A High Court judge has paved the way for administrators to sue four directors connected to the London Capital & Finance (LCF) savings scandal.
LCF, which sold investors mini-bonds and promised their money would be invested in low-risk loans to small companies, collapsed last year owing 12,000 savers £237m.
The implosion set off a series of legal battles and prompted the Financial Conduct Authority (FCA) to clamp down on mini-bonds.
Judgement: Simon Hume-Kendall, linked to London Capital & Finance, and wife Helen
Yesterday’s judgment means the four businessmen at the centre of the scandal could now be pursued by administrators for a £32.6m tranche of the money which investors lost.
Though highly technical, the decision will be a step in the right direction for LCF savers who were left out of pocket in January 2019.
The court case involved the transfer of £32.6m of investors’ money to four individuals with links to LCF – Simon Hume-Kendall, Andy Thomson, Elten Barker and Spencer Golding.
The case was brought by administrators of a separate company, London Oil & Gas (LOG), which collapsed soon after LCF.
LOG was one of the companies which borrowed around £91m of investors’ money from LCF, and lent £32.6m of it to another firm, called London Group.
LOG’s administrators alleged London Group handed the cash to Hume-Kendall, Thomson, Barker and Golding.
They claimed that Hume-Kendall then tried to shield the four from further legal action, by signing agreements which made it appear as though they did not owe investors any money. Judge Mark Mullen yesterday declared these agreements void, as Hume-Kendall did not have the authority to complete them, among other reasons.
Referring to an explanation of events given by Hume-Kendall and LOG’s company secretary, Robert Sedgwick, the judge added: ‘I am unable to accept Mr Hume-Kendall and Mr Sedgwick’s account in the absence of independent corroborating evidence, given their willingness to produce misleading documents.’
LCF promised investors returns as high as 8pc. But after it collapsed, its administrators Smith & Williamson found that almost all of the businesses which had received loans from LCF were linked to Hume-Kendall, Thomson, Barker and Golding.
Lane Bednash, of CMB Partners and joint administrator to LOG, said: ‘Because of the legal obstacles placed in our path it has taken administrators over a year of litigation to get to this point. This is an important judgment in the course of unravelling the big picture and is significant in clearing the way for administrators to recover monies for the ultimate benefit of the LCF bondholders.’
Separately, an independent review into the City watchdog’s handling of the scandal will be postponed again. The report into the Financial Conduct Authority, led by Dame Elizabeth Gloster, was due in July but was pushed back to the end of September after the FCA disclosed an extra 3,500 documents.
It is set to be published on November 23, as Dame Elizabeth said interviews with senior FCA staff took longer than anticipated and raised new issues.