Court dismisses Chancery ombudsman case

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The High Court has dismissed a case brought by accounting firm Chancery against the Financial Ombudsman Service (FOS) relating to its handling of a compensation case of a film investment scheme.

Via a judicial review, Chancery challenged a decision the FOS made in January 2014.

It argued that the FOS had no jurisdiction to consider a complaint against Chancery made by investor Ian Robinson through Rebus Investment, as the advice it gave was around entry into a tax avoidance scheme, rather than an investment. 

The firm argued that tax avoidance advice fell outside scope of the ombudsman's jurisdiction. It also said that the scheme wasn't a collective investment scheme. 

Back in October 2006, Robinson met Chancery to seek advice on non-controversial tax planning. Among the ideas were discussed were film schemes.

In October 2007, terms of engagement was signed into. The accounting firm recommended Robinson to enter into one of the film schemes, Prescience Media 1 LLP, a trading partnership. 

He then contributed £1.8m to the scheme, comprising of 450k from own capital and 1.35m via a bank loan. He gave a further contribution in 2008 of £500,000 and was elected chairman from 2009 to 2013. 

The first complaint was made in May 2012 from Rebus Investment on behalf of Robinson  made its first complaint to Chancery. This was that Prescience Media 1 was an unregulated collective investment scheme and its client hadn’t been assessed in relation to the relevant regulations.

The investment in Prescience Media 1 was said to be unsuitable for lots of reasons including the level of risk. "This was quite apart from the uncertainly which it was said existed even then in relation to HMRC’s attitude toward such film schemes," according to the court documents.

Chancery's response was that Prescience Media 1 was not a collective investment scheme but a trading partnership. The client was concerned with tax mitigation and could not properly complain about a retrospective attempt by HMRC to close off tax mitigation schemes.

The FOS then sent Robinson's complaint form to Chancery. It added that a senior partner, who gave a witness statement, was also chairman of Prescience Media 1 and therefore there was a conflict of interest. 

Chancery replied via a solicitor saying the complaint fell outside of the FOS' jurisdiction. It also said the case was more suitable for court, as the compensation Rebus would seek would be in excess of the FOS limit of £150,000 and Chancery wanted to cross examine the evidence of Robinson.

Justice Ouseley dismissed the application. He said that the FOS' decisions had been carefully considered, dealing properly with the points Chancery had made.

"I would have to hold that its estimation of its ability to carry out its functions was a long way from reality, before I could hold that this decision was irrational." He added that the Ombudsman does consider complaints in which the compensation might exceed 150,000 regularly. 

"It is for the FOS to decide to what extent its procedures require some specific and unusual adaptation for this case," he said.

About Rachael White

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02nd Mar 2015 13:58

and pull the other one

Chancery's response, if accurately reported, seems a bit daft to contend that it was just an avoidance scheme. My guess is that they hadn't, or hadn't documented, properly the client's net worth, level of sophistication, or risk acceptance properly and that the LLP's chairman then looked for an escape route... wool, over eyes, pulled.

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By rbw
02nd Mar 2015 22:55

"when thieves fall out, ...

...honest men come by their own"

 

Well, we can but hope ;)

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