There is speculation that a close analysis of the Scheme of Arrangement wording means that, in effect, it will not be possible to litigate against Hargreaves Lansdown and Northern Trust.

That would be quite a development because the general consensus had been that the Scheme of Arrangement provides for ‘closure’ in relation to just Link Fund Solutions, but it was not thought that it would prohibit people being able to litigate against Hargreaves Lansdown, Northern Trust or others. 

The idea of this emergency meeting is to have one or more lawyers explain how the Scheme of Arrangement can be interpreted in this way. Neither TTF or the Woodford Campaign Group have settled on a position about this matter yet, but we now recognise that one interpretation of the Scheme of Arrangement wording would lead the reader to conclude:

• That if the Scheme of Arrangement goes ahead it will not be possible to sue Hargreaves Lansdown or others because of the way that the indemnities trap the investors.

• That whilst it is right that, if the Scheme is approved, investors will in theory be able to claim against the other institutions that played a part in the disaster (chiefly Hargreaves Lansdown and Northern Trust; the latter as depositary had a duty to oversee Link’s role as Authorised Corporate Director) there may be a practical bar which makes it in practice impossible: 

The terms of the Scheme of Arrangement include, spaced throughout the document:

• “Contribution Claim” means any claim by a Third Party against LFSL in respect of a Third Party Proceeding. 

“Contribution Liability” means, in relation to a Contribution Claim, LFSL’s Liability (including in respect of any costs and expenses) to the Third Party in respect of the matters arising out of that Contribution Claim, including, but not limited to, Liabilities arising by virtue of contract, common law, the rules of equity or the Civil Liability (Contribution) Act 1978.

3.5 – LFSL shall not be responsible for any cost, expense, loss or Liability (including, without limitation, any Liability for adverse costs) incurred by a Scheme Creditor or any of its Representatives in connection with any Third Party Proceedings. All costs associated with commencement or continuation of Proceedings in respect of the Third Party Proceedings shall be for the account of the Scheme Creditor only (including, for the avoidance of doubt, in respect of any amount paid to LFSL in accordance with Clause 7.5 below), and shall not be for the account of LFSL.

7.5 Promptly following calculation of the Escrow Costs, LFSL shall:  (a) procure that the Proceeds standing to the credit of the Escrow Account shall be applied in the following order of application, with each successive item being discharged in full before any amount is applied to the next item: (i) first, in satisfaction of the Escrow Costs;  (ii) second, in satisfaction of any amount owing under a Pre-Existing Funding Arrangement;  (iii) third, to LFSL, up to the amount of any Established Contribution Liability; and (iv) fourth, the balance, to the Relevant Scheme Creditors; and (b) notify each Relevant Scheme Creditor of the amount of the Escrow Costs, the amount owing under Pre-Existing Funding Arrangements, the amount of any Established Contribution Liability, and the amount resulting to such Relevant Scheme Creditor in accordance with this Clause 7.5.

This is explained a little (but not all that much) more clearly in the explanatory statement, which lists among the disadvantages:

Scheme Creditors’ rights to receive proceeds from proceedings that they may take in respect of the WEIF against a Third Party will be reduced if LFSL would be liable to pay a Contribution Claim to that Third Party in respect of that claim.

52.Under the Scheme, each Scheme Creditor gives authority to LFSL to sign a document called the Third Party Litigation Deed on the Scheme Creditor’s behalf on the Effective Time.  A copy of the Third Party Litigation Deed is available at https://lfwoodfordfundscheme.com/documents/.   

53. It is important to understand that neither the Scheme nor the Third Party Litigation Deed stops Scheme Creditors from bringing a claim against those Third Parties.  However, these documents limit the amount payable by the Third Party to the extent that those amounts are ultimately payable by LFSL. 
54. The purpose of the Third Party Litigation Deed is to make sure that the releases given by Scheme Creditors in the Scheme are fully effective.  This means that if: 

(a) a Scheme Creditor brings a WEIF-related claim (a Third Party Proceeding) against a person (a Third Party); and 

(b) the Third Party seeks to bring a claim against LFSL in respect of that Third Party Proceeding (the Contribution Claim),  any monies that the third party is required to pay to the Scheme Creditor in respect of that Third Party Proceeding will not be paid to the Scheme Creditor but instead paid into a separate account (the Escrow Account) and otherwise held on trust until the validity and amount of the Contribution Claim has been determined.  If a Contribution Claim is owed by LFSL to the third party (the Established Contribution Liability), the amount held in the Escrow Account will be paid in the following order:

(i) escrow costs;

(ii) amounts owing under any Pre-Existing Funding Arrangements;

(iii) amounts owing to LFSL up to the amount of the Established Contribution Liability; and

(iv) the balance to the Relevant Scheme Creditor.

• One can imagine both Hargreaves Lansdown and Northern Trust may state that they have a contribution claim against Link – why would they not, given the significance of them taking that position, given the favourable nature (for them) of the wording in the Scheme of Arrangement?

• So it is more than conceivable that no one will in practice sue Hargreaves Lansdown or Northern Trust, knowing that Link’s liability back to them is indemnified; and that there is a further threat that Link’s costs could also be indemnified.
• And so, by protecting Link, the Scheme of Arrangement also protects Hargreaves Lansdown and Northern Trust. 
• If what has been set out above is correct, why would Hargreaves Lansdown not wish to support the Scheme of Arrangement?

Now, if all of the above leaves you feeling rather enraged because you feel Hargreaves Lansdown have contributed to your losses, then the most important thing to do as quickly as possible is to calmly make a well-informed decision; nobody should rush to a decision on this.

We are desperately hoping it may not be as described above, but we are worried it is.

So this Emergency Meeting is a chance to hear from a credible legal professional so you can move towards a well-informed decision in your own mind. 

But let’s be clear:

There is no doubt in our mind that if the above supposition is correct it would mean the Scheme of Arrangement is even more crafty, cunning and conspiratorial than we had realised; and once again we find ourselves seriously questioning whether the Financial Conduct Authority has been acting in bad faith – they would have knowingly been complicit in organising and promoting a Scheme of Arrangement that snookered victims from accessing justice; not just Link but also Hargreaves Lansdown and Northern Trust.

And we don’t feel that is either fair or just; and it could even be unlawful.

Could this be the worst example of regulatory trickery there has ever been?