KVB Consultants Limited & Ors v Jacob Hopkins Mckenzie Limited & Ors

6 July 2023

[2023] EWHC 1686 (Comm)

High Court

A company (KCL) let another company (JHM) use its license to sell investments. Those investments were illegal. The court said KCL is responsible for JHM's actions and has to pay back the investors, except for a few specific cases where more information is needed.

Key Facts

•Claimants invested £1.7 million in eight investment schemes between 2015-2019.
•Schemes were devised by Andrew Callen through Jacob Hopkins McKenzie Limited (JHM).
•JHM lacked FCA authorization, so Kession Capital Limited (KCL) became its authorized representative under s. 39 of the Financial Services and Markets Act 2000.
•Schemes were structured as bare trusts, where investors held equitable title but lacked day-to-day control.
•The schemes were marketed through videos, site particulars, and a client care letter.
•KCL's CEO, Mr. Kessler, claimed KCL relied on assurances from Callen that the schemes weren't Collective Investment Schemes (CISs).
•The Supreme Court's Asset Land case (2016) raised concerns about the schemes' legality.
•The eighth scheme, Kingsley Terrace, used MJ Hudson as a CIS operator.
•Callen's relationship with KCL soured, leading to the termination of the Appointed Representative Agreement in February 2018.

Legal Principles

Summary judgment approach: a defence must have a 'realistic' prospect of success.

Easyair Ltd v Opal Telecom [2009] EWHC 339 (Ch)

Definition of 'collective investment scheme' under s. 235 of FSMA 2000.

Financial Services and Markets Act 2000

Exemption from general prohibition and liability under s. 39 of FSMA 2000 are co-extensive.

Anderson v Sense Networks Ltd [2019] EWCA Civ 1395

Liability for unlawful promotions under ss. 21, 238, 240, and 241 of FSMA 2000.

Financial Services and Markets Act 2000

Supervisory duties of an authorized person under SUP 12 of the FCA Handbook.

FCA Handbook, SUP 12

Outcomes

Summary judgment granted for claimants regarding schemes HR 61, 65, 66, 71, 75, 81 (except for specific claimants in HR 79).

KCL is responsible for JHM's promotional activities under s. 39 of FSMA 2000, leading to liability for breach of statutory duty under s. 241.

Summary judgment refused for claims related to Kingsley Terrace (HR 82) and specific claimants in Salisbury Road (HR 79).

Factual issues remain unresolved regarding the operator of Kingsley Terrace and the timing of promotions in HR 79.

KCL's defence struck out and a new defence ordered.

The defence was unsatisfactory, containing inconsistencies and unexplained denials.

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