A businessman who presided over one of Britain’s worst “pension liberation” scandals was branded evasive, hostile and guilty of “highly regrettable conduct”, according to the judgment in a tax tribunal published yesterday.

Craig Tweedley, founder of the pension scheme company Ark LLP, displayed “a total disregard for due diligence and careful administration and was primarily motivated by a desire for personal financial gain”.

His main scheme to enable people to access their pensions tax-free before the age of 55 was “fatally flawed”, while his due diligence on one potential investment, a luxury hotel development in St Lucia, amounted to “little more than a Caribbean holiday”, the tribunal said. Nevertheless, it ruled in favour of HM Revenue & Customs, which is pursuing the 500 victims of the affair for more than £5 million in unpaid taxes.

The judgment means that they will end up with only around £4 million of the original £27 million in pension savings they were persuaded to transfer into newly created Ark-managed pension schemes more than 12 years ago.

The £9.5 million members successfully extracted from the pension funds will now incur taxes. They have already seen the bulk of their savings disappear in poor investments or get swallowed in £9 million of fees by advisers appointed to wind down the arrangements.

It is not known whether Tweedley has been investigated by regulators for his role in Ark, which wrongly told pension fund members that they could gain access to their pensions through a complex system of reciprocal loans.

The Pensions Regulator has refused to comment, but said yesterday: “We note the tribunal’s decision. This is a matter for HMRC. The trustee Dalriada is considering the ruling and we will monitor the outcome.” Dalriada Trustees was appointed by The Pensions Regulator to take over the running of the Ark schemes in 2011.

HMRC said: “The decision of the tribunal confirms our position that members of this scheme made unauthorised withdrawals from their pension savings and therefore it is our legal duty to collect the tax which is due as a result.”

The tribunal, headed by Judge Tony Beare and Gill Hunter, said the system devised by Tweedley, known as a “pensions reciprocation plan” was “disastrous for every member who chose to participate in it” and “fatally flawed from the commercial perspective”.

Tweedley “repeatedly sought to avoid answering the questions which had actually been put to him, tried to anticipate future questions which had not actually been put to him, sought to defend the indefensible and was generally evasive and hostile”.

“Many of his answers were inconsistent with the documents with which we had been provided and, in some cases, with his own evidence.”

Dalriada, which has in the past unsuccessfully pursued Tweedley for damages, told the members: “Clearly the decision is both incredibly disappointing and frustrating for the members and Dalriada.”

“We considered that the approach to taxation that we argued for in the tribunal was both correct and resulted in a fair and reasonable outcome for members and the schemes. Unfortunately, the tribunal disagreed.”

Sean Browes of Dalriada said that the members were innocent victims. “They were not wealthy well-advised tax avoiders. They were often financially vulnerable individuals who were told by the perpetrators of the Ark schemes that they could access funds in a completely legal manner.”

Dalriada will now apply to the Fraud Compensation Fund, part of the Pension Protection Fund, for compensation for the burnt members. To qualify it will have to show dishonesty took place.

Tweedley, who was approached for comment, has previously defended his behaviour, saying: “We took extensive advice about the validity of these schemes before launch.”

So-called pension liberation schemes exploded after the financial crisis as under-55s sought to unlock valuable pension benefits both in defined benefit schemes and in defined contribution pots. Dalriada has been appointed to manage more than 100 such schemes.

There are strict rules on accessing pensions before the age of 55 (and 57 from 2028). The only exceptions are those forced to retire early because of ill health or where the member receives medical advice that they have less than 12 months to live. The precise tax owing by scheme members will vary depending on the nature of the reciprocal loan arrangements entered into with other members.

The scandal has already led to suicides, marriage break-ups and in some cases members being forced to sell their homes.