Your IndustryDec 18 2017

Tenet wins fee clawback appeal against adviser

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Tenet wins fee clawback appeal against adviser

Advice network Tenet has successfully won an appeal against a financial adviser who initially won back 'unfair' fees.

Paul Morris had collected his £2,970.25 back in April this year after a judge granted him money back from a levy paid on his behalf by Tenet Connect Services.

But the cash has been ordered to be repaid back to the network after the judge ruled an indemnity clause in the contract between the pair did not take into consideration its terms of service.

Mr Morris had left the network in September 2016, but was charged for his yearly levy of protection by Tenet, which pays the cash to the Financial Conduct Authority, for 2017/18.

During the case being heard at Sheffield County Court, South Yorkshire on Friday 15 December, Mr Morris whispered "money means nothing to me" and "it's only money" after losing the case.

Hugh Drury, QC, representing Tenet, said that Judge Brain presiding over the case in April this year made the judgement in favour of the claimant "in error".

He told the court: "This [judgement] was unfortunately was entered in error and contractually we are doing differently and in reality his judgement boils down to this. 

"He [Judge Brain] thinks it is an unfortunate bargain for the claimant and is of the interest that Metro [Mr Morris' firm] is at a disservice or injustice.

"But it is nothing to do with contractual efforts at all."

Mr Morris left Tenet on 30 September 2016 after 15 years because it coincided with the renewal of his professional indemnity insurance.

Mr Morris, of Sheffield-based Metro Financial Solutions, took Tenet to court over claims he was owed £2,657.30, plus interest, for cash taken from his account.

The network had claimed Mr Morris was an appointed representative during the period when it pays its fees and therefore liable to pay up for the year 2017 to 2018 - despite the fact he had left Tenet the previous year.

Tenet appealed the decision after Judge Brain ruled that the legislation used to find in favour of Mr Morris didn't apply to its terms of service.

Judge Brain ruled that Mr Morris paying the full amount for a full year was unfair - under the Unfair Contract Terms Act 1977.

But Mr Drury said the decision made by the judge was made "without further submissions from representatives from either party".

Mr Drury said the case boiled down to one point of "who bares the risk" when the FCA was giving protection to Mr Morris in his business as as financial adviser.

He told the court: "It is my client [Levy] who paid this levy and the cover was enjoyed by Metro in the terms of its service.

"If you went on a cruise, but ended up taking a different route, that is the duty of performance which is expected of them."

Tenet argued that because the cash is in collected in arrears the Financial Conduct Authority (FCA) would take the cash regardless of the amount grossed the year before.

This lapped over into the next year and took the amount from Mr Morris when he left the role following a three year expiry period.

When he went to set up alone he was forced to pay the FCA the costs himself - meaning he would have to pay the levy twice.

Tobias Haynes, representing Mr Morris, claimed his client was "unsophisticated" due to the fact he was going up against "a big company" - "using a Queen's Council advocate".

But his Honour Judge Graham Robinson, designated civil judge at Sheffield Combined Court Centre, cut in and said: "Well wasn't it BA [British Airways] who appealed a £30 baggage charge?"

And he later added: "It might mean a lot of money to a small business."

Judge Robinson ruled in favour of Tenet Connect Services and £2,970.25 be repaid by Metro Financial Solutions.

He told the court: "Tenet has made the action and is responsible for the levy to be made in proportion in the right on leaving [the network].

"The activity of Metro does not have any proportion of risk with the burden of the conduct with the FCA.

"The appeal is allowed."

Costs for £415 of transcripts were split between both parties 50/50.

Speaking after the case, Mr Morris said: "Obviously, we are disappointed to lose on appeal, but we have taken on board the comments from the judge.

"We find that Tenet using a QC was very unusual and the level of aggression shown at the end of the case by one of their team members shows what is at stake here for them.

"I wasn't surprised they won looking at how much money they've thrown at the case - but not overly disappointed. 

"It can lead onto other things, which at the end of the day, it's not about winning the battle - but it's about the final war."