Asset Land Investments Plc v Financial Conduct Authority
| Jurisdiction | England & Wales |
| Judge | Lady Justice Gloster,Lady Justice Sharp,Lord Justice Rimer |
| Judgment Date | 10 April 2014 |
| Neutral Citation | [2014] EWCA Civ 435 |
| Docket Number | Case No: A3/2013/1017 |
| Court | Court of Appeal (Civil Division) |
| Date | 10 April 2014 |
[2014] EWCA Civ 435
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE, CHANCERY DIVISION
MR JUSTICE ANDREW SMITH
HC12D02401
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Rimer
Lady Justice Gloster
and
Lady Justice Sharp
Case No: A3/2013/1017
Mr Philip Coppel QC and Ms Vivienne Tanchel (instructed by Litigaid Law) for the Appellants
Mr Jonathan Crow QC, Mr Tim Penny and Mr Philip Hinks (instructed by The Financial Conduct Authority) for the Respondent
Hearing dates: Wednesday 11 th December 2013
Thursday 12 th December 2013
Friday 13 th December 2013
This appeal raises the question as to whether certain sales of land, or arrangements relating to sales of land, at six sites in England were "collective investment schemes" within the meaning of section 235 of the Financial Services and Markets Act 2000 (" FSMA").
The appeal is brought by the third defendant, Asset Land Investments Plc ("ALI-UK"), and the fifth defendant, David Banner-Eve ("Mr Banner-Eve") (together "the Appellants") against the decision of Andrew Smith J ("the judge") handed down on 8 February 2013, [2013] EWHC 178 (Ch) ("the judgment"). Permission to bring the appeal was granted on paper by Lewison LJ on 3 May 2013 only in respect of Grounds 2 to 6, and Grounds 8 to 10, of the Appellants' grounds of appeal.
The claim was brought by the respondent, The Financial Conduct Authority, formerly The Financial Services Authority ("the FCA"). By its claim, it alleged that certain so-called "land banking" schemes established and operated by the first defendant, Asset Land Investment Inc ("ALI-Panama") and ALI-UK were unauthorised collective investment schemes within the meaning of section 235 of FSMA and that certain of the defendants had been knowingly involved in such schemes in contravention of various provisions of FSMA.
In his judgment the judge made the following key findings in respect of a list of issues which had been identified at the PTR:
i) There were arrangements with respect to property (being the land sites at South Godstone, Liphook, Newbury, Stansted, Lutterworth and Harrogate (together, "the Sites") or, alternatively, plots of land at the Sites), the purpose of which was to enable persons taking part in the arrangements (being investors in the Sites) to participate in or receive profits arising from their acquisition and disposal of such property, within the meaning of section 235(1) of FSMA (paragraphs 157–167 of the judgment); (that was Issue 1 in the list of issues).
ii) The arrangements were such that the investors did not have day-to-day control over the management of the property within the meaning of section 235(2) (paragraphs 168–171); (Issue 2).
iii) The arrangements were such that the property was managed as a whole by or on behalf of the operators of the schemes within the meaning of section 235(3)(b) (paragraphs 172–173) (Issue 3).
iv) In breach of the general prohibition contained in section 19 of FSMA, ALI-UK established and operated schemes with the characteristics described above at the South Godstone and Liphook sites, and ALI-Panama established and operated schemes with such characteristics at the Newbury, Lutterworth, Harrogate and Stansted sites (paragraph 174) (Issue 4).
v) In the course of its business, ALI-UK (through its brokers or other representatives) communicated invitations and inducements to participate in its two schemes, and ALI-Panama did so for its four schemes, contrary to section 21 of FSMA (paragraph 175) (Issue 5).
vi) Mr Banner-Eve and the fourth defendant, Stuart Cohen ("Mr Cohen"), were each knowingly concerned in ALI-UK and ALI-Panama's aforementioned contraventions of sections 19 and 21 for the purposes of sections 380 and 382 of FSMA (Issue 6).
Consequent upon those findings, by order dated 22 March 2013 ("the order") the judge declared that:
i) In respect of each of the Sites, ALI-UK and ALI-Panama had established and operated collective investment schemes ("CISs") within the meaning of section 235 of FSMA without being an authorised/exempt person in breach of section 19, and had communicated invitations/inducements to engage in investment activity within the meaning of section 21, without being an authorised person or having those invitations/inducements approved by an authorised person.
ii) Mr Banner-Eve and Mr Cohen had been knowingly concerned in ALI-UK and ALI-Panama's contraventions.
The judge also granted injunctions against the Appellants, ALI-Panama and Mr Cohen, made orders against them under s 382 of FSMA requiring them to pay to the FCA "such sums as appears to the court to be just having regard to the considerations in section 382 …of FSMA" and ordered an inquiry as to the amounts the Appellants should pay. He ordered that various interim payments be made by the Appellants, ALI-Panama and Mr Cohen, totalling £11,270,000. He refused permission to appeal against any part of the order.
Factual background
An account of the factual background to the proceedings, together with the judge's findings of fact, is set out at paragraphs 56–110 of the judgment. I summarise the salient points by reference to the parties' skeletons.
The parties
The FCA performs regulatory functions in the financial services industry pursuant to FSMA.
ALI-Panama is a limited company that was incorporated in Panama on or about 13 th March 2007. It sold land at four of the six sites (Newbury, Lutterworth, Harrogate and Stansted). It did not participate in the proceedings before Andrew Smith J.
Mr Cohen is a director, the president, the secretary and the beneficial owner of ALI-Panama. He did not participate in the proceedings before Andrew Smith J.
Mr Banner-Eve is a director of ALI-UK. He participated in the proceedings before Andrew Smith J. It was the FCA's case at trial that Mr Banner-Eve was also involved in the management of ALI-Panama and was a shadow director of that company. Although this was denied by Mr Banner-Eve, the judge found that "although he held no office and had no shares, he was otherwise as fully involved with Ali-Panama as he had been with ALI-UK.". In relation to his evidence the judge held:
"Mr Banner-Eve was a dishonest witness. He was evasive in his answers and often claimed to know nothing, or to remember nothing, about documents and other matters of which he must, in my judgment, have been aware and recalled. I reject parts of his evidence as deliberately dishonest for reasons that I shall explain, but in particular I reject his claim that he was not involved in establishing and operating ALI-Panama, and his evidence about his and ALI-UK's involvement with buying the Newbury, Lutterworth, Harrogate and Stansted sites."
The second defendant, Equity Services (London) Limited ("ESL"), is a limited company that was incorporated in England and Wales on 28 th April 2008. ESL's sole shareholder and director is Susan Siggins, the sixth defendant. From about June 2008, ESL acted as a UK based administrative agent for ALI-Panama in the processing of sales of plots to consumers, for which it received a commission from ALI-Panama. ESL did not participate in the proceedings before Andrew Smith J. Ms Siggins, who was unrepresented, did occasionally participate in the proceedings before Andrew Smith J. During the course of the hearing she reached a settlement with the Respondent.
ALI-UK is a public limited company that was incorporated in England and Wales on 26 April 2005. As I have mentioned, Mr Banner-Eve is a director of ALI-UK, and Mr Cohen was a sales manager. ALI-UK's registered office was at Caxton House, Old Station Road, Loughton, Essex (being the same address as the registered office of ESL), and it carried on business at Warlies Park House, Horseshoe Hill, Upshire, Essex EN9 3SL (an address that it shared with ESL from July 2008 until early 2009). A number of the individuals who worked at the Warlies Park address worked for both ALI-UK and ESL.
The Sites
The judge found that the sites were acquired as follows:
i) ALI-UK acquired two of the three parts of the South Godstone site on 2 nd February 2006 for a purchase price of £310,000. The third part of the site was acquired in or about October 2007.
ii) ALI-UK later acquired the Liphook site on 30 th April 2008 for a consideration of £105,000.
iii) ALI-Panama acquired:
a) the Lutterworth site for £181,500 on 11 August 2008;
b) the Newbury site for £175,000 on 20 March 2009;
c) the Harrogate site for £115,000 on 14 May 2010;
d) the Stansted site in or about June 2011 for a price which was not in evidence.
Soon after its acquisition of the South Godstone site, ALI-UK began to sell plots. In the early days of its operation, it sold plots at trade exhibitions and through telephone sales. The judge concluded that it seemed likely that, following the start of an investigation by the FCA into ALI-UK's operations, ALI-UK began to sell its plots through third party off-shore brokers. Some of the same brokers were used to sell plots of land owned by ALI-Panama.
The judge made no specific finding as to how much ALI-UK and ALI-Panama (together, "Asset Land") received from investors as a result of their sale of plots at the sites, save as to comment that:
"except in the case of the Stansted site where few plots had been sold when the proceedings were brought, Asset Land's receipts undoubtedly far exceeded what they paid for...
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