On 27 September 2024, the High Court handed down judgment in which the lead claimants obtained a significant victory in a complex, long running fraud group action claim arising out of a multi-million pound property investment scheme.
Trowers acted for the Claimants together with a Counsel team led by Dan Saoul KC (4 New Square) and supported by Matthieu Gregoire (Essex Court). The lead claimants were successful in their claims for deceit and unlawful means conspiracy and in seeking declarations that the investments were unregulated collective investment schemes and is the first step in the claimants obtaining redress from the defendants (4VVV Ltd and Others v Spence & Others [2024] EWHC 2434 (Comm)).
Background
The case concerned investments made by 435 claimants in student accommodation and holiday properties around the United Kingdom. The Claimants bought their investment properties between 2012 – 2019, which were sold by companies owned or controlled by the First and Second Defendants, Mr Nicholas Spence and Mr Derek Kewley. The sales of the properties took place through marketing and estate agency companies owned or controlled by the Third Defendant, Mr Andrew Crump. The Claimants alleged that the investment schemes pursuant to which the properties were sold, which promised fixed returns over set periods of time, which did not materialise, were fraudulent. With a number of the companies involved now insolvent, the claimants sued Mr Spence, Mr Kewley and Mr Crump personally for their roles in events, as well as a number of companies within their control. The estimated damages were calculated at circa £45 million.
This litigation, which has been hard fought by the Claimants was issued in February 2021; and the Claimants, who also obtained an ex parte Worldwide Freezing Orders (WFO) against the First – Third Defendants, had to subsequently defend the First and Second Defendants' attempts to increase the fortification (successfully in the Court of Appeal in February 2022 (here)) and the First and Third's Defendants' attempts to discharge the WFOs (successfully maintained in October 2022 (here)). Further, the Claimants have had to monitor the WFO carefully across the years, making various interlocutory applications in the UK and in Florida (where Mr Spence now resides) for asset disclosure. Mr Kewley was also found to have been in contempt of court for his stark failures to provide truthful asset disclosure pursuant to the WFO and was sentenced to 5 months' imprisonment, suspended for two years by a separate judge in a hearing post-trial.
Whereas, the Claimants reached a confidential settlement with marketing agents (the Third and Fifth Defendants), Mr Spence and Mr Kewley (and the defendant companies they controlled) defended the claim, claiming that they honestly believed that the investments were viable, and any losses suffered were to be expected as with any investment made.
The trial of the ten test cases was heard by Mr Justice Foxton, in the Commercial Court, over ten weeks commencing in April 2024.
High Court's decision
The Court has found that all the lead claimants were successful in principle :
- to seek damages for deceit and unlawful means conspiracy;
- to seek rescission of certain leases on the basis they were induced by fraudulent misrepresentation;
- to seek the appropriate relief following the finding that the certain investments were unenforceable under s.26 of FSMA 2000 on the basis that that they were UCIS, and consequential relief in respect of those investments (including recovery of all monies paid and compensation); and
- to seek a determination that running an UCIS amounted to an unlawful means conspiracy.
The judgment emphasises the considerable distress that Mr Spence and Mr Kewley's deceptive business practices have caused to the investors and criticises the defendants, who knowingly and deliberately conspired over many years to deceive and thereby intended to cause injury to the Claimants by causing them to enter into investment schemes that were both economically disadvantageous and a UCIS.
The judgment has awarded the lead claimants with the appropriate relief, the quantum of which will be assessed at a consequential hearing.
Disputes partner Helen Briant, who has led the team in this highly complex claim commented:
"This is a fantastic result for the lead claimants and a demonstration of the strength and depth of the litigation team at Trowers & Hamlins. With the support of the exceptional Daniel Saoul KC (4 New Square) and Matthieu Gregoire (Essex Court) together with dedicated clients, we have been successfully fighting this complex litigation for over 4 years in order to obtain the result that our clients have long deserved. I am very pleased that this monumental result brings them all closer to that and we will continue to work hard to ensure that all of our claimants get the redress they deserve."
Practical implications
It is no secret that pleading fraudulent misrepresentation is no mean feat and this judgment is highly significant in demonstrating the scale in which such allegations can be presented and fought.
Further, following FCA v Forster [2023] EWHC 173 (Comm) we are once again reminded of the importance of the FSMA regulation being there to protect potential investors from the significant risks that such investments can present and the necessity for investments of this kind to be offered by only authorised or regulated individuals.
Please keep an eye out for further articles which will follow exploring the practical legal implications of this important judgment in greater detail.
The team was led by partner Helen Briant, and supported by Alex Sharples, Partner & Meera Solanki, Associate along with other solicitors from across Trowers & Hamlins dispute resolution department. The judgment can be found here.
