In a damning verdict released on Monday, the judge in the case blasted the conduct of both parties but eventually found in favour of Harlequin in one of the six claims the company made against the accountancy firm.
However, Justice Coulson said the money should not be paid directly to Harlequin Property SVG until issues around compensation for investors are resolved.
“That seemed to me to be the fairest way of ensuring that those who have lost the most in this case, namely the investors, had at least some prospect of recovering some of their money from this judgment,” he said.
Harlequin claims
Founded in 2005, Harlequin is an unregulated property scheme based luxury villas in the Caribbean and other exotic locations, promising ‘guaranteed returns’ of 10% a year, which have never materialised. More than 6,000 pension savers invested around £400m into the scheme via financial advisers.
It ran into trouble in 2013 after the Financial Conduct Authority (FCA) issued several warnings, while the Serious Fraud Office is looking into the fund amid several legal cases.
The UK’s Financial Services Compensation Scheme (FSCS) has already picked up the tab of £100m to investors who received poor advice from financial advisers regarding investments in Harlequin, with many advisers being declared bankrupt after failing to cover client claims.
In October, Harlequin Property SVG, officially entered insolvency proceedings – a decision likely to result in hefty losses for thousands of investors.
However, the company’s chairman David Ames, said at the time that the legal move to wind up its Saint Vincent and the Grenadines headquarters was designed to protect investors
Win on overpayments
The case, which has lasted seven weeks, saw Harlequin make a $60m claim against Wilkins Kennedy for ‘breaches of contract and/or duty arising in connection with the development of a luxury resort at Buccament Bay, St Vincent and the Grenadines in the Caribbean’.
Harlequin employed Wilkins Kennedy as its accountants between 2006 and 2010. During that period, it employed contractor ICE Group to work on the resorts. However Harlequin claims that ICE’s works was delayed and not carried out as intended.
Harlequin blamed Wilkins Kennedy, which was also acting for ICE for overpayments of $25.7m after Harlequin paid the contractor $50.5m for its services, when it should have been $24.8m.
The judge rejected five other claims made by Harlequin relating to payments and fees made to Wilkins Kennedy, but ruled that there had been an overpayment made to ICE.
However, when calculating the compensation, the original overpayment was reduced by more than 50% due to ‘contributory negligence’ on the behalf of Harlequin and its chairman David Ames, bringing it down to a total of $11.6m.
“In a much broader way, that [reduction] also reflects my generally adverse views of the conduct and evidence of both McDonald [a partner at Wilkins Kennedy] and Ames: I consider that there is complete justice in a result which makes them equally to blame for this major cause of loss to the investors,” the judge said.
Mud-slinging
Harlequin founder Ames said in statement: “It is of no surprise that the aggressive and cynical tactics of the defendants were unsuccessful in distracting the court from the key arguments and evidence.
“With the sheer volume of mud that was thrown by the defendants, it was expected that some might make it to the Judgment, but it was a price worth paying for today’s successful result.
“Today we have, at last, some justice. Tomorrow, we return to fighting to rebuild our business.”
