‘No comfort’ for accountants embroiled in court dispute

March 21, 2011 No Comments

‘Sad’ this ever came to court, say Jurats.

A row between three accountants in an Alderney practice led to the break up of the team and the longest case at Alderney Court in living memory, After the relationship broke down between Roger Featherstone, his wife’s nephew Graeme Neal and Brendan Noone, Neal and Noone were dismissed by Mr. Featherstone. The court was told that when they were locked out of the firm’s Victoria Street premises Neal and Noone forced their way in so they could continue to manage their clients’ affairs.

When the office computer system was shut down by Mr. Featherstone, Mr. Noone said he believed it to be his duty as compliance officer to notify the Guernsey Financial Services Commission, Following communications with the Commission Mr. Neal and Mr. Noone were re-instated in order to maintain the fiduciary licence the practice required.

The case was all about whether a partnership agreement existed between the three of them. Mr. Neal brought the action, citing Mr. Featherstone as first defendant
and Mr, Noone as second defendant. He sought a declaration that a partnership agreement existed or, alternatively, that the partnership was a “partnership at will”.

He also sought a declaration that he was entitled to a one-third interest in Featherstone Leach and Co and a one-third share of net profits in accordance with a profit-sharing agreement. Additionally, he sought to establish that Century Accounting Ltd and Century Trustees Ltd, and its wholly owned subsidiaries, were assets of the partnership and that the assets were held by the three of them in proportion to their interests in the partnership. Mr, Featherstone counter-claimed against Mr. Neal and Mr. Noone seeking to establish that at all material times the pair were, in fact, employees. The trial, which started in November, lasted for seven days in court. The final
hearing was on January 18th and the parties waited two months for the Jurats to return their verdict.

None was in court yesterday when the chairman, Jurat Colin Partridge, handed down the judgement which took 90 minutes to read, They had been sent copies of the judgement earlier in the day, The Jurats dismissed the plaintiffs’ claim and decided that partnerships never existed between the parties at any time after Mr. Neal joined the practice in September 2001. Mr. Noone had been working for the firm since March 2000 and had been appointed a salaried partner in 2005 but the Jurats held that this had not established a partnership at will. The Jurats upheld Mr. Featherstone’s counter-claim that both colleagues were employees at all times.

The court had been told that the subject of Mr. Neal joining the firm had been discussed at a family gathering with Mr. Featherstone and his wife, who was office manager and company secretary, later to be a director of several of the Century Group companies, At that time Mr. Featherstone was in partnership with Mr. George Scott.

Both Mr. Neal and Mr. Noone believed they had been engaged with the prospect of eventually taking over the practice at a future date.

Trouble between the parties arose around the retirement of Mr. Scott in 2007, Efforts were made by Mr. Neal and Mr, Noone to establish their true business relationship with Mr. Featherstone, culminating in a letter from Mr. Featherstone inviting them to purchase the business before offering it to potential outside buyers. Mr. Neal and Mr. Noone signified their disagreement regarding their position within the practice and in which they benefited from a profit-sharing arrangement. Following uncoordinated counter offers from Mr. Neal and Mr. Noone, Mr. Featherstone advised them in December 2008 that he and his wife had decided to retain ownership of the business.

The Jurats said that matters were brought to a head in August 2009 when Mr. Neal and Mr. Noone, having declined to sign off the annual accounts of Century Trustees Ltd, were reminded of their directorial duties by the finance commission. Shortly afterwards, Mr. Featherstone terminated their employment. Having heard conflicting evidence at the trial as to the express intentions and intentions of the parties, the Jurats decided they could not conclude there was ever any consensus between them as to their true relationship which could be construed as a partnership either in law or at will.

In dealing with the issue of costs, Jurat Partridge said they had no doubt that the parties set out in the understanding that both principals in the practice would retire at some point and the expectation was that their two younger colleagues might take over the business, “The very sad aspect of this case is that, despite those intentions and initial shared feelings of trust and collective working spirit, they did not find time to set out the terms of an agreement in writing, and allowed misunderstandings and, later, acrimony, to sour their relationships, increasingly so after the retirement of Mr. Scott.

Jurat Partridge went on “Mr. Noone was placed in the difficult position of constructing a defence against an action with which he substantially agreed – perhaps a further reflection of the lack of consensus between them, flowing from Mr. Neal’s offer to purchase 100 per cent of the practice without consulting Mr, Noone, and Mr, Noone’s own efforts to rebuild a bond with the first defendant (Mr. Featherstone) after the offer to purchase had expired and Mr. Neal had made clear his intention to move to
Guernsey.

“In the face of this, the first defendant remained undeterred in asserting his position throughout that he had been the employer of the plaintiff and second defendant and that no partnership had ever existed between them – one might say obdurate in his approach, by his precipitate termination of their employment at the risk of the fiduciary licence, his rejection of their interests in purchasing the business and his refusal to enter into arbitration or even mediation.

“Neither Mr. Neal nor Mr. Noone will derive any comfort from the Court’s judgement and will, no doubt, continue to believe that they were in partnership with Mr. Featherstone. Nor will Mr. Featherstone derive any comfort from the judgement in the certain knowledge that after a life of industry spent building up a successful island business, and at a time when he wished to retire, he has lost the services of the two professionals who showed themselves to be willing and capable of taking over from him and, not least, because one is the nephew of his wife,”

Jurat Partridge noted that throughout the trial evidence showed that Featherstone Leach, and later Century Accounting, operated on a basis of trust with minimal formality in its internal administration, “frequently referred to as the way things are done in Alderney”.

He went on “This was nevertheless a business in which qualified members of the accountancy profession were engaged. They have shown themselves to be intelligent, committed people with a clear understanding of their legal responsibilities to their clients in the accountancy and fiduciary fields. Yet it must be observed that in their responsibilities towards each other, all three parties have patently failed to define and order their own legal business relationship. This is the sad consequence of allowing their former harmonious working situation to deteriorate for want of a definitive understanding between them. If this had been addressed at the commencement of their
respective relationships, this action would not now be before the court.”

For these reasons the Jurats ordered that each party should pay their own costs. Mr. Featherstone and Mr. Neal were both represented by advocates at the trial while Mr. Noone conducted his own case.

It has been estimated that the case has cost the parties in excess of £l00,000 in legal fees.

Tags: Alderney Court

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