Mousey
Member of DD Central
Posts: 1,571
Likes: 6,568
|
Post by Mousey on Oct 15, 2020 16:15:56 GMT
This thread details elements of Claim Ref CR-2019-MAN-001065 at the High Court in Manchester. This first post will be updated as the claims progress, so all the important information is in one place. It is imperative that these proceedings are reported fairly and accurately. If you wish to repeat what is written here please take careful note of the context. E.g. “The cat chased the mouse” is a very different statement to “the court was told the cat chased the mouse”. We have no authority or jurisdiction to determine the truth of any claim or defence – that is a job for a judge having heard all the evidence in court.
The Claim Details IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES Claim No: CR-2019-MAN-001065 In the Matter of Fundingsecure Ltd (In administration) Administration Application
PARTIES: (1) Fundingsecure Limited (IN ADMINISTRATION) Company -and-
(1) REDACTED FOR P2PFORUM "MZ" (2) REDACTED FOR P2PFORUM "PM" (3) REDACTED FOR P2PFORUM "RL"
(4) Kumar, Rajinder
Respondents
-and- (1) The Official ReceiverThird PartyNo information is availably publicly about who these three individuals are so with respect to forum rules I have redacted their names.
Timeline
**** 16th October 2020 In the High Court of Justice Business and Property Courts in Manchester Before His Honour Judge Halliwell Sitting as a Judge of the High Court Sitting remotely At the Manchester Civil Justice Centre, 1 Bridge Street West, Manchester On Friday 16 October 2020 Insolvency and Companies (ChD) 10:30 CR-2019-MAN-001065 Fundingsecure Ltd Appl 2 hours (Teams)This was a directions hearing concerning the matter of Fundingsecure Ltd (in administration). Mr Mark Cawson QC appeared for Fundingsecure Ltd (in administration) Mr Sam Cheesbrough appeared for the three investor respondents Mr Andrew Shaw appeared for ex-director Raj Kumar BackgroundMr Cawson QC explained to the court that when the administrators were appointed, they “found a state of confusion” at the company with regards to the state of the paperwork. He explained how the administrators dealt with the issue of whether loan recoveries should be treated as funds held on trust by an agreement with the charge holders. The background to the trust monies issue and its resolution can be found in part 5 of the Administrators progress report dated 30th May 2020 5% IssueMr Cawson QC then came to the main issue in dispute – the ability of the company to deduct a 5% fee on loan recoveries. He explained that the administrators have adopted a neutral position on the matter and hence have asked the court for directions. Mr Cheesbrough representing the three respondents told the court that their position was there was no basis to charge the 5% fee. They relied on, among other things, statements made by the company that the fee would be not be deducted before investors received their full return. In response Mr Cawson QC said he had not seen the respondent’s evidence and until then it would not be possible to formulate the issues. He explained a clause in his draft order had been written deliberately vague to allow for the respondent’s arguments to be placed before the court. Disclosure RequestMr Cheesbrough submitted a request for disclosure of the loan book records in order that the respondents could determine which loans had been subject to the 5% fee. The suggestion that if none had been pre-appointment of administrators this caused a so-called ‘Estoppel by convention’ preventing the fee from being charged. In response Mr Cawson QC told the court that in order for his client to review some 3000 loans for the required information, given the state of the records, could take some 1000-1500 hours. “At whatever hourly rate you charge this will cost some several hundreds of thousands of pounds”. Opposing such an order for disclosure at this stage Mr Cawson QC described it as “premature and unusual for disclosure before evidence”. Mr Shaw explained that as his client, Raj Kumar, was a charge holder of the company he had an interest in keeping costs down and spending £100k’s on a “fishing expedition” would not be appropriate. Responding to a request for disclosure of creditors committee meeting records Mr Cawson QC told the court that its content may be confidential and as one of the respondents was on the creditors committee the information would be known already. A suggestion was made by Mr Cheesbrough that a sample of the loan book could be made. Mr Cawson QC responded by saying any such search of the loan book needed to be “fairly robust” with Mr Shaw adding he wasn’t clear how such a sample could work. “If there’s 3000 loans how will 50 be any good?”. The judge told the court he is not persuaded to make an order for disclosure at this stage. Application to “hold the ring” and preserve 5%Mr Cheesbrough told the court that in December 2019 an agreement was reached for the costs of the administration to be paid by a 2.5%(+VAT) fee on loan recoveries. In early 2020 it was realised there was “insufficient money” to fund the administration and the company “tried to construct the contract” in such a way to justify the additional 5% fee. Mr Cheesbrough told the court that in July 2020 the company changed the way it was charging the fee by applying it to the whole loan rather than just the amount recovered. Mr Cheesbrough submitted that the administrators should be prevented from disbursing the amounts claimed under the 5% fee as “substantial sums of money” were being removed to fund the administration and if the respondents were successful the company wouldn’t be able to pay them back. Mr Cawson QC explained that if such an application were successful that the administration would have to be paused as there would not be enough money for the administrators to continue their work. He explained that RSM had retained Fundingsecure employees who were currently working on recovering loans for investors and this activity would have to be halted. The judge explained that it seemed the respondents were seeking an injunction, and this would have to be done by separate application to the court, with what was described as a “cross-undertaking for damages”. Next StepsThe parties have 28 days to file evidence and 28 days to respond. A provisional hearing date of Nov 20th 2020 will have to be vacated to a date next year. Costs in the case.
**** 19th January 2021 In the High Court of Justice Business and Property Courts in Manchester Insolvency and Companies (ChD)
Before His Honour Judge Pearce Sitting as a Judge of the High Court
10:30am - CR-2019-MAN-001065 FundingSecure Ltd -v- Marek Zwiefka-Sibley & Others
By way of background this hearing concerned the determination of four issues. The issues were identified at a Pre-Trial-Review held on the 16th October 2020 before HHJ Halliwell (sitting as a High Court judge) and are as follows:
(1) whether the 5% fee falls to be deducted from the proceeds of sale of the asset before repayment of investors, or only out of any surplus thereafter;
(2) whether the 5% fee is to be calculated by reference to the amount realised on sale of the asset, or to the “loan value”, ie the amount of the initial advance;
(3) whether the 5% fee applies to all loans that have exceeded term, or just those that have been marked as “defaulted”, ie loans closed without realising the full amount of the capital;
(4) whether the way in which the Administrators ought to approach the deduction of the 5% Fee on behalf of the Company is affected in any way by any course of conduct on the part of the Company prior to Administration, and if so, how and to what extent.
At the date the company was placed into administration there were some £80m outstanding to circa 3,500 retail investors. The courts decision will therefore potentially affect the distribution of £4m.
Judgement reserved
|
|
Mucho P2P
Member of DD Central
Posts: 945
Likes: 1,632
|
Post by Mucho P2P on Oct 16, 2020 22:50:26 GMT
A summary of the hearing will be made available over the weekend.
un-welcome back Mr RK!! That is OUR capital, not yours!
Sorry for the delay everyone, I scribbled too madly during the hearing and now having to decipher my scribbles into type takes some time.
|
|
Mousey
Member of DD Central
Posts: 1,571
Likes: 6,568
|
Post by Mousey on Oct 17, 2020 11:50:00 GMT
Added to the first post: **** 16th October 2020 In the High Court of Justice Business and Property Courts in Manchester Before His Honour Judge Halliwell Sitting as a Judge of the High Court Sitting remotely At the Manchester Civil Justice Centre, 1 Bridge Street West, Manchester On Friday 16 October 2020 Insolvency and Companies (ChD) 10:30 CR-2019-MAN-001065 Fundingsecure Ltd Appl 2 hours (Teams)This was a directions hearing concerning the matter of Fundingsecure Ltd (in administration). Mr Mark Cawson QC appeared for Fundingsecure Ltd (in administration) Mr Sam Cheesbrough appeared for the three investor respondents Mr Andrew Shaw appeared for ex-director Raj Kumar BackgroundMr Cawson QC explained to the court that when the administrators were appointed, they “found a state of confusion” at the company with regards to the state of the paperwork. He explained how the administrators dealt with the issue of whether loan recoveries should be treated as funds held on trust by an agreement with the charge holders. The background to the trust monies issue and its resolution can be found in part 5 of the Administrators progress report dated 30th May 2020 5% IssueMr Cawson QC then came to the main issue in dispute – the ability of the company to deduct a 5% fee on loan recoveries. He explained that the administrators have adopted a neutral position on the matter and hence have asked the court for directions. Mr Cheesbrough representing the three respondents told the court that their position was there was no basis to charge the 5% fee. They relied on, among other things, statements made by the company that the fee would be not be deducted before investors received their full return. In response Mr Cawson QC said he had not seen the respondent’s evidence and until then it would not be possible to formulate the issues. He explained a clause in his draft order had been written deliberately vague to allow for the respondent’s arguments to be placed before the court. Disclosure RequestMr Cheesbrough submitted a request for disclosure of the loan book records in order that the respondents could determine which loans had been subject to the 5% fee. The suggestion that if none had been pre-appointment of administrators this caused a so-called ‘Estoppel by convention’ preventing the fee from being charged. In response Mr Cawson QC told the court that in order for his client to review some 3000 loans for the required information, given the state of the records, could take some 1000-1500 hours. “At whatever hourly rate you charge this will cost some several hundreds of thousands of pounds”. Opposing such an order for disclosure at this stage Mr Cawson QC described it as “premature and unusual for disclosure before evidence”. Mr Shaw explained that as his client, Raj Kumar, was a charge holder of the company he had an interest in keeping costs down and spending £100k’s on a “fishing expedition” would not be appropriate. Responding to a request for disclosure of creditors committee meeting records Mr Cawson QC told the court that its content may be confidential and as one of the respondents was on the creditors committee the information would be known already. A suggestion was made by Mr Cheesbrough that a sample of the loan book could be made. Mr Cawson QC responded by saying any such search of the loan book needed to be “fairly robust” with Mr Shaw adding he wasn’t clear how such a sample could work. “If there’s 3000 loans how will 50 be any good?”. The judge told the court he is not persuaded to make an order for disclosure at this stage. Application to “hold the ring” and preserve 5%Mr Cheesbrough told the court that in December 2019 an agreement was reached for the costs of the administration to be paid by a 2.5%(+VAT) fee on loan recoveries. In early 2020 it was realised there was “insufficient money” to fund the administration and the company “tried to construct the contract” in such a way to justify the additional 5% fee. Mr Cheesbrough told the court that in July 2020 the company changed the way it was charging the fee by applying it to the whole loan rather than just the amount recovered. Mr Cheesbrough submitted that the administrators should be prevented from disbursing the amounts claimed under the 5% fee as “substantial sums of money” were being removed to fund the administration and if the respondents were successful the company wouldn’t be able to pay them back. Mr Cawson QC explained that if such an application were successful that the administration would have to be paused as there would not be enough money for the administrators to continue their work. He explained that RSM had retained Fundingsecure employees who were currently working on recovering loans for investors and this activity would have to be halted. The judge explained that it seemed the respondents were seeking an injunction, and this would have to be done by separate application to the court, with what was described as a “cross-undertaking for damages”. Next StepsThe parties have 28 days to file evidence and 28 days to respond. A provisional hearing date of Nov 20th 2020 will have to be vacated to a date next year. Costs in the case.
|
|
Mucho P2P
Member of DD Central
Posts: 945
Likes: 1,632
|
Post by Mucho P2P on Oct 17, 2020 11:55:57 GMT
Update to 5% Issue. CMC Hearing 16.10.2020 in Manchester Courts
So as not to duplicate posts under several threads, anyone interested in further reading, see my update in "FSAG Group Updates" in this forum for a who-said-what recap of the Court hearing yesterday.
All the best, MP2P
|
|
adrian77
Member of DD Central
Posts: 3,895
Likes: 4,122
|
Post by adrian77 on Oct 17, 2020 14:48:13 GMT
Thanks to the CC for doing this - I am still wading through this and trying to translate it into non-legalese
The court are more than welcome to have a copy of my top 40 mega list and my 100% losses if they want it - true it is not a forensic sample but I think they give a pretty good idea as to how bloody useless (at best) FS were in dealing with our money.
Also I read
Bit puzzled as to how this 5% serves our best interests - especially as it seemed to have been changed after FS went under.
Setting aside justifiable anger regarding how many people feel they may well have been had this is an interesting court case and will hopefully set a precedent.
I can't find the T&Cs - can somebody give me a link
I thank you.
|
|
iRobot
Member of DD Central
Posts: 1,657
Likes: 2,450
|
Post by iRobot on Oct 17, 2020 15:03:37 GMT
|
|
iRobot
Member of DD Central
Posts: 1,657
Likes: 2,450
|
Post by iRobot on Oct 17, 2020 16:43:13 GMT
Firstly, thanks to Mousey and Mucho P2P for giving up your time (not to mention costs) to oversee these proceedings - I'm sure it's very much appreciated by all lenders. Next, apologies if this isn't the place to make observations / encourage discussion; if there is somewhere more appropriate, then I'm sure we can arrange for a Mod to relocate the post(s). So, ... Disclosure Request. Seems there are two parts to this: a) " Responding to a request for disclosure of creditors committee meeting records Mr Cawson QC told the court that its content may be confidential and as one of the respondents was on the creditors committee the information would be known already." -- use of the 'may be confidential' seems like a poor excuse; if any of it is truly confidential surely that info can be appropriately redacted, unless that which is believed to be confidential is actually part of the contended issue in which case isn't it down to the Judge to make a determination? -- I hope this request is pursued, I think we'd all benefit from seeing what goes on under the bonnet (and CC members might appreciate daylight being cast on matters they are otherwise NDA'd from discussing so that it highlights the difficulty of the task they faced with). b) " Mr Cheesbrough submitted a request for disclosure of the loan book records in order that the respondents could determine which loans had been subject to the 5% fee." " In response Mr Cawson QC told the court that in order for his client to review some 3000 loans for the required information, given the state of the records, could take some 1000-1500 hours. “At whatever hourly rate you charge this will cost some several hundreds of thousands of pounds”. " Mr Shaw explained that as his client, Raj Kumar, was a charge holder of the company he had an interest in keeping costs down and spending £100k’s on a “fishing expedition” would not be appropriate." -- would it be necessary to review all 3000? -- for a start, not all 3000 loans went into default, so - in theory - the 5% default loan administration fee (or 3% if prior to circa March 2016) wouldn't have been applicable. -- also, as MP2P points out, there are numerous 'loan cohorts' where there is a single 'parent' agreement and the other 'loans' are tranches, renewals, supplemental or 'additional' borrowing - although these last two may be deserving of separate analysis as they would typically rank differently to that 'parent' agreement and therefore be treated differently in the event of a defaulted redemption. -- without crunching the absolute numbers, (but with a feel for things based on analysis previously undertaken) I'd estimate that there'd 'only' be in the region of 600-750 loans to analyse. -- I suspect one of the next steps would be to agree what constituted 'proof' and proof of what, exactly; ie: there may be cases where the redeemed sum was so great that the 5% was covered by the monies received such that it didn't impact lender returns. Would that mean it could only be applied in similar circumstances, or would it allow the 5% to be levied even when it did adversely affect lender returns? (I presume this boils down to which flavour of estoppel might be applied, if any.) 5% Issue -- surprised that that MC (for FS/CG) didn't mention that legal opinion had (twice?) been previously sought on the matter, but maybe it wouldn't have held much or any weight; this process being considered a fresh look, as it were -- that the 2.5% of redemptions wasn't considered sufficient to cover CG's total costs ties in with my earlier ramblings on the subject. (And in light of that, I fail to see how the Administrator's can claim to have a neutral position on the matter, but I don't suppose they really care too much if they walk away now, so long as they get paid for their work to date.) -- given the progress made to date (as outlined in the Admin's Progress Report from 22/04/20) I would be interested to know whether CG feel that 5% of the loan book would be sufficient to continue their activities / cover their fees, if the 2.5%+VAT were deducted from that 5% instead of from lenders returns. -- if CG feel that would be achievable, then as I see it, the only parties likely to be adversely affected would be those classed as Secured Creditors - ie, Rajinder Kumar (£1.6m) and EZ Invest Limited (£1.2M); although I do acknowledge that the 40-or-so unsecured creditors (£937k) may also be impacted. -- will be interested to hear how FSAG / their counsel respond to the claims that CG et al would have to cease their activities if the 5% were deemed non-applicable. Might that mean CG would have to negotiate a different arrangement other than the 2.5%+VAT already in place? General (and not really germane) Employees: Mousey , you mention " He explained that RSM had retained Fundingsecure employees who were currently working on recovering loans for investors and this activity would have to be halted." -- is that correct? If so, presumably RSM are re-charging at their rates. Seems it would have been more cost effective for FS / CG to have retained the staff on their original salaries. In the aforementioned Progress Report, CG do state they retained one FS employee but don't mention in what capacity. Termination of Administrators: CG&Co were appointed by FS (Nigel Hackett). Are there any circumstances where the Administrators could be sacked? I'm thinking if the Secured Creditors didn't like the way things were heading, they may want to frustrate proceedings at some point. (Not sure what they'd gain from it, but ...) (Apologies, that turned out a lot longer than I was originally expecting! )
|
|
Mousey
Member of DD Central
Posts: 1,571
Likes: 6,568
|
Post by Mousey on Oct 17, 2020 17:05:26 GMT
Next, apologies if this isn't the place to make observations / encourage discussion; if there is somewhere more appropriate, then I'm sure we can arrange for a Mod to relocate the post(s). -- surprised that that MC (for FS/CG) didn't mention that legal opinion had (twice?) been previously sought on the matter, but maybe it wouldn't have held much or any weight; this process being considered a fresh look, as it were Well I've highlighted the two bits I'm qualified to respond to... firstly ideal place. I'm updating the first post with new info, which in hindsight I should have done with the art loans fiasco as the detail got lost in the 80-odd-pages.
My notes do say that "2 firms provided advice admin" but as you say "My lawyer told me I'm right" wouldn't carry any weight in this court and so I didn't mention it.
|
|
Mucho P2P
Member of DD Central
Posts: 945
Likes: 1,632
|
Post by Mucho P2P on Oct 18, 2020 0:15:14 GMT
Firstly, thanks to Mousey and Mucho P2P for giving up your time (not to mention costs) to oversee these proceedings - I'm sure it's very much appreciated by all lenders. Next, apologies if this isn't the place to make observations / encourage discussion; if there is somewhere more appropriate, then I'm sure we can arrange for a Mod to relocate the post(s). So, ... Disclosure Request. Seems there are two parts to this: a) " Responding to a request for disclosure of creditors committee meeting records Mr Cawson QC told the court that its content may be confidential and as one of the respondents was on the creditors committee the information would be known already." -- use of the 'may be confidential' seems like a poor excuse; if any of it is truly confidential surely that info can be appropriately redacted, unless that which is believed to be confidential is actually part of the contended issue in which case isn't it down to the Judge to make a determination? -- I hope this request is pursued, I think we'd all benefit from seeing what goes on under the bonnet (and CC members might appreciate daylight being cast on matters they are otherwise NDA'd from discussing so that it highlights the difficulty of the task they faced with). b) " Mr Cheesbrough submitted a request for disclosure of the loan book records in order that the respondents could determine which loans had been subject to the 5% fee." " In response Mr Cawson QC told the court that in order for his client to review some 3000 loans for the required information, given the state of the records, could take some 1000-1500 hours. “At whatever hourly rate you charge this will cost some several hundreds of thousands of pounds”. " Mr Shaw explained that as his client, Raj Kumar, was a charge holder of the company he had an interest in keeping costs down and spending £100k’s on a “fishing expedition” would not be appropriate." -- would it be necessary to review all 3000? -- for a start, not all 3000 loans went into default, so - in theory - the 5% default loan administration fee (or 3% if prior to circa March 2016) wouldn't have been applicable. -- also, as MP2P points out, there are numerous 'loan cohorts' where there is a single 'parent' agreement and the other 'loans' are tranches, renewals, supplemental or 'additional' borrowing - although these last two may be deserving of separate analysis as they would typically rank differently to that 'parent' agreement and therefore be treated differently in the event of a defaulted redemption. -- without crunching the absolute numbers, (but with a feel for things based on analysis previously undertaken) I'd estimate that there'd 'only' be in the region of 600-750 loans to analyse. -- I suspect one of the next steps would be to agree what constituted 'proof' and proof of what, exactly; ie: there may be cases where the redeemed sum was so great that the 5% was covered by the monies received such that it didn't impact lender returns. Would that mean it could only be applied in similar circumstances, or would it allow the 5% to be levied even when it did adversely affect lender returns? (I presume this boils down to which flavour of estoppel might be applied, if any.) 5% Issue -- surprised that that MC (for FS/CG) didn't mention that legal opinion had (twice?) been previously sought on the matter, but maybe it wouldn't have held much or any weight; this process being considered a fresh look, as it were -- that the 2.5% of redemptions wasn't considered sufficient to cover CG's total costs ties in with my earlier ramblings on the subject. (And in light of that, I fail to see how the Administrator's can claim to have a neutral position on the matter, but I don't suppose they really care too much if they walk away now, so long as they get paid for their work to date.) -- given the progress made to date (as outlined in the Admin's Progress Report from 22/04/20) I would be interested to know whether CG feel that 5% of the loan book would be sufficient to continue their activities / cover their fees, if the 2.5%+VAT were deducted from that 5% instead of from lenders returns. -- if CG feel that would be achievable, then as I see it, the only parties likely to be adversely affected would be those classed as Secured Creditors - ie, Rajinder Kumar (£1.6m) and EZ Invest Limited (£1.2M); although I do acknowledge that the 40-or-so unsecured creditors (£937k) may also be impacted. -- will be interested to hear how FSAG / their counsel respond to the claims that CG et al would have to cease their activities if the 5% were deemed non-applicable. Might that mean CG would have to negotiate a different arrangement other than the 2.5%+VAT already in place? General (and not really germane) Employees: Mousey , you mention " He explained that RSM had retained Fundingsecure employees who were currently working on recovering loans for investors and this activity would have to be halted." -- is that correct? If so, presumably RSM are re-charging at their rates. Seems it would have been more cost effective for FS / CG to have retained the staff on their original salaries. In the aforementioned Progress Report, CG do state they retained one FS employee but don't mention in what capacity. Termination of Administrators: CG&Co were appointed by FS (Nigel Hackett). Are there any circumstances where the Administrators could be sacked? I'm thinking if the Secured Creditors didn't like the way things were heading, they may want to frustrate proceedings at some point. (Not sure what they'd gain from it, but ...) (Apologies, that turned out a lot longer than I was originally expecting! ) Its not only @mousey and I, but a host of people all diligently working behind the scenes. From a few hours, to hundred+ of hours. I thank all the unsung heroes for their assistance, it is greatly appreciated.
What grates me so much with the disclosure order, we, the lenders are expected to shoulder the burden of costs for providing the evidence against the 5%, when it’s the lenders who have been filed against as respondents!
Returning to your post and queries.
Oct 17, 2020 19:43:13 GMT 3 iRobot said: Firstly, thanks to Mousey and Mucho P2P for giving up your time (not to mention costs) to oversee these proceedings - I'm sure it's very much appreciated by all lenders. Next, apologies if this isn't the place to make observations / encourage discussion; if there is somewhere more appropriate, then I'm sure we can arrange for a Mod to relocate the post(s). So, ... Disclosure Request. Seems there are two parts to this: a) "Responding to a request for disclosure of creditors committee meeting records Mr Cawson QC told the court that its content may be confidential and as one of the respondents was on the creditors committee the information would be known already." -- use of the 'may be confidential' seems like a poor excuse; if any of it is truly confidential surely that info can be appropriately redacted, unless that which is believed to be confidential is actually part of the contended issue in which case isn't it down to the Judge to make a determination? I did publish a set of redacted notes for the first Creditors Committee, with the approval of the administrators. I was prohibited from any further redacted publication from subsequent meetings. No idea why, the redacted minutes were lame! I acknowledge that points relating to litigation, past, present or future, should be redacted. But there are very few other points that require redaction. I am not at my usual desk with the CC minutes handy. I believe from memory there might be a point from the first meeting that is non-litigation based that the administrators might well wish to keep under wraps. I will check once back to my normal desk. -- I hope this request is pursued, I think we'd all benefit from seeing what goes on under the bonnet (and CC members might appreciate daylight being cast on matters they are otherwise NDA'd from discussing so that it highlights the difficulty of the task they faced with). definitely.b) "Mr Cheesbrough submitted a request for disclosure of the loan book records in order that the respondents could determine which loans had been subject to the 5% fee." "In response Mr Cawson QC told the court that in order for his client to review some 3000 loans for the required information, given the state of the records, could take some 1000-1500 hours. “At whatever hourly rate you charge this will cost some several hundreds of thousands of pounds”. "Mr Shaw explained that as his client, Raj Kumar, was a charge holder of the company he had an interest in keeping costs down and spending £100k’s on a “fishing expedition” would not be appropriate." -- would it be necessary to review all 3000? Most definitely not. Mr Kumar barrister was the principal (in my opinion) objector to the analysis of a sample of these loans. Thankfully the Judge requested the participants to come to an agreement on which loans are to be analysed. -- for a start, not all 3000 loans went into default, so - in theory - the 5% default loan administration fee (or 3% if prior to circa March 2016) wouldn't have been applicable. -- also, as MP2P points out, there are numerous 'loan cohorts' where there is a single 'parent' agreement and the other 'loans' are tranches, renewals, supplemental or 'additional' borrowing - although these last two may be deserving of separate analysis as they would typically rank differently to that 'parent' agreement and therefore be treated differently in the event of a defaulted redemption. -- without crunching the absolute numbers, (but with a feel for things based on analysis previously undertaken) I'd estimate that there'd 'only' be in the region of 600-750 loans to analyse. -- I suspect one of the next steps would be to agree what constituted 'proof' and proof of what, exactly; ie: there may be cases where the redeemed sum was so great that the 5% was covered by the monies received such that it didn't impact lender returns. Would that mean it could only be applied in similar circumstances, or would it allow the 5% to be levied even when it did adversely affect lender returns? (I presume this boils down to which flavour of estoppel might be applied, if any.) 5% Issue -- surprised that that MC (for FS/CG) didn't mention that legal opinion had (twice?) been previously sought on the matter, but maybe it wouldn't have held much or any weight; this process being considered a fresh look, as it were -- that the 2.5% of redemptions wasn't considered sufficient to cover CG's total costs ties in with my earlier ramblings on the subject. (And in light of that, I fail to see how the Administrator's can claim to have a neutral position on the matter, but I don't suppose they really care too much if they walk away now, so long as they get paid for their work to date.) They have to claim neutrality, as it’s a legality in administration law to cover themselves. -- given the progress made to date (as outlined in the Admin's Progress Report from 22/04/20) I would be interested to know whether CG feel that 5% of the loan book would be sufficient to continue their activities / cover their fees, if the 2.5%+VAT were deducted from that 5% instead of from lenders returns. My responses are limited, you must ask the right questions . -- if CG feel that would be achievable, then as I see it, the only parties likely to be adversely affected would be those classed as Secured Creditors - ie, Rajinder Kumar (£1.6m) and EZ Invest Limited (£1.2M); although I do acknowledge that the 40-or-so unsecured creditors (£937k) may also be impacted. -- will be interested to hear how FSAG / their counsel respond to the claims that CG et al would have to cease their activities if the 5% were deemed non-applicable. Might that mean CG would have to negotiate a different arrangement other than the 2.5%+VAT already in place? A court appointed Official Receiver was also named as a participant. I presume she is there in the event that the administration is wound up and converted to a liquidation. I would also presume that CG&Co might revert to the CC for an increase in pay, if not approved by the courts. General (and not really germane) Employees: Mousey , you mention "He explained that RSM had retained Fundingsecure employees who were currently working on recovering loans for investors and this activity would have to be halted." -- is that correct? If so, presumably RSM are re-charging at their rates. Seems it would have been more cost effective for FS / CG to have retained the staff on their original salaries. In the aforementioned Progress Report, CG do state they retained one FS employee but don't mention in what capacity. Termination of Administrators: CG&Co were appointed by FS (Nigel Hackett). Are there any circumstances where the Administrators could be sacked? I'm thinking if the Secured Creditors didn't like the way things were heading, they may want to frustrate proceedings at some point. (Not sure what they'd gain from it, but ...) yes secured creditors can dispose of them, unsecured cant.(Apologies, that turned out a lot longer than I was originally expecting! )
|
|
adrian77
Member of DD Central
Posts: 3,895
Likes: 4,122
|
Post by adrian77 on Oct 18, 2020 9:30:41 GMT
Thanks for the link to the T&Cs
I am being careful here but I find the above interesting and will wait for the court to make its ruling but the above is not how I understand the current 5% fee is being charged but what do I know. Still wading through the legal comments - not easy for legal slapheads such as moi...
|
|
Mousey
Member of DD Central
Posts: 1,571
Likes: 6,568
|
Post by Mousey on Oct 18, 2020 9:39:32 GMT
Thanks for the link to the T&Cs ... to be read with 6.2.5 which clearly shows Administration Fees to be paid after payment of capital and interest to investors:
6.2.5 Net proceeds of sale of Assets shall be used to settle amounts due in the following order:
1) Principal amount of Loan which was funded by, and is repayable to, the Investors (allocated pro rata in accordance with the proportion of the Loan amount which each Investor invested); 2) Direct costs incurred by FundingSecure through the setting up and the administration of the Loan including, but not limited to, storage costs, referral fees and valuation fees up to the date of sale; 3) Interest due to the Investors up to the date of sale (allocated pro rata in accordance with the proportion of the Loan amount which each Investor invested); 4) Administration fees due to FundingSecure not recovered through clause 6.2.5(ii) above; 5) The balance (if any) will be returned to the Borrower.
|
|
mah
Member of DD Central
Posts: 328
Likes: 365
|
Post by mah on Oct 19, 2020 16:00:19 GMT
Just to add :
"some 3000 loans for the required information, given the state of the records, could take some 1000-1500 hours"
That is 30 mins per Loan. I guess 5 mins should suffice to see the headline figures and find if 5% was charged or not and on Full Loan Value or Realised Value. And as said, Not all Loans Defaulted and there were multiple Tranches.
legal opinion had (twice?)
I think Legal Opinion were sought thrice (at our cost), but as said, Judge wouldn't go by those Legal Opinions. He is there to Judge and deliver Legal Opinion !
|
|
Mousey
Member of DD Central
Posts: 1,571
Likes: 6,568
|
Post by Mousey on Oct 30, 2020 18:43:39 GMT
First Post updated: Kumar, Rajinder added as forth respondent. Represented by Underwood
|
|
Mousey
Member of DD Central
Posts: 1,571
Likes: 6,568
|
Post by Mousey on Jan 18, 2021 14:47:39 GMT
In the High Court of Justice Business and Property Courts in Manchester Insolvency and Companies (ChD)
Before His Honour Judge Pearce Sitting as a Judge of the High Court
Sitting Remotely
At the Manchester Civil Justice Centre, 1 Bridge Street West, Manchester
On Tuesday 19th January 2021
In Public 10:30am
CR-2019-MAN-001065 FundingSecure Ltd -v- Marek Zwiefka-Sibley & Others
|
|
Mousey
Member of DD Central
Posts: 1,571
Likes: 6,568
|
Post by Mousey on Jan 20, 2021 15:48:38 GMT
A new record - some 4600 words of notes across 12 pages. As of course correctly reported by Mucho P2P judgement was reserved and will be handed down at a later date.
By way of background this hearing concerned the determination of four issues. The issues were identified at a Pre-Trial-Review held on the 16th October 2020 before HHJ Halliwell (sitting as a High Court judge) and are as follows:
(1) whether the 5% fee falls to be deducted from the proceeds of sale of the asset before repayment of investors, or only out of any surplus thereafter;
(2) whether the 5% fee is to be calculated by reference to the amount realised on sale of the asset, or to the “loan value”, ie the amount of the initial advance;
(3) whether the 5% fee applies to all loans that have exceeded term, or just those that have been marked as “defaulted”, ie loans closed without realising the full amount of the capital;
(4) whether the way in which the Administrators ought to approach the deduction of the 5% Fee on behalf of the Company is affected in any way by any course of conduct on the part of the Company prior to Administration, and if so, how and to what extent.
At the date the company was placed into administration there were some £80m outstanding to circa 3,500 retail investors. The courts decision will therefore potentially affect the distribution of £4m.
|
|