. This can lead to a high level of service but it also has got risks where a Relationship Manager misinterprets a client instruction. The result is that an order may be not executed as a client may have required and when substantial loss occurs the situation can be examined with greater scrutiny.

Investor Classification.

Expert Evidence has been involved with a large number of cases which have primarily been determined by the investment sophistication of the clients and whether the work conducted by the financial institution was “suitable” and “appropriate” as required under the FSA Conduct of Business Sourcebook. The UK regulatory environment has strict rules determining the way that investors are categorised into Retail and Professional investors at the outset of a relationship to provide investment services. Expert Evidence has advised on a range of situations involving Unit Trusts, Structured Products, Interest Rate Swaps and Derivatives to determine the knowledge level of the underlying clients and the investment institutions responsibilities.

International Cases.

Expert Evidence has a wide international experience and has advised on cases being heard in England, the offshore islands (being Jersey Guernsey and Isle of Man), Ireland and also the Caribbean, the Americas, the Middle East (including the DIFC), and Australasia. Each jurisdiction has its own regulatory environment as well as the requirements on experts giving evidence to their courts. Expert Evidence is pleased to have a wide range of experts familiar with all the above, after all banking if often an international and global activity.

Offshore Clients which had a Portfolio and were represented by Offshore and Onshore Banks, Investment Advisors and Managers.

It is frequently the case that clients will have their investment account with an offshore bank although the account will be managed and/or advised by managers in one of the world’s main financial centres. This is intended to provide the benefits of tax efficiency yet also that the managers are near the heart of the financial community. In some cases the clients will have their custody arrangements in a third location and also the facility of onshore bank accounts and credit cards for their day-to-day expenditure requirements. Whilst highly beneficial in theory, these arrangements have been seen to cause issues for some clients and in a minority of cases they have believed that this will give them a cause for action. Expert Evidence has advised in a number of cases where problems have been brought to light and sought to advise both the banks and clients on the merits of the case.

A portfolio which had been managed with an inappropriate risk profile and substantial costs had been incurred through investment in over risky assets.

The turmoil in the world’s financial markets during 2008 caused many asset classes to react in a way that was highly unpredictable. Whilst every effort was made to invest the funds correctly, the losses incurred may have been totally different to those that clients were led to believe was possible. In some cases the losses have been highly substantial and clients have sought to seek redress. The cases will be decided by the detail of the advice given to clients and the investment experience of the clients themselves. In cases where the concentration of investments in highly risky areas do not fit the clients risk profile, then there may well be a case of negligence by the investment manager in discretionary managed portfolios. For advisory portfolio, it will depend often on where the investment idea was initiated. The normal FSA rules needed to be obeyed in all cases.

Tax Case – Commercial dispute (unreported)

The parties had swapped high value cars and some equality monies. However what is a car for Value Added Tax (‘VAT‘) purposes and was VAT chargeable? Our expert reviewed the papers and concluded it was not relevant to the dispute. The Judge agreed and the Defendants counterclaim for the extra VAT failed because even if VAT was due, the contract made it clear the price was not VAT exclusive.

Investment Managers obligations in the provision of advice.

Since the introduction of the Conduct of Business Sourcebook Rules (‘COBS‘) on the 1st November 2007, the requirements on investment manager has become significantly more onerous on understanding the particular circumstances of the clients and their background in relation to the investment markets. This is normally referred to as Appropriateness and Suitability which needs to be satisfied for all retail clients. The investment requirements in the case of more sophisticated clients, usually called intermediate clients, is significantly less but then the investment institution must be able to show that the client has appropriately classified. This area has led to many cases over the years and Expert Evidence has advised in a number of situations where the case has been decided on these requirements.

Independent Financial Advisors obligations to Clients.

The role of the independent financial advisor (‘IFA‘) has been very general and can include almost any area where the finances of their clients are concerned. The majority of IFAs deal with clients who are looking for advice in the fields of investment and insurance. Many of the IFAs have traditionally received their income from the product providers and this is thought to have led to a conflict of interest between the IFAs and their clients. As a result many IFAs are looking to move to a fee based approach paid by the clients. The IFAs role has now been additionally complicated by the introduction of the Retail Distribution Review. All these areas are where disputes between the IFA and their clients can arise.

Clients which had suffered loss through foreclosure of a loan arrangement.

Banking relationships with clients are very different to investment relationships but have some of the underlying requirements. The issues of Payment Protection Insurance (‘PPI‘) insurance have been highly material in recent years but whatever the situation the Bank retains a duty of care to its clients. The issues found in the termination of banking facilities or even the foreclosure are fraught as the bank is by this stage seeks to protect its position and it can have a material detrimental effect on the clients. This process needs to be managed correctly by the bank and clients should normally be provided with an opportunity to correct an adverse situation and be treated fairly through the process. Expert Evidence has been involved with a number of tricky situations, particularly where it involves a largely illiquid market for the asset collateral.

Investment managers obligations in execution of client instructions.

Client instructions to an investment manager need to be executed promptly and professionally at the best price available in the market at that time (Best Execution Requirements of Conduct of Business Sourcebook (‘COBS‘)). Occasionally an order can be lost or delayed which can be highly frustrating to clients in a fast moving market. The situation becomes more complex when it involves a limit order that may sit on the market for an extended period (sometimes many days) although these types of error have become rarer with more sophisticated dealing room software.

A reporting error in the quarterly valuations sent to the client, which showed a grossly inflated valuation.

Occasionally some of the highly complex investment instruments are not correctly recorded by the investment institution and so continual errors can be made in the periodic reporting that is sent to clients. Whilst these situations can be highly upsetting for the clients and cause significant distress, it is normally not a situation where a liability for redress would be made. Expert Evidence has advised in relation to a number of situations which have arisen and sought successful resolution of the case.

Deduction for US income tax made when client had not completed appropriate documentation.

International tax has become ever more complicated and financial institutions usually have a responsibility to deduct some withholding tax at source. This has become much more important in recent years with the introduction of the Foreign Account Tax Compliance Act (‘FATCA‘) legislation by the US. This follows the parallel regime set up to create Qualified Intermediaries (‘QIs’) which related to investments. Clients may object to not receiving their income gross but institutions have their own requirements from their National Governments which have to be applied.

Civil case on liability where a Ponzi scheme was being operated.

Expert Evidence has provided advice to a trial involving a Ponzi scheme which was conducted alongside and within a trading company. Very large sums of money were invested in a non-existent business ideas and bank statements and invoices were fabricated to make it appear that all was proceeding according to plan. Expert Evidence advised on the point at which the bank which was providing corporate banking facilities to the company should have realised that criminal activity was being perpetrated and on the liability of the bank. Although the core of the issue was criminal activity, this case was brought under the civil procedure rules and focused on the responsibility of the bank to investors in a company rather than the actually account holders and authorised individuals from the company.

Confiscation of assets where no criminal case had been successful.

The case focused on the ability of the authorities to confiscate assets where various banking instruments had been presented to financial institutions. Expert Evidence advised on the normality of the banking instruments which included Bills of Lading, Conditional Guarantees, and Banking Purchase Orders. Some of the documents contained either errors and/or red flags and/or contained conditions which made them worthless. The authorities sought confiscation of assets held in the UK through the English Courts.

Criminal cases involving Fraud, Confiscation of Assets, Money Laundering and Insider Dealing.

Expert Evidence also has a wealth of experience in dealing with a whole range of Criminal cases and determining the advice to the court on the precise situations which have been uncovered. Sometimes in the cases of Fraud the case may be brought as a Civil matter to then follow the Criminal hearing. We are able to act for both the prosecution or defence and investigate the circumstances of the case under either the CPR 35 requirements for Civil cases or CrimPR 33 rules for Criminal cases.

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