London Property Investments Trial begins as FCA take action

A 5-day trial began this morning at the High Court in London following action taken by the Financial Conduct Authority.

Jessica Bird of ‘Mortgage Introducer’ wrote an excellent summary of the claims back in July 2020 which I don’t intend to replicate. It is well worth a read.

This 5-day trial before Judge Richard Smith, sitting as a High Court Judge, is being heard at the Rolls Building. The FCA are represented by Mr Mark Fell QC.

Defendants Debarred

Following a series of breaches of disclosure orders, the Defendants’ defence was struck out and they were debarred from defending the Authority’s claim.

Relief from these sanctions was refused by Deputy Master Nurse on 25 March 2022.

As a result the defendants were not represented at the hearing although their solicitor did attend to provide what was described as “a watching brief”.

The Present Trial

This ‘liability’ trial is concerned only with the following issues:

• Whether the alleged contraventions of the general prohibition by LPI and NPI and of the financial promotion restrictions by LPI occurred, and whether declarations to that effect should be made;
• Whether Daniel and Tony Stevens were knowingly concerned in those contraventions;
• Whether the court should grant declarations that the relevant Service Agreements and the alleged SRAs are unenforceable under section 26 of the Act;
• Whether the court should grant a remedial order under section 380(2) of the Act requiring LPI to apply for restrictions it has registered against properties in relation to fees due under its Service Agreements to be removed from the register; and
• Whether the court should grant an order under section 380(1) of the Act restraining continued or repeated contravention of the general prohibition and the financial promotion restrictions.

It is understood that, depending on the Judgment of this court, a further trial would be heard to decide how any findings on the above points could be remedied.

Court Documents

Thirty pages of the written submissions advanced on behalf of the Financial Conduct Authority can be read here.

Day 1

The mouseinthecourt attended day 1 of the trial and tweeted some updates as the day progressed.

This is my twitter thread:

I’m in Court 4 at the Rolls Building where proceedings in the matter of “Financial Conduct Authority v London Property Investments (UK) Limited and others” are about to begin

The defendants are not represented but we’re told their solicitor is maintaining a watching brief, and he is not anticipated to make any submissions during this trial 

Today the court is expected to hear arguments on the law with witnesses called tomorrow.

The judge has had 2-days pre-reading. “If we had more time to prepare the trial we might have been able to boil it down more.” 

We’re told there are 45 affected individuals and 88 potentially affected individuals.

We’re told the authority has had trouble finding some consumers. Trouble contacting them and also sporadic communications with some. 

There is an app to adjourn the hearing of the 88 potential until the quantum trial. More consumers may come forward 

Judge Richard Smith asks “Do you need to do more analysis [on the data you have] or will more information come to light?”

“It’s both of those I’m afraid” comes the response 

Court hears there is a “collection of e-mails that couldn’t be opened. It’s possible with more time we might be able to open those and reveal more evidence.” 

Judge asks what arguments will be duplicated if more individuals are added to a later second liability trial. Potential Henderson v Henderson/ Abuse of process territory 

Judge asks “might there be a risk of inconsistent judgment?”
A pause for the reply – “I suppose we would hope it’s possible to have the same judge. In practice that would reduce the issue of inconsistent judgments” 

“The court probably ought to proceed on the basis that the court would be right.”
Judge comments “any difference on outcome would be on the facts.” adding this isn’t “London v Brussels” 

Last query from judge – should there be a cut off date for the extra 88. Counsel suggests the date of judgment 

We’re now going to hear submissions on the law. Starting on page 594 of the bundle… 

It appears the defendants have been subject to a debarring order. However they have filled a defence. We’re hearing submissions as to what weight the court should place on it. 

Counsel for the FCA tells the court that if a legal point arises that the Judge may wish to consider in aid of the defs, he will still bring it to the courts attention, even if not mentioned in the defence

[All parts of a Barristers duty to the court] 

We’re now going on a “whistle-stop tour” of the Amended Particulars of Claim 

Phew, a fair whack of detail. The court has adjourned until 11.55 

Proceedings have resumed. We’re hearing submissions on the ‘General Prohibition’ contained with FSMA “which states that no person may carry on a regulated activity in the United Kingdom…” 

Mark Fell QC obo the FCA says “I’m going to try and avoid taking Your Lordship down any rabbit holes”. Judge replies “That’s my job” 

“There is a substantial body of evidence showing that Tony Stevens and Danial Stevens were knowingly concerned in the contraventions of the general prohibition” 

We’re hearing about Section 21(1) of FSMA which imposes restrictions on financial promotion. Mr Fell QC draws attention to two exemptions – either promotion can be made by someone who is authorised, or approved by someone who is auth 

What’s the point of this trial – “The consumers don’t have access to the FOS, the FSCS, they don’t have the benefit of the protections that the authorisation process provides.” The FCA have a stat objective to “Preserving the integrity of the UK’s financial market” 

Citing the concept of a level playing field we’re told of the “huge advantage if you don’t have to comply with the burden of the authorities rules” 

We’ve been hearing about the rather complex rules about what is and isn’t caught up by the FSMA rules. 

Mr Fell QC quotes from skeleton argument:
“the crucial point for present purposes is that a remortgage by a borrower, not acting for the purposes of a business, secured by a first legal charge over a property they own and intend to live in will not be caught by those carve outs” 

Lunch is called. Resume at 14.05 

And the hearing has resumed. Mr Fell QC is raising a couple of housekeeping matters… 

“Your lordship may have felt after this morning that the law of regulation of mortgages is crying out for reform and modification” – Mr Fell QC obo of the FCA 

The court is hearing submissions on the application of Article 25A(1) and (2) of the Regulated Activities Order. This deals with arranging regulated mortgage contracts

Case Details

Claim No Bl-2020-001003
In The High Court Of Justice
Business And Property Courts Of England And Wales
Business List, Financial Services And Regulatory Sub-list (Chd)

Between:
The Financial Conduct Authority
(A Company Limited By Guarantee)
Claimant

-and-

(1) London Property Investments (U.K) Limited (Trading As LPI Emergency Property Finance)
(2) NPI Holdings Limited
(3) Anthony Kafetzis (Also Known As Anthony Stevens, Tony Stevens, George Stasis, Anthony Stephens, Anthonio Georgiou And Andreas Georgiou)
(4) Daniel Stevens
Defendants