Jump to content


Shareholder as consumer - claim against bank (live case)


anthonyfca
 Share

style="text-align: center;">  

Thread Locked

because no one has posted on it for the last 4023 days.

If you need to add something to this thread then

 

Please click the "Report " link

 

at the bottom of one of the posts.

 

If you want to post a new story then

Please

Start your own new thread

That way you will attract more attention to your story and get more visitors and more help 

 

Thanks

Recommended Posts

Technical forum note: I have had to introduce a space to disable the quoted links, as I am a first time poster, please copy and paste links into your browser and delete the surplus spaces after the h's. Most links are to the FSA Handbook or Wikipaedia.

-------------------------------------------------------------------

 

I am posting this here for two reasons:

 

(1) the case is live and I am interested to hear any counter argument to the arguments I have put forward. I suspect my letter has been sent to legal dept as there has not been any reply in the first instance, whereas up to now the client received replies almost immediately.

 

(2) seems to me that there is a perfectly good case for shareholders having consumer protection, where they meet the conditions I describe below and therefore these arguments may benefit others in the future.

 

By way of emphasis, this is all about whether a shareholder can be an eligible claimant as a consumer where a bank has wronged the company in whom the shareholder has shares. I am not addressing anything else, such as whether the claim is valid. Just the indirect claim, that's the key here - and it is complicated.

 

 

I have removed all the names except my own and I hope kept the details confidential so that it is the subject matter that is here published for general consumption by consumers, for whose benefit I have written this post.

 

My client received the following response from the FOS concerning whether shareholder can make a claim about the company's bank's actions.

 

Sounds like an obvious "no" does it not? This is "obvious" because of the principle of "privity of contract", and because it just sounds somehow sensible.

 

Here is the FOS response:

 

Thank you for your e-mail.

 

Forgive me for saying so but we keep revisiting the same questions. I have previously referred you to the FSA website which shows the categories of eligible complainant. In case you have mislaid the link I repeat this below:

 

h ttp://fsahandbook.info/FSA/html/handbook/DISP/2/7

 

If you look at section 2.7.6 you will see the fourteen defined relationships which can give rise to eligible complainants - the two that generally figure in banking complaints concern being an actual or prospective customer - clauses (1) and (2) - or the provider of security - clause (10). You will see that shareholders, company officers, consultants and employees are not included anywhere in these fourteen categories. If you disagree, please tell me the precise section and clause which you consider proves me (and Mr xxxx) to be incorrect.

 

I appreciate that this is a message you do not wish to hear but I am afraid that this is the position. I mean no disrespect, but continuing to press the same point will not change the limits of our jurisdiction and suddenly change the eligibility criteria.

So one might think, that's the end of it. I was presented with this and decided to have a look. Here is my response:

 

 

Financial Ombudsman Service

 

Date 12 October 2010

 

 

Dear Sirs,

 

Re: clientname NAME CHANGED and case refs removed.

 

By way of introduction I am a Chartered Accountant of 30 years in general practice, and the Clientname's circumstances were brought to my attention by mutual acquaintances. While insolvencies generally trace back to tales of business woe that might sometimes have been avoided, one does not expect to find a bank being an underlying cause of any aspect as has been described to me. As such I have taken an interest by preparing and writing this letter, for no fee.

 

Having read your earlier correspondence I can see that this matter has persisted for some time. I applaud your continuing patience and ask if you will please give your consideration to my review on behalf of the Clientnames generally.

 

In addition to that, I would like to express my mild surprise at the conclusion I have reached. Naturally I sympathise with the Clientnames, but I am accustomed to clients discovering regulations are not as they might like and then having to deliver that news. So in this case my reading has reached an unexpected conclusion. With that said, recognising there may be authoritative text I have not yet seen that would cause me to revise my opinion and in the light of your expertise and experience in these matters I offer the following discussion.

 

 

 

INTRODUCTION

 

My discussion in support of the following statements is presented below.

 

(1) "Company officers, consultants and employees are all acting for purposes inside their trade, business or profession per the glossary for "consumer" at 2.7.3 whereas this not the case for every shareholder".

 

(2) "In addition, a consumer is unique in being eligible to make a complaint where the relationship is indirect. Privity of contract does not instantly apply, or rather is dis-applied by the definition."

 

 

Privity of Contract

 

Within (2) above I mention "privity of contract". This concept underpins contract law not just in the UK, but across our planet. I have added this section to provide emphasis of just how important, nay, fundamental an alteration to our normal understanding of the application of our laws is effected by allowing complaints to cover indirectly affected consumers. Such an alteration means that our standard evaluations and assumptions require careful re-examination in such cases.

 

h ttp://en.wikipedia.org/wiki/Privity_of_contract

 

 

AUTHORITIES - from the online FSA Handbook.

 

DISP 2.7 Is the complainant eligible?

 

h ttp://fsahandbook.info/FSA/html/handbook/DISP/2/7

 

and in the detail of the glossary for "consumer":

 

h ttp://fsahandbook.info/FSA/glossary-html/handbook/Glossary/C?definition=G210),

 

Throughout there is a distinction between a "natural person,(and) a legal person...". The word "person" is used to include both, whereas "natural person" means a human being; so the distinction clearly appears to be intended by the draughts-people. Definitions are always hyper text linked, so where there is no special definition, the general English language can reasonably be assumed to apply. The link to "person" is here:

 

h ttp://fsahandbook.info/FSA/glossary-html/handbook/Glossary/P?definition=G869

 

 

 

THE RULES

 

2.7.6 States that the complaint must arise from 1 or more of 14 types of relationship with the bank (respondent). Relationship Type no 2 within 2.7.6 states that the bank (respondent) must be a potential payment service provider or potential supplier, to the complainant. Direct debits are included as payment services here:

h ttp://fsahandbook.info/FSA/glossary-html/handbook/Glossary/P?definition=G2617

 

2.7.6 uses the word "complainant" in each of the 14 relationships. It occurs to me that the undefined word “complainant” encompasses every conceivable category of complainant including both "ineligible complainant" and "eligible complainant", 2.7.6 is NOT concerned with whether or not the complainant is otherwise eligible, but purely with the type of the relationship. For the record I can not offer suggestions for possible types of complainant beyond eligible or ineligible. If the type of relationship is not listed, then an eligible complainant becomes ineligible. However, the complainant is as defined elsewhere, including consumers and indeed others.

 

2.7.3 States that a consumer is an eligible complainant provided they are not engaged in the relationship in any business capacity, which is worded as: “any natural person acting for purposes outside his trade, business or profession.”

 

2.7.3 also states at para 2 “a person” at para 2b “ who has rights or interests which are derived from, or are otherwise attributable to the use of, any such services by another person; “. NOTE “person” includes a company. This so states that the link between the consumer and the respondent does not have to be direct, it means the consumer can be a person who has rights or interests derived from or otherwise attributable to the use of services by another person. See "privity of contract" section above for why this is fundamental.

 

PUBLIC INTEREST

 

My understanding is that the complainant is, or can be, the consumer and not necessarily the "person" in the middle. My, or perhaps "the" point being that the complaint has life through the consumer regardless of the existence or otherwise of "another person" in between.

 

So if a bank effectively unfairly disadvantages a consumer shareholder by putting that "other person" out of business by maladministration: there is proper accountability to the consumer. Which one might consider is as it should be, banks should be accountable and take responsibility for their actions just like everyone else, and so far in this case they are evading the issue - my sympathetic opinion of course.

 

It occurs to me that bank maladministration in these circumstances is rare and therefore this issue could be unique in the life of the FOS to date. I say "rare" because one would hope that banks usually have perfectly good reasons for the closure of businesses and are not the cause of it through maladministration: in this case agreeing one thing and then doing the opposite.

 

 

REVIEW

 

The glossary uses the verb "to act" in the phrase "acting for purposes". Given the legal persona of a company, shareholders are clearly neither employees and officers nor acting by virtue of being a shareholder within any trade, business or profession. Of course a shareholder can be any of these, but that is not the same thing. In life we all act in many different capacities. So for example acting as a stockbroker or other trader in securities could be for purposes inside their trade or profession etc, but that requires skills for the trading of shares.

 

A shareholder does not, indeed can not "act" other than in general meetings of members of a company where they exercise oversight of their investment. Outside that investor act (being none of trade, profession, business, vocation, employment or office) a natural person shareholder simply exists as a consumer. I do not believe shareholder meetings would/should be categorised as acting within a trade, profession, business, vocation, employment or office because they are enacting oversight of their investment, which is not a trade, profession, business, vocation, employment or office. Again a professional exercising their profession would be different and make that shareholder not a consumer.

 

Attendance at any company AGM will show the presence of large numbers of consumers side by side with the professionals. Clearly consumer shareholders have rights and interests (per the glossary of defined terms) because that is the very nature of shares, and this does not amount to acting in business (to save repeating the list again). Clearly the professionals are expected to know what they are doing and consumer protection is not extended to them. Most consumers being unaware will not be persuaded by the actions of a bank and so this situation will rarely arise, indeed taken with that, the banks one hopes do not then maladminister the matter to boot.

 

CONCLUSION

 

I am particularly interested to hear what you think as it occurs to me that seeing a shareholder as a consumer may be intuitive for the general public and perhaps the only real issue in this case. I cannot, however, find anywhere any text that excludes shareholders impliedly or expressly by definition, including a short review of F.O.S. Ltd newsletters. Ordinary shareholders are not in business, they are investors, which statutes expressly distinguish from trading in business, professions, vocations or employments or offices. Case law abounds with argument about the distinguishing features.

 

From the above my conclusion is that if the shareholder can indeed be properly classified as a consumer, then the complaint can be available for you to pursue via the indirect link of "another person".

 

I do hope you find my arguments cogent and with due respect for your positions and as such I remain

 

Yours faithfully,

 

 

 

Anthony Mellor F.C.A.

 

Chartered Accountant

Working to Professional Standards

 

T +44 (0)121 314 4750

 

 

 

INSPIRING CONFIDENCE

Link to post
Share on other sites

  • Replies 91
  • Created
  • Last Reply

Top Posters In This Topic

Top Posters In This Topic

Wouldn't the consumer be the actual company for example abc ltd with the company officer (director/secretary) acting as a representative of the company involved. The shareholder is not named on a companies account held with a bank and unless they are also a director they have no signatory or authorisation rights with the said bank. I have looked carefully at 2.7.6 and I can't see anything that would imply directly or indirectly that a shareholder is a consumer of the limited companies bank.

Link to post
Share on other sites

I have looked carefully at 2.7.6

 

In my original post under "The Rules" final para:

 

2.7.3 also states at para 2 “a person” at para 2b “ who has rights or interests which are derived from, or are otherwise attributable to the use of, any such services by another person;

 

Emphasis added.

 

I preliminarily mention the impact of this under

"INTRODUCTION" sub heading "Privity of Contract".

 

The point you raise is practically the whole point, it makes the "consumer" unique compared to other types of claimant.

 

Edit: under 2.7.3 a company is not a consumer, not being a "natural person", but can be a "complainant".

 

Thank you for reading my long and complex presentation. Appreciate your time.

 

Anthony

Edited by anthonyfca
Link to post
Share on other sites

In my original post under "The Rules" final para:

 

2.7.3 also states at para 2 “a person” at para 2b “ who has rights or interests which are derived from, or are otherwise attributable to the use of, any such services by another person;

 

Emphasis added.

 

Are you sure it is 2.7.3 paragraph 2 b ?

 

DISP 2.7.3 01/11/2009

An eligible complainant must be a person that is:

(1) a consumer;

(2) a micro-enterprise;

(a) in relation to a complaint relating wholly or partly to payment services, either at the time of the conclusion of the payment service contract or at the time the complainant refers the complaint to the respondent; or

(b) otherwise, at the time the complainant refers the complaint to the respondent;

Link to post
Share on other sites

Sorry my mistake when you click on consumer it comes up

 

(2) (in relation to the FSA's power to make general rules (section 138 of the Act (General rule-making power))) the approval requirements for controllers (section 186 of the Act (Objection to acquisition of control)), the publication of notices (section 391 of the Act (Publication)) and the exercise of Treaty rights (Schedule 4 to the Act (Treaty rights)))a person: (a) who uses, has used, or is or may be contemplating using, any of the services provided by: (i) an authorised person in carrying on regulated activities; or

(ii) a person acting as an appointed representative , or where applicable, a tied agent; or

 

(b) who has rights or interests which are derived from, or are otherwise attributable to the use of, any such services by another person; or

Link to post
Share on other sites

So if I am reading what you have said correctly you are saying:

 

A shareholder is someone who has rights or interests which are derived from, or are otherwise attributable to the use of, any such services by another person

 

and that another person is

 

(in accordance with the Interpretation Act 1978 any person, including a body of persons corporate or unincorporate (that is, a natural person, a legal person and, for example, a partnership)

 

So

 

A shareholder is someone who has rights or interest which are derived from, or are otherwise attributable to the use of, any such services by a body of persons corporate

Edited by NoButYesBut
Link to post
Share on other sites

I am carefully avoiding the next steps as there are quite a few and first I want a view from the Ombudsman that a shareholder can be capable of being a consumer. In other words recognition and acceptance of the "another person" indirect privity of contract breaching principle.

 

Seems to me to be clear as day, but only when illustrated because it is all buried in layers of regulations and definitions, just as you discovered above when you beat me to it by clicking "consumer" in the actual FSA handbook. So you have seen it is not even immediately apparent when thinking one is reading the relevant rule. Seems to me these rules were not written with the average reader in mind, it needs to be someone accustomed to reading statutes etc - which when the FOS encourages individuals to pursue their own claims, leaves the individual at an immediate disadvantage unless given a word to the wise to read very slowly while learning every definition. Then it can work.

 

Anthony

Link to post
Share on other sites

From a common sense approach, I would still say the following:

 

Wouldn't the consumer be the actual company for example abc ltd with the company officer (director/secretary) acting as a representative of the company involved. The shareholder is not named on a companies account held with a bank and unless they are also a director they have no signatory or authorisation rights with the said bank.
Link to post
Share on other sites

this has nothing to do with common sense.

 

a company cannot be a consumer, per 2.7.3

 

however (again) a company can be a claimant.

 

What you are saying you would "still say", relies on and indeed is"privity of contract" which as I have described, has been suspended.

 

see what I mean about common sense?

 

My treatise does not open up an opportunity for a huge number of people to make claims, nor expose big companies, but it does open a door for certain claimants who are otherwise without any form of redress.

Edited by anthonyfca
a company cannot be a consumer, per 2.7.3
Link to post
Share on other sites

this has nothing to do with common sense.

 

a company cannot be a consumer, per 2.7.3

 

however (again) a company can be a claimant.

 

see what I mean about common sense?

 

 

DISP 2.7.3 01/11/2009

 

An eligible complainant must be a person that is:

(1) a consumer;

(2) a micro-enterprise;

 

micro-enterprise

an enterprise which:

(a) employs fewer than 10 persons; and

(b) has a turnover or annual balance sheet that does not exceed €2 million.

In this definition, "enterprise" means any person engaged in an economic activity, irrespective of legal form and includes, in particular, self-employed persons and family businesses engaged in craft or other activities, and partnerships or associations regularly engaged in an economic activity.

 

Person

(in accordance with the Interpretation Act 1978 any person, including a body of persons corporate

 

My apologies I see your point with regard to consumer and complainant

Link to post
Share on other sites

2.7.3 does not imply a company is not a consumer as such, it is the definition of consumer which expressly excludes businesses. Bear in mind a consumer is only a subset of eligible claimants, so not being a consumer does not preclude being a claimant. Sorry about all the "not"s.

Link to post
Share on other sites

Please no need to apologise, you are giving me a chance to examine how I might better present my case, which as you have just seen, is difficult bearing in mind our natural assumptions and/or expectations.

Link to post
Share on other sites

Lets look at what it says closer and work from there:

 

Two entities can be classed as an eligible complainant

 

1) a consumer

 

It would have to be established that the shareholder has rights or an interest derived from or attributable to the use of the limited companies bank account

 

2) a micro-enterprise

 

A Limited Company can bring a complaint to the Financial Ombudsman Service, if it meets the criteria for a micro-enterprise. If it employs more than 10 people and has a turnover of more than 2 million euros it is not an eligible complainant.

 

As far as shareholders are concerned we can totally disregard it being a micro-enterprise. Therefore, it is only the meaning of consumer that is of relevance.

 

What rights do Shareholders have ?

 

  • The right to ask the court to call a General Meeting CA 1985, s371 CA 2006, s 306
  • The right not to be unfairly prejudiced CA 1985, s459
  • The right to have the company wound up provided that it is just and equitable to do soInsolvency Act 1986, s122(1)(g) The company must be solvent for this to apply CA 2006, s 994
  • The right to vote CA 1985, s370 CA 2006, s 284
  • The right to receive notice of general meetings CA 1985, s370 CA 2006, s 310
  • The right to a dividend if one is declared Table A Article 104 Directors have power (but are not obliged to) declare a dividend. Members cannot vote to pay themselves more than the directors have recommended. Model Articles, Article 30 [as of 01/10/09]
  • The right to a share certificate CA 1985, s185 CA 2006, s 769
  • A members right to have his name entered on the Register of Members CA 1985, s352 This right Depends on the Articles of the company. See the section of this site entitled "selling your shareholding".CA 2006, s 113 [as of 01/10/09]
  • The right to a copy of the Annual Accounts CA 1985, s240 CA 2006, s 431
  • The right to an AGM CA 1985, s366 ONLY IF IN ARTICLES
  • The right to inspect Minutes of General Meetings CA 1985, s382, s382A and s383 CA 2006, ss 248, 355 & 358
  • The right to vote CA 1985, s379A
  • The right to inspect the register of members and index of members' names without charge CA 1985, s356(1) CA 2006, s 116(1)(a)
  • The right to require a copy of the register of shareholders within 10 days of the request subject to a charge CA 1985, s356(3) CA 2006, s 116(2)
  • The right to inspect the register of directors service contracts without charge CA 1985, s318(7) CA 2006, s 229(1) Registers to be maintained at a Company's Registered Office

Register of Directors and Secretaries CA 1985, s288, to record the information required by CA 1985, ss289, 290 CA 2006, s 162 & 275 to record the information required by CA 2006, ss 163 & 277 [as of 01/10/09] Register of Members CA 1985, ss352-362 CA 2006, s 113 [as of 01/10/09] Register of Directors' Interests in Shares CA 1985, ss406-408 CA 2006, s 808 Register of Charges, together with copies of all instruments. Containing registration with the Registrar under CA 1985, s295 CA 2006, ss 875-876 [as of 01/10/09] Minute Books The Companies (Inspection and Copying of Registers, Indices and Documents) Regulations 1991. CA 2006, s 248 The Company shall make the register, index or document available for inspection for not less than 2 hours during the period between 9 a.m. and 5 p.m. on each business day and permit a person inspecting the register, index or document to copy any information made available for inspection by means of the taking of notes or the transcription of the information.

 

Although there is no statutory obligation to maintain the following registers, if the Company does keep such registers, they must be open to inspection by shareholders without charge. Register of debenture holders Register of share applications and allotments and register of transfers. SI 1991 No 1998 3(2)

 

http://www.shareholderrights.co.uk/rights_table_frame.htm

 

I have been unable to find anything about any rights a shareholder has with regard to the actual bank account of a limited company

Edited by NoButYesBut
Link to post
Share on other sites

Looking at the above a shareholder does not have any rights with regard to the limited companies bank account. As per my previous example if I was a shareholder of Royal Bank of Scotland I would have no rights with regard to a bank account held in it's name.

 

That leaves us with does a shareholder have an interest in or atributable to an account held in the name of limited company

Link to post
Share on other sites

Ok try this:

The rights and/or interests are the shares themselves.

A share is an asset.

A share is "an interest".

An insurance policy is an "interest"

A house or car is "an interest".

 

If said house or car is damaged, then the owners interest has been reduced in value. Same with shares.

The "rights" are rights to ownership, not rights of ownership.

Edited by anthonyfca
Link to post
Share on other sites

"As far as shareholders are concerned we can totally disregard it being a micro-enterprise. Therefore, it is only the meaning of consumer that is of relevance. "

 

Well actually: if the company is not a micro enterprise, then it cannot be an eligible complainant as "another person" having an eligible complaint, so the consumer's complaint will also not be eligible.

 

This excludes shareholders generally making claims about reduced value of their shares in larger companies, even if they were privy to bank actions harming the company.

Link to post
Share on other sites

"It would have to be established that the shareholder has rights or an interest derived from or attributable to the use of the limited companies bank account "

 

"That leaves us with does a shareholder have an interest in or atributable to an account held in the name of limited company"

 

It is about damage to a right or interest caused by a relationship defined in 2.7.6, through another person.

 

The right or interest is the shares themselves.

The relationship is any of those defined in 2.7.6.

Link to post
Share on other sites

 Share

  • Recently Browsing   0 Caggers

    • No registered users viewing this page.

  • Have we helped you ...?


×
×
  • Create New...