The outcome was the setting up of the 3,076-member Gooda Walker action group (GWAG), and a decision to take legal advice.
Initially, GWAG's move was funded by two subscriptions of pounds 300 a head, followed by 1.2 per cent of each members' losses - about pounds 1,500 for a typical 'name' - when it embarked on its High Court battle.
Michael Deeny, chairman of GWAG, explains that his members felt they had no alternative. 'First, we had a Lloyd's official review committee, and its description of the way the losses arose seemed to demonstrate very clear and obvious negligence. In 1992, when we decided to issue proceedings, nobody offered us any compensation or offered to negotiate with us.'
Last month, the group voted by a huge majority to reject the Lloyd's settlement offer, and is pressing ahead with litigation which comes to court on 26 April. Philip Rocher, of solicitors Wilde Sapte, who act for GWAG, says it is suing for pounds 550m. 'We're claiming that three different underwriters in the Gooda Walker group were negligent in the way they underwrote, and that they didn't adhere to even the most basic underwriting disciplines. As a result, they've lost the names a vast amount of money.'
The case highlights the issue of whether lawyers can do anything to help out-of-pocket investors. If victims band together to share costs, it seems they can. But for individuals, legal fees may drain resources and even add to existing indebtedness.
Not all names have set up action groups, however. Richard Brown and Michael Sword-Daniels are fighting what is called a 'portfolio selection' case - complaining that their members' agents failed to follow their instructions to give them low risk investments, and put them on a bad spread of syndicates. 'It's regarded as a test case,' says David Tiplady of D J Freeman, acting for Mr Brown.
Manchester solicitor Antony Gold of Eversheds Alexander Tatham, who set up the Barlow Clowes investors' group after the empire collapsed in 1988, says: 'The critical task for lawyers is to find a cost-effective way of helping investors. Individuals don't usually have the means to pay for legal advice. The keystone of this type of work is devising a mechanism so that people can get advice collectively.'
Following submissions made by Mr Gold to the parliamentary ombudsman, the Department of Trade and Industry was accused of 'significant maladministration' in its handling of Barlow Clowes, and pounds 150m was paid to investors.
Another firm of solicitors specialising in groups of investors is Barnett Sampson, whose clients include over 500 victims of home income plans. In the late 1980s, hundreds of elderly people were persuaded to enter into such schemes, often at the instigation of two firms of financial consultants which have now failed, Fisher Prew-Smith and Aylesbury Associates. Basically the plans involved borrowing money on owner
occupied homes and reinvesting it in high-risk equity-based bonds to obtain capital or income.
But in 1991, contrary to promises made by advisers, the value of the bonds went down, the cost of borrowing went up and victims were left sitting on 'time-bomb' mortgages - as falling house prices added to their fears.
Richard Barnett acted for the victims in their dealings with the investors compensation scheme (ICS), set up in 1988 to come to the aid of clients of corrupt or inept investment businesses. Barnett Sampson has since challenged the basis of some ICS awards through the courts. 'We've increased the amount every investor will get,' he says. He has also negotiated with building societies involved in the scheme. 'None of our clients have had their homes repossessed and some societies have lowered mortgage rates,' he says.
If the ICS and the investment regulators have been slow to deal with the debacle, it may be because the schemes were complex and involved advisers, building societies and insurance companies.
But Mr Gold feels the problem lies deeper. 'Either, under this new system of regulation, there is a scheme for compensating people or there isn't,' he says. 'But people should really not have to work so hard and wait so long to try and justify their claims.'
Jane Plumptre of Titmuss Sainer & Webb thinks such criticism is unfounded. But she admits that, without a lawyer, some people might find the ICS's 30-page claim form an ordeal.
Meanwhile in Titmuss Sainer's fraud investigation office, former Metropolitan police detective Rowan Bosworth-Davies is concerned about a different matter - the clients of a former mayor of Chippenham, Anthony Wheeler, whose investment business, Selective Investment Brokers Ltd (SIBL), crashed in June 1988, owing 150 people pounds 1.3m.
In July 1991, the ombudsman exonerated the DTI, but Michael Beckman QC thought differently. His review of the report concluded that the DTI had been aware of the need for an investigation of Wheeler's firm 18 months before it collapsed, and that the department was guilty of 'serious maladministration'.
The SIBL clients got a raw deal, Mr Bosworth-Davies says. 'I'm still fighting for them. I don't think they got a fair suck of the sauce bottle at all,' he says.
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