The case’s conclusion saw the liquidators of the Connaught Fund given the green light to pursue a claim against Capita Financial Managers Limited and Blue Gate Capital Limited,
The Fund, which was an unregulated collective investment scheme, was operated by Capita from April 2008, which was then operated by Blue Gate from September 2009 until its winding up.
The Fund alleged that both operators had “unlawfully promoted the Fund to the investors”, which was in breach of sections in the FSMA, as well as claiming they were responsible for misleading promotional literature.
The claim was made on the basis of assignments from over a staggering 1,000 retail investors who subscribed a total of around £75 million to the
Fund before it went into liquidation two years ago. The Fund sought compensation regarding the losses supported by assigning investors.
Prior to the proceedings, Capita claimed that the assignments to the Fund were invalid. It stated that the partnership had no authority to take assignments from investors after the Fund dissolved. Blue Gate also claimed that the Fund wasn’t a separate legal entity and therefore was no capable of acting as legal assignee.
Blue Gate claimed that the Fund’s liquidator had “no power to accept the purported assignments.” Mr Christie, acting on behalf of Blue Gate, stated that the liquidator of a partnership does have power to accept an assignment.” The fund then challenged this view in the hearing stating that the liquidator did have such power.
In discussing the relevant sections of law and the powers that are attached, the judge found that the Fund had sanction to bring the proceedings under Paragraph 4.
The judge disagreed with Mr Christie that Paragraph 13 was “ancillary to the other powers”.
The judge added that the determination of what it necessary or unnecessary for the winding-up of the Fund made by the defendants, “is an unpromising starting point”.
He added that, the position of Connaught’s legal representative, Mr Anderson, was “an unassailable justification for what the Fund proposes to do. The judgement is in any event one for the liquidators.”
The judge concluded that the liquidators of the fund succeeded, and “can bring the claims on the basis of the assignments.”
The FCA announced last week that it will be extending its support for the interested stakeholders regarding the Connaught Income Series 1 Fund.
“We are working closely with interested parties and our current view is that it is still in the interests of investors for the FCA to continue to support these negotiations with a view to obtaining appropriate redress for them,” the FCA reported.
You can also read more about the fund that notoriously brought down one of the industry's biggest bridging lenders, Tiuta, on B&C's news archives.
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