The Financial Conduct Authority (a company Ltd by guarantee) v Mr Lee Anthony Skinner
| Jurisdiction | England & Wales |
| Judge | Kelyn Bacon |
| Judgment Date | 06 May 2019 |
| Neutral Citation | [2020] EWHC 1097 (Ch) |
| Docket Number | Claim No: BL-2018-000837 |
| Court | Chancery Division |
| Date | 06 May 2019 |
[2020] EWHC 1097 (Ch)
Kelyn Bacon QC
(sitting as a Deputy Judge of the High Court)
Claim No: BL-2018-000837
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (Ch D)
Royal Courts of Justice, Rolls Building
Fetter Lane, London EC4A 1NL
James Purchas and Daniel Khoo for the Claimant
The First and Second Defendants appeared in person
The Fifth and Sixth Defendants appeared in person on their own behalf and on behalf of the Fourth Defendant
Hearing dates: 2–6 and 10–11 March 2020
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Kelyn Bacon QC
Kelyn Bacon QC (sitting as a Deputy Judge of the High Court):
Introduction
The Claimant is the Financial Conduct Authority (“the FCA”), which is the regulator of the UK financial services industry pursuant to various provisions of the Financial Services and Markets Act 2000 (“ FSMA”) and the Financial Services Act 2012 (“FSA”). Its claim against the Defendants arises from their promotion of shares in the company Our Price Records Limited (“OPR”), a company whose directors were the first and second Defendants, Mr Skinner and Ms Ferreira. A total of £3.6 million was raised from 259 investors over the course of two share offerings in 2014 and 2015. The share offerings were promoted by 32 marketing agents. The two marketing agents that introduced the majority of the investors were Miller & Osbourne (“M&O”, the third defendant) and Venor Associates (“Venor”, the fourth defendant). Both companies were operated as a joint business trading under the name of “Gemini”, and were jointly managed by the fifth and sixth Defendants, Mr Mongelard and Mr Miller. OPR did not ever trade in any material way and is now in administration. M&O was dissolved after these proceedings commenced.
The FCA alleges that OPR, M&O and Venor contravened s. 21 FSMA and s. 89 FSA by communicating, to potential investors, materials promoting investments in OPR that had not been approved by an authorised person; that (in OPR's case) the investment materials contained false or misleading statements and/or dishonestly concealed material facts; and that (in the case of M&O and Venor) the companies promoted the shares to potential investors by making false or misleading statements. In addition, the FCA alleges that M&O and Venor contravened s. 19 FSMA by carrying out regulated activities (of making arrangements for investors to acquire shares in OPR, and advising those investors on the merits of acquiring those shares) without authorisation.
Regarding the individual Defendants, the FCA says that Mr Skinner and Ms Ferreira were knowingly concerned in OPR's breaches of s. 21 FSMA, Mr Skinner was additionally knowingly concerned in OPR's breaches of s. 89 FSA, Mr Miller and Mr Mongelard were knowingly concerned in M&O/Venor's breaches of ss. 19 and 21 FSMA, and that Mr Mongelard was additionally knowingly concerned in M&O/Venor's breaches of s. 89 FSA.
On that basis the FCA seeks restitution orders under s. 382 FSMA, which once recovered are for distribution among the investors. The FCA also seeks declarations regarding the contraventions, and orders restraining the Defendants from committing further contraventions.
The first and second Defendants contest the claim, saying (essentially) that they understood the various materials to have been approved by their accountants, Leigh Carr, and therefore did not know that there were breaches of s. 21 FSMA; that the investment materials were not false or misleading; that in any event Mr Skinner relied upon his professional advisers in preparing those materials; and that in the circumstances, even if there were contraventions they should not be required to make restitution of the investors' losses.
The fourth to sixth Defendants admit the contraventions of the FSMA and FSA by M&O and Venor, and admit that Mr Mongelard and Mr Miller were knowingly concerned in those contraventions. They say, however, that they believed that Leigh Carr was authorised to approve the investment materials; that the scripts for communicating with potential investors were prepared on the basis of the information provided by Mr Skinner; and that in the circumstances they should (likewise) not be required to make restitution.
The FCA was represented at trial by Mr Purchas and Mr Khoo. The Defendants represented themselves, with the main submissions being made by Mr Skinner and Mr Miller, and only brief further submissions from Ms Ferreira and Mr Mongelard.
Witnesses
A key element in the FCA's case is its allegation that the individual Defendants were aware of the contraventions of the FSMA and FSA by OPR, M&O and Venor, and in particular were aware of the lack of approval of the investment materials and the lack of authorisation of M&O and Venor, and were also aware that statements in the investment materials and promotional communications made by marketing agents were false and/or misleading. All of this is, on the facts, vehemently disputed by the relevant Defendants in their evidence. It is therefore appropriate, at the outset, to make some general comments about the various witnesses.
The FCA relied on the evidence of 13 witnesses, 10 of which were investors who had acquired shares in OPR (with the sums invested by them ranging from £3000 to £30,000). They gave evidence as to the circumstances in which they had come to invest in OPR, including the statements made to them by either Mr Skinner or the marketing agents who had contacted them. Eight of the 10 investors had been recruited by M&O/Venor. Hearsay notices were served in respect of the evidence of three of those witnesses, who for various different reasons were unable to attend the trial to give evidence. No objections to these were made by the Defendants. While the other seven investors attended the trial to give evidence, their evidence was not challenged by any of the Defendants, and the only question put to them by Mr Skinner asked for confirmation that they had received various Information Memoranda (which was evident from the witness statements in any event).
The FCA's remaining witnesses were Ms Bianca Daley-Gage, Mr Roy O'Gorman and Mr Jagdish Natt. Ms Daley-Gage is an investigator in the Unauthorised Business Department of the Enforcement and Market Oversight Division of the FCA and was an appointed investigator in relation to the activities of the Defendants. Her evidence essentially presented the material obtained by the FCA in the course of its investigation, on which it relied in these proceedings, including information obtained in interviews with the Defendants and with Mr O'Gorman and Mr Natt. While Mr Skinner asked her a number of questions, he did not challenge her evidence in any substantial respect.
Mr O'Gorman is the senior partner at Leigh Carr and OPR was, formally, his client. He attended the initial meetings with Mr Skinner and Ms Ferreira, before handing over to others in his firm (principally Mr Natt) for the work that OPR required. His evidence addressed, in particular, the extent to which Mr Skinner and Ms Ferreira had been told by Leigh Carr that it was not authorised to assist with investor fundraising. His account was robustly challenged in cross-examination by Mr Skinner, and Mr O'Gorman's evidence in response was very defensive. For the reasons set out further below I consider that his account of events was not reliable.
Mr Natt is a junior partner at Leigh Carr who, in practice, was responsible for the advice and approvals on which the Defendants rely. Again, his account of his involvement with OPR was robustly challenged in cross-examination by Mr Skinner. In certain respects I consider that Mr Natt's account was not reliable, and I have therefore treated the remainder of his evidence with some caution. Mr Natt's explanation of the circumstances in which he came to write the two key “approval” letters relied on by the Defendants was however clear, detailed and consistent with the contemporaneous evidence. On this particular point, therefore, I consider that his evidence was credible, and I prefer it to Mr Skinner's version of events.
In addition, the FCA served a hearsay notice in relation to (i) statements made by investors relevant to their dealings with OPR and marketing agents, contained within the FCA's consumer questionnaires; (ii) similar statements made by investors in records of calls between the FCA and those investors; and (iii) the statements made on calls between M&O/Venor marketing agents and investors, as recorded in extracts from M&O/Venor's call records management system. No objection was made to the admission of any of this evidence.
All four individual Defendants served witness statements, and all except Mr Mongelard were cross-examined by Mr Purchas for the FCA. Mr Miller also put some supplemental questions to Mr Skinner.
Mr Skinner was described by Mr Purchas in his closing submissions as displaying “a confidence and appeal that reflected his ability to secure investment in OPR”. I agree with that assessment. Mr Skinner maintained in unequivocal terms, throughout his evidence (and indeed his submissions), that everything was the fault...
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