Philips Trust scandal victims must withdraw complaints to get compensation from building societies

The four mutuals and six other smaller societies had introduced hundreds of customers to unregulated advisers who sold them family trusts linked to properties and investment schemes for their savings which have since become mired in financial complications.

The assets ultimately ended up in the hands of Philips Trust Corporation. After entering administration, a PTC director called Kay Collins admitted there had been “co-mingling, pooling and mistreatment of client monies” by the firm.

The voluntary compensation scheme was announced by the societies after The Yorkshire Post and other media covered the stories of the victims, many of whom had joined an action group campaigning on the issue.

In a court hearing on Wednesday afternoon, Judge Raquel Agnello KC of the Deputy Insolvency and Companies Court approved changes to the administration distribution plan to allow the compensation scheme to proceed.

Simon Passfield KC, representing the administrator Kroll, said there were 697 eligible claimants to the scheme being offered by the building societies.

The court heard that concerns had been raised by victims that the terms of the agreement include withdrawing any existing claims or complaints against the societies involved, as well as a deadline for decisions on whether to accept the money being set for December 31.

Farhaz Khan KC, representing the building societies, said the date represented the end of the financial year for the mutuals and was also considered to be a “reasonable period of time” for decisions to be made.

He added that the societies believe it is reasonable that as “part of the price” of the agreement any existing complaints or claims are withdrawn.

“What it means in practical terms is that a client who is unhappy with the trustee’s decision to accept the offer can withhold their consent and thereby ensure that no settlement agreement is effective.

"The trustees may be persuaded it is not in the interests of the trust to accept the offer because there is a good chance to getting a better outcome some other way. From a perspective of a client who is suspicious of this arrangement, it is a virtue that it is present because it gives them an opportunity to veto the settlement.”

He added: “There are some 697 trusts that are related to the societies. That is a drop in the ocean in terms of the wider membership of these building societies.

"They have thousands of members and the approach the building societies have taken is between striking a balance between the interests of these members and the wider membership has not been a straightforward one. This is the offer on the table. We commend it to trustees and beneficiaries but it is ultimately a matter for them whether they accept it.”

Lynn Parsons, from the victims’ action group, said victims had a number of complaints about the matter with the Financial Conduct Authority which appeared “unlikely” to get a response by December 31.

Judge Agnello said she had no power over the potential deadline as her role was limited to whether to amend the distribution plan.

Ms Parsons said: “I understand we are now in an essentially formal mechanical process to get this over the line but as a group of victims we very much feel that the legal process has been used to railroad us.”

Another affected person, Shaun Carroll, added: “From a victim’s point of view, we do feel as if this a fait accompli.”

Making her ruling, Judge Agnello said this was a “sad case about many, many respondents who have lost significant sums of money or property”.

"I make no comment whether or not December 31 is a reasonable or otherwise deadline. That is what has been imposed by the building societies.

"I have to decide whether to allow the mechanics to go through. For those who want to accept the offers, this seems to be the best mechanical way to deal with it. Even with the concerns of those who have turned up before me, I will sanction the distribution plan.”

The societies will pay 100 per cent of affected customers savings investments as well as up to £2,400 each towards the costs of getting property titles back. The latter figure is what had been charged by administrator Kroll to make the changes to get properties back.