For thousands of British retail investors, Harlequin Property's promise of a solid investment and a place in the sun proved too good to be true.
Harlequin Property (SVG) Ltd & Anor v Wilkins Kennedy (a firm)  EWHC 3188 concerned a claim by Harlequin against Wilkins Kennedy (WK), an accounting and consultancy firm. Harlequin had engaged WK to provide advice regarding the construction of a luxury Caribbean resort in Buccament Bay.
After Harlequin took deposits from 1900 investors, only 195 units were built of which just 16-20 were passed on to investors. The arrangement was described as having the appearances of a significant Ponzi scam, given that the funding required for the development was filled by the deposits of other investors, as opposed to Harlequin attaining financing.
Harlequin paid building contractor 'ICE' USD$52m and made weekly payments, regardless of whether any work had been carried out. Remarkably, this occurred without any written contract or detailed agreement as to the scope or valuation of the works, which was arranged on the advice of Mr MacDonald of WK. Furthermore, during this time Mr MacDonald had provided advice to both Harlequin and ICE's owner, Padraig O'Halloran, with the latter of whom he had developed a close personal and business relationship.
Justice Coulson of the England and Wales High Court found that WK was liable for "failing to advise as to the necessity of a contract between ICE and Harlequin". Harlequin's pleaded case, however, was based upon the assumption that, but for the breaches of contract/negligence, nothing would have gone wrong with the project; a position described as fanciful by the Judge. WK's liability for breach of contract/negligence was ultimately found to have caused no loss, except for one portion of the action which survived this causation issue; namely, Harlequin's loss which arose from WK's failure to provide advice on a proper and contractually-binding method of valuing the work to be conducted. The Judge found that, against the USD$52m paid for ICE's work, the proper valuation was no more than USD$24.8m. WK was liable for this overpayment, although this sum was halved to reflect Harlequin's contributory negligence. The Judge held that this award be held on escrow, in the hope that the unfortunate investors might recover some of their money.
See the Court's decision here.