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In Place of Strife

The Mediation Chambers

Civil and Commercial - Financial Services

Summary

A claim for in excess of £1 million brought by a retired couple against wealth managers in professional negligence and for breach of the FSA Conduct of Business rules.

Background
The claimants were cautious risk averse investors but in the financial crisis they discovered that they had a substantial exposure to concentrated illiquid commercial property funds. The funds were closed with an estimated realisation value of 10%. The wealth managers contended that they had acted within their mandate, that the investors had approved the exposure to commercial property and that within the next 18 months the funds would provide a significant return to investors. Some voluntary disclosure of documents had been given by the defendants, which did not clearly support or contradict the contentions of either side.
The claimants had incurred substantial costs and had obtained a favourable expert’s report. The defendants, who were insured, had the resources to contest the claim to trial, whilst the claimants could ill afford to run the risk of an adverse costs order if the claim failed. The firm would suffer reputational damage if the claim succeeded, whilst the claimants clearly found the litigation process stressful. Neither side was particularly looking forward to trial, but each was convinced that if placed before a judge its case would succeed.

Outcome
The opening positions at the mediation were not promising, but by the end of the day each side had a much better appreciation of the strengths and weaknesses in its case, and the gap between the parties had narrowed. The mediator had suggested an agreement under which the defendants might agree to underwrite the value of the units in the property funds held by the claimants. But the day finished with no agreement. Over the following week the mediator followed up with each party to develop an agreement under which an investment value was guaranteed and some compensation paid. Within two weeks a satisfactory settlement was reached.
It is a rare mediation that does not improve the chances of settlement.

Mediator: Charles Flint