The House Crowd was a so-called peer-to-peer lending firm which was founded in 2012 by Frazer Fearnhead and Suhail Nawaz. The company facilitated the crowd funding of loans made by members of the public secured against property and other assets.
In June 2020 the firm was placed under restrictions by the FCA after what was described as “non-compliance with various regulatory rules“. The company was placed into administration in April 2021 following “concerns about THC’s viability and ability to continue to fund its operations“.
At the date of administration the firm had 24 loans outstanding, all of which are described as defaulted. Seven of those projects were said to require “significant work before they can reach practical completion“.
We know that ‘money isn’t funny’ – beneath the colourful illustrations, we take our business and your money very seriously indeed, working exceptionally hard to deliver the best returns to you we can.
Statement on a page titled “Why we consider ourselves the best peer to peer lending platform available to investors” on thehousecrowd website
Court Proceedings
In their most recent progress report dated March 2022 the Joint Administrators’, Jeremy Woodside, Francis Wessely and Franklyn Ofonagoro of insolvency firm Quantuma, described two court applications that would be forthcoming:
First Court proceedings
In several previous reports, the Joint Administrators advised that they have been preparing an application to Court in which they intend to ask for approval to their proposed basis on which they will fund their remuneration and third-party costs.
The reason for the Joint Administrators’ application is because the majority of their work since appointment (and in the future) has and will be been spent securing, controlling and ultimately realising assets belonging to investors, not the Company’s administration estate.
The process of preparing this application has been complex and lengthy due to the nature / composition of the House Crowd’s operations and business that the Joint Administrators discovered on their appointment. The Joint Administrators on appointment found a business that was characterised by incomplete books and accounting records; a patchwork of sometimes conflicting contractual agreements purporting to govern THC’s relationship with investors; significant cash at bank with indeterminate ownership status; and various other issues.
These factors necessitated upfront work (Including support from legal Counsel) by the Joint Administrators to be able to evaluate and outline for the Court the necessary steps that will be required over a period of time to secure and realise assets for the benefits of Investors. Furthermore, the FCA, as THC’s regulator, were keen that the Joint Administrators prioritise this evaluation phase before considering a Court application for their fees. The Joint Administrators have therefore had to ensure that the FCAs queries and enquiries were sufficiently addressed in advance of any Court application.
The Joint Administrators are pleased to advise that their aforementioned fee basis application to Court has now been filed. The Joint Administrators are currently awaiting an initial trial date and proceedings timetable which will be relayed to investors once received.
Second Court proceedings
The Joint Administrators have previously advised of the need for a separate application to Court for it to approve a proposed distribution mechanism that allows net asset realisations to be returned to investors in the most equitable manner given the limitations inherent in THC’s books and accounting records which makes It currently unclear as to how net bridging and development loan realisations should be properly and accurately distributed to retail lenders.
In order to prepare an appropriate model to be put to Court, the Joint Administrators have unfortunately been hampered by the issues outlined above for the First Court Proceedings. In particular, they have had to ask the THC employees retained to assist in the wind down of the Company, to prioritise tasks focussed on investigating, securing, controlling and realising investor assets before latterly turning their attention to establishing the information required by the Joint Administrators to prepare a distribution mechanism.
The Joint Administrators expect to shortly be in a position to provide the Court with their proposed distribution mechanism and will advise investors of the same when filed.
Information to creditors in the Administrator’s progress report dated March 2022
And indeed on 8th April 2022 the Joint Administrators appeared at the High Court in Manchester, represented by barrister Martin Ouwehand. It is understood the FCA had two observers present however they didn’t make submissions.
Mr Ouwehand explained the purpose of the hearing was “to get a timetable started” to enable a substantive application to be made in due course. It was expected that investors may wish to make submissions on the application and that there should be a process as to how this can occur. If this was not done “there is a risk of procedural chaos on the day of the hearing” concluded judge HHJ Stephen Davies.
An application under CPR19.8A might be made to ensure that any decision of the court would be binding on those who had chosen not to participate.
Notice for todays hearing was purportedly given via e-mail and “each investor was notified and requested to log in to ‘view the details’. Certainly a number have done so” said Mr Ouwehand. The recipients had been directed to a survey and so-far some 16 had given responses – “We’re going to collate that info and report to the court.“
The e-mail sent to investors didn’t mention this hearing, which was only referenced within documents available on the website. We were told the e-mail had been sent at 14.20 on the Monday for this 10.30 hearing on Friday. “The wording might have been a little bit better” we were told amid a “concern not to unduly panic the investors.” There was a “balance between giving full information and making it clear that even though they’re not parties they have the opportunity to attend and make representations” continued Mr Ouwehand.
I make a passing note that the e-mail address shown on the court list to request access to this remote hearing was incorrect and I had to call the court a number of times to gain access. The first seven phone calls were disconnected immediately and the eighth resulted in a 13-minute-conversation – with court staff initially incorrectly insisting that I use the digital document filing system ‘CE-File’ to make my request to attend. It is for others to conclude whether the notion that this was a ‘public hearing’ is a complete fiction.
In any event the court ordered that investors have three weeks – until the 29th April – to give notice to the applicants that they wish to make submissions at the final hearing.
The Judge explained that he was next available between June 21st and June 23rd 2022 to hold a further directions hearing, expected to last half a day, however he wouldn’t be offended if the matter was brought before a different judge prior to then.
Update 12/04/2022
Following receipt of the Applicant Administrators written submissions the following information can be revealed:
The Substantive Application seeks, among other things, relief … to the ability of the [Administrators] to pay their remuneration and expenses from the amounts recovered for investors in respect of loans made through the Platform. It includes an application for “Berkeley Applegate” relief.
According to the Companies’ records, there are over 3,000 unpaid investors who would have an interest in the relief. As yet, none of them have been made respondents to the Application so as to avoid a potentially unmanageable and costly proceeding which might result from a large number of investors being parties.
There are 19 cases where an unpaid investor is believed to be deceased.
From the Skeleton argument on behalf of the applicants for the hearing on Friday 8th April 2022
Case Details
In the High Court of Justice
Business and Property Courts in Manchester
Insolvency and Companies (ChD)
Before His Honour Judge Stephen Davies
Sitting as a Judge of the High Court
8th April 2022 10.30am
CR-2021-MAN-000111 – THE HOUSE CROWD LIMITED (IN ADMINISTRATION) (07893395)
CR-2021-MAN-000116 – HOUSE CROWD PROPERTY MANAGEMENT LIMITED (IN ADMINISTRATION) (08964668)
CR-2021-MAN-000117 – HOUSE CROWD FINANCE LIMITED (IN ADMINISTRATION) (10564875)
CR-2021-MAN-000118 – HOUSE CROWD FINANCE (SECURITY AGENT) LIMITED (IN ADMINISTRATION) (09893838)
Mouse in the Court 
One thought on “House Crowd investors given three weeks to have voices heard”