R v Investors Compensation Scheme Ltd ex parte Gerald Taylor
| Published date | 01 February 1997 |
| Date | 01 February 1997 |
| Pages | 178-180 |
| DOI | https://doi.org/10.1108/eb024926 |
| Author | Staughton LJ,J Tucker,Joanna Gray |
| Subject Matter | Accounting & finance |
Timing was crucial for ICS claim
R v Investors Compensation Scheme Ltd
ex parte Gerald Taylor
(High Court: Queen's Bench Division: Divisional Court)
Staughton LJ and Tucker J
Date of Judgment: 29th November, 1996
Reported at: Times Law Reports, 27th December, 1996
Journal of Financial Regulation and Compliance Volume 5 Number 2
FACTS
Mr Barrett was authorised to carry on
investment business under the trading
name of Beechcroft by virtue of his mem-
bership of FIMBRA. In March 1986 Mr
Taylor, the Applicant in this case, inherited
£5,500 which he wished to invest with
Beechcroft. In April 1986, on Mr Barrett's
advice the Applicant handed Mr Barrett a
cheque for £5,500 which Mr Barrett
undertook to invest in such a way so as to
yield 9.5 per cent pa for a fixed term of
five
years,
with interest capable of being
withdrawn as and when it accrued. The
Applicant's mother then gave Mr Barrett a
total of £11,000 to invest on the same
terms.
She died in 1989 leaving the Appli-
cant as her sole heir.
In fact, no investment was ever made
with these monies. Instead Mr Barrett used
it for his own purposes. On 1st April, 1991
the investment, if it had existed, would
have matured. Mr Taylor had taken out
only £800 as 'interest' so there should have
been £24,000. However, by then Beech-
croft was technically insolvent. Mr Taylor
'withdrew' £2,000 in April 1991 and
instructed Mr Barrett to invest the
£22,000 he thought he had left. Mr Bar-
rett promised him 11.24 per cent pa on this
sum for a further five years and gave him a
document dated 20th April, 1991 confirm-
ing those terms.
There was no such sum and there was no
such further investment made. In mid-1992
Mr Taylor obtained, with some difficulty,
£700 from Mr Barrett and Beechcroft col-
lapsed in November 1992. Mr Taylor
claimed compensation from the Investors
Compensation Scheme. His claim was for
£22,000 plus interest on one basis and was
for £37,490 less a discount for early pay-
ment on an alternative basis (this loss
reflected the loss of expectation caused by
the fictional 1991 investment). The man-
agement company of the Investors Com-
pensation Scheme rejected his claim since
Rule 1.02 of the Scheme Rules states:
'(3) Nothing in any rules made under
section 54 of the Act is to be interpreted
... as authorising the payment of
compensation on a claim except to the
extent that the claim is a claim in
respect of any description of civil
liability incurred on or after 18
December 1986 in connection with the
investment business of a person who, at
the time compensation is to be paid, is
or has been an authorised person.'
ACTION
Mr Taylor brought an action for judicial
review of the decisions of the Investors
Compensation Scheme (ICS) management
company. His argument was, essentially,
Journal of Financial Regulations
and Compliance, Vol. 5, No. 2,
1997,
pp. 178-180
© Henry Stewart Publications,
1358-1988
Page 178
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