Administrators at Evelyn Partners welcome High Court ruling on London Capital & Finance

On 14 November 2024, Mr Justice Miles handed down judgment in favour of the joint administrators of LCF and the joint administrators of LOG in their claim for in excess of £177.5 million against the following defendants:

• Michael Andrew Thomson (aka Andy Thomson), the former CEO of LCF.
• Spencer Golding, one of the beneficial owners of LCF.
  Surge Financial Limited (Surge Financial), the marketing company engaged by LCF as its sales agent.
• Paul Careless, the owner of Surge Financial.
  John Russell-Murphy, a salesman at Surge Financial, and his company Grosvenor Park Intelligent Investment Limited (Grosvenor Park).
• Robert Sedgwick, a solicitor who at various times was a director of companies that were direct and indirect recipients of sums from LCF.

Background

LCF raised money from retail investors by selling “mini-bonds”. These were debt securities which were typically non-transferrable (so that there was no secondary market). Issuance of mini-bonds was not itself a regulated activity and the marketing materials for them did not require approval by any listing authority (e.g. the FCA).

Between 2013 and December 2018 LCF raised a total of over £237 million from about 11,600 bondholders. LCF presented itself to investors as a commercial lender to the SME sector in the United Kingdom. In fact, it advanced the money it raised to a small number of connected companies, associated with four individuals, Andy Thomson (the LCF CEO) and Spencer Golding. These four individuals personally received approximately £76.4 million of LCF funds.  Surge Financial was a marketing company engaged by LCF as its sales agent.  It received approximately £60 million from LCF.

LCF was placed into administration on 30 January 2019.  LOG was first placed into administration on 18 March 2019.

The High Court proceedings brought by the joint administrators of LCF and LOG against the Defendants was commenced on 27 August 2020.  At the same time, the joint administrators obtained worldwide freezing orders, and later proprietary freezing injunctions, against numerous of the defendants.

Judgement 

Mr Justice Miles found that Mr Thomson, Mr Golding, Mr Careless, Surge Financial, Mr Russell-Murphy, Grosvenor Park, and Mr Sedgwick were liable to LCF for knowing participation in the fraudulent conduct of LCF’s business and misappropriated significant sums from investors into LCF.

• In the judgment, Mr Justice Miles observed that: 
  "Mr Thomson deliberately and cynically procured LCF to present itself so as to maximise sales, knowing that bondholders were given a false and misleading story…..The false representations were systematic and widespread. I find that Mr Thomson dishonestly procured or allowed LCF to make false representations to investors" (see paragraph 1603 of the judgment).
• "Mr Golding was the ultimate architect of LCF’s fund-raising scheme….I have found that at all material times Mr Golding had actual or blind-eye knowledge of the fraudulent scheme carried on by LCF. His conduct was therefore objectively dishonest throughout." (see paragraphs 2227(ii) of the judgment).
  "[Mr Careless] was willing on occasion to tell deliberate lies about the relevant events" (see paragraph 48 (viii) of the judgment).

Mr Justice Miles also found that LCF was operated as a Ponzi scheme: "LCF depended on the use of new bondholder money to meet redemption and interest payments to existing bondholders" (see paragraph 1631 of the judgment).

Comments from the joint administrators of LCF and LOG

Finbarr O'Connell of Evelyn Partners, on behalf of the joint administrators of LCF commented: "We are delighted to have obtained judgement, with the indefatigable support of our legal team at Mishcon de Reya and at South Square Chambers, in these proceedings against the perpetrators of this Ponzi scheme who have now been found liable for the damage they caused. The administrators will now be in a position where they can realise very substantial sums from the defendants for the benefit of the creditors of LCF and LOG".

Colin Hardman of Evelyn Partners, on behalf of the joint administrators of LCF commented: "This fraud was perpetrated against over 11,500 bondholders many of whom suffered significant financial hardship as a result of the fraudsters' wrongdoings. Not only were investors unwittingly mis-sold bonds but, unbeknown to them, the funds were then fraudulently misapplied for the benefit of the fraudsters’ lifestyles and their business interests. We hope that the outcome of this trial, together with tighter regulation which has subsequently been introduced, will act as a deterrent going forwards".

Lane Bednash of CMB Partners, on behalf of the joint administrators of LOG commented: "Mr Justice Miles recognised the deceitful testimonies that key defendants tried to hide behind.  The Joint Administrators uncovered the truth after painstaking forensic work. Now the truth has been heard in public.  Clearer warnings must be given by the authorities on all highly speculative investment schemes, and it is time that these high risk mini-bond schemes are outlawed. LCF must not be repeated".

David Hudson of FRP Advisory, on behalf of the joint administrators of LCF, commented: "It’s heartening to see the Court rule in favour of the Joint Administrators, delivering a positive outcome for those defrauded by LCF. We’re pleased to have played our part in analysing the companies' practices and ultimately being able to prove the systemic deception."

Danny Davis, Barry Coffey, Mike Stubbs and Elena Georgiou of international law firm, Mishcon de Reya LLP, act for the joint administrators of LCF and LOG.

*Finbarr O'Connell, Colin Hardman, Henry Shinners and Adam Stephens of Evelyn Partners and Geoff Rowley of FRP Advisory. 
**Lane Bednash of CMB Partners and Finbarr O'Connell, Colin Hardman and Adam Stephens of Evelyn Partners.