PetersOpal

[Whitelighter]

Ok, let me say that I choose to open a client account with my bank. This a account is just a bank account operated by my business, that I have chosen to call 'Client Account No.1'. In the same way my current account is called 'Daily Account' or whatever.

I am the sole signature on the account. But it is still my account. If I take money out of this how is it fraud? It is after all my account, which I have chosen to nominate as a Client Account and therefor offers no protection whatsoever. There is no account that I can open with a UK bank that will provide any legal covenenant to monies placed in it.

There is no facility to have a backed account in the same way the law society underwrites and regulates the accounts of solicitors. It is a totally different system.

 

[Gludy]

Rob
Not so.
Even if the business does not touch the client account the Inland revenue and others can step in and take the proceeds - it ioffers no protection even if the bank guarantees not to touch it or use it as security.

 

[jfm]

100% agreed Jez

 

[benjenbav]

I get involved (as a lawyer) in a lot of civil engineering work. Invariably a highway authority will insist on a bank bond before allowing a private developer to work on the public road network. As a consequence, I am well aware that there is a big industry out there in providing financial bonds for third party commitments. They are not inexpensive to procure but, given the current financial climate, I can't help thinking that if a boat builder were to provide an insurance backed scheme to bond its commitment it would (a) make the deal much, much more attractive to the buyers and (b) would be a cost which could be passed on to the buyers.

And if anyone says that they wouldn't need it if they buy from your competitors because they are big, long established companies - well, so was Arthur Anderson; so was Barings.

 

[moondancer]

[ QUOTE ]
Do you know who the current Chair of the BMF is?.................................................

[/ QUOTE ]

No - but I know who the previous President was. I think the industry has to show leadership and should not underestimate the confidence knock that this will give consumers - particularly given the history of the last few days.

 

[[2574]]

Paul,

I do not believe that to be correct. Monies held within client accounts are held on trust for another party and HMRC or anybody else do not have recourse to assets which are not owned by the defaultee. To do so is theft. That is why it is critical to have the word "Client" in the name of the account as this legally puts all others on notice as to the legal status of those monies.

rob

 

[[2574]]

No it is not a totally different system - except that the Law Society and the RICS have insurance policies that back up defalcation of clients monies. The YBDSA could (indeed even might) operate an insurance policy to run alongside the client account.

In your analogy it is fraud to withdraw monies from a client account other than for the purposes of (and under the instruction of) the client. To withdraw monies from the client account to fund your own cashflow would be a wrongful use of those monies. This to my mind hinges on the meaning of funds being "held on Trust". I belive that this phrase has standing in law which gives the client account its usefulness.

rob

 

[jfm]

Ribih, that's the wrong distinction imho and misses the point. A client account per se doesn't offer protection, let alone excellent protection, in the case of an honest business failure. That's the crucial point, and the reason why client accounts should simply be discarded from the discussion on protecting new boat buyers.

In the case of a non fraudulent business failure the deposit-paying customer could be protected by Jez's guarantee system or could be improved by giving the buyer a direct claim against the builder as per your other post. But not by a client account system per se. Manufacturers have strong aversion to having any direct contractual relationship with customer's though, so likely will not play ball. Jez'z 3rd party guiarantee at 1% is therefore the best sounding idea imho.

In the case of brokers rahter than new builds there is a simple solution sitting there, namely the trust idea in Gludy's thread

 

[jfm]

For the record, no creditor lost any money in the Arthur Andersen closure. It was an entirely solvent wind up, and indeed the US firm (which was the only entity to be indicted and convicted of anything) was 100% acquitted on all counts, with costs, by the US Supreme Court.

 

[jfm]

Robih - that's the crucial point. You have to create a trust. Then you are correct, hmrc and anyone else can't touch the money (would be theft, as you say) and the Joe Public is protected. That's what was expalined a week ago in the other Gludy thready. But merely putting the word "client" in an account name doesn't of itself create the trust (an even if a constructive trust were created passively, the terms of that trust wouldn't be precisely enough defined to give the Joe Public what he ought to have). Other changes to standard broker documentation are needed, but would be simple to do...

 

[Nautical]

Forgive me ignorance / stupidity if this sounds twaddle but why can't (if the value of the boat is big enough) the sale be conducted through a lawyer assuming one was willing enough to be engage in such, much like a conveyance of any property, it might not be a set format at the moment but surely not rocket science.

On the Isle of Man there are about six law firms all offering yacht financing services and I can't imagine there are no structures in place if the yard or the agent go belly up, I imagine through a bond.

In our case the money isn't due until the boat is completed and being prepared for transport ready to go and then Bill of Sale, transfer of builders certificate and CE docs which the yard send to us prior to the boat being loaded as we will have already paid for the boat ourselves we then exchange these with the client when the money hits our account. We will even register the boat in the clients name if they are still nervous. If they don't pay us and balance of for options fitted after arrival here we just put a charge over the boat until the debt is cleared.

 

[Gludy]

I have recently had to deal with the question of trust.

I am still owed over £140k in VAT on my Trader from Tarquin Boat Company. I also have a set of post dated cheques dated the 30th of every month until Xmas. These now amount to £50k. So I am still owed over £190k. The VAT has a personal guarantee with it from Mr. Tony Chappell.

Given this state of play I asked that any deposit for Drumbeat was paid into the escrow account. Tarquin refused claiming that they may have to refund the purchaser so I then came up with the Escrow account that only needed their signature if the payment was back to the purchaser - they still refused - a point blank refusal in writing without reason given. I explained that I had proof they were short of money in as much they could not pay me all they owed me.... but they would not budge.

What worried me was that we were discussing not their money because we had aa written agreement that they could charge anything for the sale of Drumbeat and even had a penalty of £20,000 due to me if they did not sell.... we were discussing my money and they refused to handle it so that it was secure for me .... hence I decided to move and put effort into selling Drumbeat myself rather than risk anything.

So the security of a client account was a major factor in me selling Drumbeat myself rather than risk any other route for the money.

The marine industry needs a radical; shake up with set standards and consumer protection I am totally fed up with it.

 

[benjenbav]

Was only using Arthur Andersen as an example of a big name which stopped trading within a very short time. As a complete irrelevance, one of the first jobs I had on my first day of articles was to serve a writ on Arthur Young (as was)!

 

[Whitelighter]

We also don't ask for the balance until the boat is ready to be shipped. The bank guarentee covers the 10% build deposit and the two weeks before the customer takes delivery for the full amount, should something happen to them or us before the boat lands

 

[benjenbav]

jfm - to save you the trouble: I know that Arthur Young merged with Ernst & Whinney to form Ernst & Young, not Arthur Andersen. But 10 minutes ago my brain was abducted by aliens and has only just been returned /forums/images/graemlins/smile.gif

 

[jfm]

Nautical, sorry but what you write in the last para isn't precise enough. When does the client pay? When does the boat belong to him?

It sounds to me like client pays you, then you pay that money to builder, then builder ships the boat and it's on the road/freight for a few weeks. There still seems to be a period when client is unsec creditor of you and you are unsec creditor of builder. Or is there not... can you explain?

Overall though credit risk seems much lower with you than the UK builders if you dont take stage payments as the boat build progresses? Absolute must have a lot of capital employed in their business?

 

[Nautical]

Bob's your uncle, maybe us little guys have something to offer after all, small is beautiful in this business IMHO, I might not have a Bentley and my suits come from Mark & Sparks but I own everything I sit on /forums/images/graemlins/grin.gif

 

[jfm]

Hurrah for this idea

Well that proves it can be done. This is a fab idea, and should become industry standard. The 1% is a fair enough price imho, and would come down with market forces if the idea became widespread.

I vote Jez Banks as new BMF president

Incidentally, interesting to note that Westline only take 10% till boat is finished. No stage payments. Again, like Absolute, lots of capital invested (somewhat unnecessarily imho) in the business

 

[Nautical]

Sorry didn't explain that too well, we fund the purchase from the yard ourselves, only when the boat is completed and ready to be shipped does the client pay us but we already at that point have ownership so we do the transfer of title there and then, the boat is transported then to UK, Med, or where ever but the client owns the boat at that stage and it is insured for full loss if it becomes a right off cus numpty driver went under a low bridge etc.

Perhaps unusual but thats the way we do it and we are very fortunate that we have a financial principle willing to do so. We still ask for a booking deposit and if you decline the boat for any reason other than a problem due to survey (assuming you wish one) once it is ready then you loose that which is fair enough in my view.

Absolute are very well funded (we keep tabs /forums/images/graemlins/grin.gif) and certainly the new 20m euro yard is funded by them.

 

[benjenbav]

Re: Hurrah for this idea

Seconded. If I could avoid the sleepless nights between handing over the last tranche of the hard-earned and delivery by paying an extra 1% I would definitely see it as money well spent. Likewise, I would be much happier to stump up stage payments knowing they were guaranteed (which would help the builder, too).

So, Jez, on this tide of popular support where do you plan to lead the BMF in your new role?