Trafalgar Multi Asset Trading Company v James David Hadley & Anor.
[2023] EWHC 1184 (Ch)
4VVV Ltd & Ors v Nicholas Spence & Ors
27 September 2024
[2024] EWHC 2434 (Comm)
High Court
Two guys ran a company selling investments in holiday homes and student flats. They lied about how much money the investments would make. A court found them guilty of fraud and ordered them to pay back the investors' money plus extra because they broke the law.
Key Facts
- •435 claimants invested in holiday properties and student accommodation based on allegedly dishonest misrepresentations in investment prospectuses.
- •The claimants sought damages for deceit and unlawful means conspiracy, rescission of contracts, and a declaration that certain investments were unenforceable under FSMA 2000.
- •The defendants included Nicholas Spence and Derek Kewley, directors of companies involved in the investments.
- •The trial proceeded in phases, with the first phase determining common issues and the claims of ten lead claimants.
- •Mr. Kewley gave evidence, but Mr. Spence did not, leading to adverse inferences drawn against Mr. Spence.
- •The court heard evidence from lead claimants, defendants, and experts on property valuation.
- •The court found significant gaps in the defendants' disclosure of documents.
- •The court found that the promised returns on the investments were not realistically achievable.
- •Mr. Kewley was sentenced to a suspended prison sentence for contempt of court.
- •The court found that both Mr. Spence and Mr. Kewley engaged in deceit and unlawful means conspiracy.
Legal Principles
Elements of the tort of deceit
Ivy Technology Ltd v Martin & Bell [2022] EWHC 1218 (Comm), [338]
Implied representations
IFE Fund SA v Goldman Sachs International [2006] EWHC 2887 (Comm), [50]
Director's personal liability in deceit
Barclay-Watt v Alpha Panaretti [2022] EWCA Civ 1169, [65]
Mental state required for deceit
Derry v Peek (1889) 14 App Cas 337, 374
Presumption of reliance in deceit
Hayward v Zurich Insurance Company plc [2016] UKSC 48, [37]
Damages in deceit
Smith New Court Securities Ltd v Citibank NA [1997] AC 254
Compound interest as damages
Equitas Ltd v Walsham Bros & Co Ltd [2013] EWHC 3263 (Comm)
Equitable jurisdiction to award compound interest
Granville Technology Group Ltd v LG Display Co Ltd [2023] EWCA Civ 980
Ingredients of unlawful means conspiracy
Kuwait Oil Tanker Co SAK v. Al Bader [2000] 2 All ER (Comm) 271 (CA), [108]
Definition of collective investment scheme under FSMA 2000
Financial Services and Markets Act 2000, s.235
Unenforceability of agreements under FSMA 2000
Financial Services and Markets Act 2000, s.26
Outcomes
The court found that Mr. Spence and Mr. Kewley engaged in deceit.
The court found that Mr. Spence and Mr. Kewley made dishonest misrepresentations about the viability of the investments, intending for investors to rely on them and suffer losses.
The court found that the investment schemes were collective investment schemes under FSMA 2000.
The court found that the schemes involved pooling of contributions and profits, and lacked investor day-to-day control over management.
The court found that the agreements were unenforceable under FSMA 2000.
The Alpha Group companies were not authorized to operate collective investment schemes, thus breaching s.19(1) of FSMA 2000.
The court found that Mr. Spence and Mr. Kewley were parties to an unlawful means conspiracy.
The court found that Mr. Spence and Mr. Kewley conspired to cause investors losses by inducing them into disadvantageous contracts through deceit and the operation of unauthorized collective investment schemes.
Various remedies were awarded to the lead claimants, including damages for deceit and unlawful means conspiracy, and rescission of contracts where appropriate.
The remedies aimed to compensate the claimants for their losses resulting from the defendants' actions.
Similar Cases
KVB Consultants Limited & Ors v Jacob Hopkins Mckenzie Limited & Ors
[2023] EWHC 1686 (Comm)
Maria Helena Groen & Ors v Martin Charles Heath
[2024] EWHC 1654 (Ch)
London Capital & Finance Plc & Ors v Michael Andrew Thomson & Ors
[2024] EWHC 2894 (Ch)
The Financial Conduct Authority v Robin Scott Forster & Ors
[2023] EWHC 1973 (Ch)