Update – WIN for the FCA….21 APR 16

Firstly, the FCA have confirmed that the appeal by Asset Land and David Banner-Eve was dismissed – so the final result – WIN for the FCA.

JUDGMENT
The Supreme Court unanimously dismisses the appeal by Asset Land and Mr Banner-Eve, finding that Asset Land’s activities amounted to operating “collective investment schemes” under section 235 FSMA, and were thus “regulated activities” for the purpose of section 19. Lord Carnwath gives the lead judgment. Lord Sumption gives a concurring judgment.

You can see a copy of the judgement with a press summary here: https://www.supremecourt.uk/cases/uksc-2014-0150.html

or download the pdf copies from the links below:

JUDGEMENT

PRESS SUMMARY

You can watch a video of the final judgment here (3 mins 15sec in length): https://www.supremecourt.uk/watch/uksc-2014-0150/judgment.html

The FCA will now be taking action to enforce the payment order of £21 million they obtained in 2014 but it is likely that the defendants will not have sufficient assets to pay that sum.  It is follows therefore that investors will not receive anything but a very small proportion of what they invested. Also, this process is likely to be complex and protracted.

Regarding time-frames, the FCA have stated, “So we are really only at the ‘end of the beginning“. FCA

Also, for those still struggling to Section 75 claims or who have not started their claim, the Supreme Court’s dismissal of the appeal will help push your claim towards success. The FCA say,

“Those investors who paid by credit card and who that have not already pursued claims under s75 of the Consumer Credit Act should think about doing so.” FCA

Who does the land we all hold now belong to?

“The land remains the property of the current owners. So all those investors who bought plots will continue to remain the legal owners. Some plots were not sold so they will remain the property of Asset Land. However, once we have taken action to enforce the payment of the £21 million that the judge ordered to be paid to us, it is very likely that Asset Land will be forced into liquidation at which time its assets will come under the control of a liquidator. It will then fall to the liquidator to dispose of the land that Asset Land owns and some scheme will probably have to be put in place whereby the plots belonging to the investors are brought into the equation so that the various sites can be disposed of as a whole. This is likely to be a complex matter, and there might be other ways of dealing with it that the liquidator may come up with.

But in short, the Supreme Court’s decision does not affect who owns the land.” FCA

 

Further Answers to Investor Questions 21 Jan 16

In response to the comprehensive summary I posted yesterday,   further questions were posed by investors.  Once again, I am indebted to James Smith for his eloquent and accurate answers.

I have taken the liberty of posting his comment below for all to see.

The £20.9 million figure is derived from the preliminary order made by the High Court in March 2013 (see link below). This figure would normally be revisited at a formal “quantum hearing” and could be increased (or possibly decreased) but would be nullified if the Defendants won in the Supreme Court and the original judgement was overturned.
http://citywire.co.uk/new-model-adviser/news/fca-wins-court-battle-against-illegal-land-bank/a745891
It is reasonable to conclude that the figure is a best estimate derived from the documents obtained by the Court or FCA. These could include published and internal accounts, statements of assets, bank account and credit card statements and land registry records which would show the consideration paid for the land by investors. I would expect the figure to be reasonably accurate. Remember this is a gross figure (i.e. it does not take into account the associated costs incurred by the Defendants).

You have asked a number of questions:

1. Where is the money now?

The High Court would have required the Defendants to disclose all of their assets when seeking a global freezing order. No doubt the FCA would have employed forensic accountants to follow the audit trail. I understand that the land was paid for by bank transfers, cheques and by credit card. It would therefore be relatively easy to confirm the gross sales figures and the identify the destination to which those receipts were original paid. Modern anti-money laundering regulations make it very difficult to extract and hide significant sums but not impossible. It would be a serious criminal offence if the Defendants failed to made full disclosure of their assets.

2. How has it been used?

I would speculate that a large proportion of the sales receipts would have been expended in the costs of running the business and therefore no longer exist, some would have been spent on assets such as land banks (which are now probably close to worthless) and the balance would have been extracted as profits by the Defendants. My previous post suggested that is quite likely that any net profits received by the Defendants could subsequently have been largely expended on living expenses and legal fees over the last four years.

3. By whose authority has the money been used?

Obviously until the original freezing order in 2012 the business and owners were free to spend the monies as they saw fit. The £20.9 million figure related to gross sales over a six year period. A high proportion of this money would have been spent on legitimate business activities before the freezing order (purchase of land, administration costs, premises, commissions, taxes etc) and I would suggest that a further significant sum could have been spent by the owners on their lifestyle during the same period. It is therefore probable that only a small proportion of the gross sales would have existed at the time of the freezing order and much of this could have been reinvested in land banks that would now have little real value.

After the freezing order the Defendants would have been restricted in their use of any residual funds, however, they would have been permitted their basic living costs and would have been allowed to fund their defence against the Civil and Criminal actions. I would anticipate that those costs would have run into several £millions.

4. Are there any accounts for us to see?

There are published accounts available at Companies House for two of the six Defendants – Asset Land Investment Plc and Equity Service (London) Limited (see links).
https://beta.companieshouse.gov.uk/company/05435811
https://beta.companieshouse.gov.uk/company/06577542
Asset Land Investment Plc’s last published accounts at 31/12/2010 showed that its net balance sheet position (i.e. value of net assets) was £76,705. Its total turnover until this date from its incorporation was £4,563,016. Equity Services (London) Limited was dissolved on 17 May 2014. Its last published accounts showed a negative balance sheet (i.e. it had no value). There does not appear to be any public record of Asset LI Inc’s accounts which is not surprising as it is a Panamanian company.
In the event that the original High Court ruling is not overturned by the Supreme Court I would anticipate that the FCA will appoint Insolvency Practitioners to liquidate Asset Land Investment Plc and to bankrupt the two individuals who have not already settled (Susan Siggins has reached a settlement). The accounts would then become available. However, there is little that can probably be done about the Panamanian company.
5. £20.9m is referred to below. Accountability is important. Who is overseeing this large sum and getting the best value for expenditure?
As stated previously, the £20.9m is an estimate of investors’ gross investment. It is unlikely that more than a small fraction of this exists in the form of cash. The Defendants’ assets have been frozen but would have been allowed access to funds to pay for their defence and basic living costs. No one would be managing any remaining assets until the original court order is confirmed.
As also stated previously, the FCA would have incurred very substantial costs in undertaking the investigation and court actions and there will be more substantial costs in tracing and liquidating assets so after these costs are recovered it is unlikely that there would be anything left to distribute to investors.
Investors might be interested that there are many other high profile legal cases waiting on the outcome of the Supreme Court decision. As this is a major test case I would conclude that the FCA have pulled out all the stops and not spared any legal expense to win the case. If they are successful in may well be a pyrrhic victory for the Asset land investors.

James Smith

Summary of current position 20 Jan 16

One recent comment on the blog provided a very  comprehensive (and accurate in my opinion) summary of the current situation with regards to investors and Asset Land.  I thought it was worthwhile posting this summary here as I know not everyone will read all the comments on the blog.

Thanks to James Smith.

You may have missed the conclusion of the criminal case in December when all of the Defendants were found not guilty. Therefore, technically, no one has actually been defrauded.
We have now reached the Supreme Court stage of the civil case. Previously the Defendants had been found to be in breach of Section 21 of the Financial Services and Markets Act, 2000 by operating an unauthorised unregulated collective investment scheme (i.e. the Defendants did not have authorisation to operate such a scheme). This can result in a criminal sanction with a maximum penalty of two years imprisonment and an unlimited fine. However, it now seems extremely unlikely that the Defendants will be prosecuted after being found not-guilty of conspiracy to defraud. The question before the Supreme Court is a point of law revolving around the definition of a collective investment scheme which is defined as follows:

Collective investment scheme (S.235, FSMA, 2000)
(1) In this Part “collective investment scheme” means any arrangements with respect to property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangements (whether by becoming owners of the property or any part of it or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income.
(2) The arrangements must be such that the persons who are to participate (“participants”) do not have day-to-day control over the management of the property, whether or not they have the right to be consulted or to give directions.
(3) The arrangements must also have either or both of the following characteristics—
(a) the contributions of the participants and the profits or income out of which payments are to be made to them are pooled;
(b) the property is managed as a whole by or on behalf of the operator of the scheme.
(4) If arrangements provide for such pooling as is mentioned in subsection (3)(a) in relation to separate parts of the property, the arrangements are not to be regarded as constituting a single collective investment scheme unless the participants are entitled to exchange rights in one part for rights in another.
(5) The Treasury may by order provide that arrangements do not amount to a collective investment scheme—
(a) in specified circumstances; or
(b) if the arrangements fall within a specified category of arrangement.

This is very complicated and the correct interpretation is by no means clear otherwise the Defendants would never have received leave to appeal to the Supreme Court.
The original High Court case found in favour of the Financial Conduct Authority (FCA) and a provisional order was made compelling the Defendants to surrender £20.9 million. Their global assets had already been frozen by High Court Order prior to this hearing. The compensation order was held in abeyance during the appeal process. The Appeal Court upheld the original High Court judgement. This is the final stage in the UK courts. Only Mr David Banner-Eve and Asset Land Investment Plc have appealed on the grounds that the High Court misinterpreted the meaning of “Collective Investment Scheme”. In the event that the remaining Defendants win at this stage it will probably mean that the revised judgement would apply equally to the non-appealing Defendants – Stuart Cohen, Susan Siggins, Asset LI Inc and Equity Services (London) Limited.

On the assumption that there is no further appeal to the European Court of Justice or (less likely) European Court of Human Rights, then the following outcomes are likely:

DEFENDANTS WIN:
In the event that the Supreme Court finds in favour of the Defendants it is likely that the compensation order will be overturned and no compensation would be paid. Indeed, where investors have been compensated by their credit card provider then they would in all likelihood be required to make repayment.
However, the investors would still be able to take out a private damages action against the Defendants for misrepresentation. The likelihood of success would be limited but would be based on the balance of probability unlike the criminal case where the burden of proof was greater (i.e. beyond reasonable doubt). The cost of any such action would probably run in six figures.

FCA WIN:
If the original High Court judgement is upheld then the provisional compensation order would be confirmed and the FCA could seek to enforce the compensation order (subject to the quantum being appealed which is likely).
If the compensation order is upheld or reduced then the balance would be recoverable from the Defendants. Investors who can prove that they have been disadvantaged can seek compensation but this would only be paid after the FCA has recovered its costs. In the event that an investor has already been compensated by their credit card provider then it is the provider who would be entitled to compensation.
This is where the really bad news starts. £20.9 million is the FCA’s estimate of the gross investments made by the investors. The actual profits earned by the Defendants is likely to be only a fraction of the gross amount after taking into account the costs of buying the land, conveying the land, operating the business, paying commissions to the sales team and even suffering tax on declared profits. In addition the Defendants will have certainly incurred substantial legal fees and would have been unable to trade in the intervening four years. It is therefore highly unlikely that they will have any substantial assets remaining.
Assuming that the Defendants are unable to pay the full level of compensation then the FCA can seek to bankrupt the individuals and liquidate the companies. This is an expensive process. The Insolvency Practitioner’s fees would be paid out of the net proceeds derived from liquidating the Defendants’ assets. Insolvent liquidations are hardly notorious for generating tangible returns.

In summary, it is quite possible that the net amount of compensation available to investors after court costs, legal fees, FCA costs and insolvency costs will be a big fat zero.

I am sorry to be so pessimistic. As the old saying goes “justice is the preserve of very rich and the very poor”. Hopefully, the FCA have been working overtime in identifying a hidden pot of gold. I am not holding my breath.

Supreme Court Appeal Concluded 15 Jan 16

Asset Land Investment PLC and its director Mr David Banner-Eve had their appeal heard today by the Supreme Court following a DISMISSAL of their appeal in the COURT of APPEAL.

The previous decision made by the Divisional Court to uphold the FCA complaints stands.

http://www.bailii.org/ew/cases/EWCA/Civ/2014/435.html

Facts

The first appellant is a public limited company. The second appellant is a director of the first appellant. Between 2006 and 2008 the first appellant, and another company ALI-Panama, purchased areas of farmland with the aim of carving them up into plots and selling them to individual investors. The judge found that the structure of the scheme was that: (i) the first appellant would seek to progress planning procedures so that the sites could be used for housing; (ii) the first appellant would procure their sale to developers; and (iii) the investors who sold the plots would be paid a share of the total consideration paid by the purchaser. Investors would only receive the contract for the purchase of land after they had paid the full purchase price. The contract included clauses that: the first appellant had made no representations which the investors were relying on in entering the contract other than those set out; and, the first appellant would not apply for planning permission or any other act within the 2000 Act unless authorised. Investors filled out a separate form confirming that they read and understood the disclaimers. Once these documents had been received, title to the plot would be registered at the Land Registry in the name of the investor. Following complaints, the FCA appointed investigators. On 14 June 2012, the FCA brought proceedings against, amongst others, the appellants for operating “collective investment schemes” (s.235 of the 2000 Act) in contravention of the 2000 Act. The Divisional Court upheld the FCA’s complaints and the Court of Appeal dismissed the appellants’ appeal.

https://www.supremecourt.uk/cases/uksc-2014-0150.html

 

Newbury Planning Dept information

There has been talk of Newbury and the potential for planning departments to re-zone this site especially after the recent court case.

The only firm information we received from the Planning Office can be seen below (admittedly this was in 2012 but did give future predictions).

Who has firm evidence from the Planning Office that Newbury may be re-zoned and given planning permission for development then?

Newbury Planning Office Reply

‘Fields of gold’ trial trio cleared – from Newbury Today

THREE people have been cleared of conning clients into investing in Newbury’s “fields of gold”.

Afterwards one of the supposed victims, who bought a plot of land in Newbury, complained that his investment had been tainted by the case.

But West Berkshire Council has defended its part in bringing the prosecution.

During the 48-day Southwark Crown Court trial in Central London, it was alleged investors were conned into putting £20m into a land banking scheme.

Paul Taylor, prosecuting, said investors were offered “eye-watering rates of return” if they ploughed their cash into tiny pieces of worthless land too small to build a house on.

Clients were sold land on sites in Newbury and in Lutterworth, Leicestershire, Huby in North Yorkshire and a site near Stansted, Essex.

In the dock were former Asset Land Investment directors Stuart Cohen, aged 67, of West Lane, West Hampstead, North West London; David Banner-Eve, aged 55, of Rambles Lane, Harlow, Essex; and 54-year-old Susan Siggins of Whighten Mews, Isleworth, Middlesex.

The defendants denied they set out to rip off customers, blaming the wild claims about potential profits on unscrupulous brokers out to boost their commission.

Mr Cohen said a consortium of Asset Lands Investments’ clients were pressing ahead with planning applications on sites in Newbury and elsewhere, adding: “It’s happening, it’s happening now, it’s going ahead as we speak.”

He said profit estimates given to clients of 200 to 300 per cent were “conservative” and that he was “very, very confident” of getting planning permission on the land.

All were cleared of conspiracy to defraud.

Afterwards Newbury resident Andrew McLean, whose friend invested in the scheme, queried the wisdom of bringing the case.

He said: “The legal costs must be astronomical at a time of severe cuts.”

An investor in the Newbury scheme, which offered plots of land at The Chase, Wash Water, asked  for his name to be withheld, but said: “We were all encouraged to seek independent legal advice before buying.

“I have a land registry certificate and my lawyer says it’s all above board.

“Of course it’s a gamble but I thought it was worth a punt.

“Now West Berkshire Council has branded the land worthless so I feel it’s far
less likely to ever get
planning permission in future.”

Council spokesman Martin Dunscombe said the costs of bringing the prosecution would come from a central Government fund.

He added: “West Berkshire Council became involved after receiving a significant number of enquiries from consumers who had invested money in plots of land in Wash Common, Newbury, and who had subsequently become concerned about what they had been told about returns when they had invested.”

He said the council had sought expert advice from a barrister before and during the case

Mr Dunscombe went on: “The outcome of this case will have no bearing on whether or not the land would or would not receive planning permission.

“This is dealt with by an entirely separate process and each application is treated on its merits.”

Trading standards portfolio holder Marcus Franks (Con, Speen) said: “While the council must respect the decision reached by the jury in this case, I am nevertheless disappointed by the outcome of the trial.

“The money invested was in the order of £20m and the scheme had a significant adverse impact on the lives of many of the investors that gave evidence, none of whom had seen a return on their investment.

“I am therefore satisfied that there was a compelling public interest in putting the matter before the court.”

Source: http://www.newburytoday.co.uk/news/news/16648/-Fields-of-gold–trial.html

ACQUITTAL IN £20million LAND BANK SCAM 04 Dec 15

For the benefit of those who said Mr Banner-Eve was not acquitted – here it is from the webpage of his own barrister – ACQUITTED. (mainly for you Mr Realism!)

Acquittal in £20 million ‘Land Banking’ Conspiracy

Timothy Kendal and Thomas Daniel, instructed by Simon Rose of Morgan Rose, secured the acquittal of the first and lead defendant in a multi-million pound ‘land banking’ conspiracy to defraud at Southwark Crown Court.

Timothy Kendal and Thomas Daniel represented David Banner-Eve, who was the director of a public limited company that sold plots of land as an investment opportunity.

The prosecution alleged Mr Banner-Eve was in fact in control of other land investment companies involved in the sale of land and that these companies used independent sales brokers who lied to consumers. The prosecution’s case was that Mr Banner-Eve and his two co-defendants had conspired together in relation to a fraudulent enterprise that was worth £20m.

Following an eleven week trial, which involved evidence from planning experts and others in the industry, Mr Banner-Eve was unanimously acquitted by the jury.

http://www.2bedfordrow.co.uk/acquittal-in-20-million-land-banking-conspiracy/

 

 

This might be helpful:

In a criminal case “it is the prosecution’s job to prove beyond a reasonable doubt that a person is guilty. If the prosecution is unable to do this, the accused is acquitted ….