“Heads you win, tails I lose” – the problem of windfall gains

The financial services industry is still reeling from a High Court decision in July this year which has resulted in a significant victory for consumers entitled to compensation for product mis-selling but who have also benefited from windfall payments received as a result of a firm’s demutualisation. John Virgo, barrister and Philip Ryley, solicitor take a brief look at the Needler decision and comment on how fair the judgment is and how it affects the industry.

On 31 July 2001, judgment was handed down by the High Court in the test case of Needler Financial Services v Taber . The action had been brought to obtain a determination of the Court at to whether windfall gains to investor claimants entitled to compensation for pension mis-selling should give credit for fortuitous gains arising from demutualisations.