FS Action Group Updates (FSAG Administrators only)

Paperwork from FS


If any lenders are in possession of the following items, can you please send me a copy, or contact me to discuss:

Items such as:


1. Borrowers contracts – completed or the blank contracts.



2. Cashflow projections or "forecast recovery sheets", or similar – these were shown to some FS lenders to show the financial health of FS. If you have any such material, please forward to me.



3. Any written guarantees from ex-Directors or FS: It’s widely known that FS promised various enticements to the lenders to either keep us happy or quiet. If any lender has anything in writing from FS promising to “make good” any shortfalls or to “cover” any shortfalls, please also send along.



The above items (should they be deemed suitable) maybe possibly be used in litigation against the former Directors, or supplied to Litigation Funders as extra ammunition to enable them to extract funds from the borrowers and/or sent to the FCA as part of this case.


Thx all.

Update to Sales Procedures by the Joint Administrators During Covid-19


Last week, the CC put our point forward to discuss the current sales procedures for our assets during the Covid period with the administrators. The administrator’s response is below:



“We are dealing with a number of issues across all cases involving properties not just FS. We have taken the view on other matters that we should progress where possible sales agreed prior to the downturn in the market caused by the pandemic. We have had a number of completed sales across the board this week and offers are still being made at previously anticipated levels where the asset is strong.



We agree that we should not fire sale properties or simply accept a lower offer due to the issues we all face however some refinances are proceeding where before the crisis we felt these would produce the best outcome for investors. We need to use judgement on a case by case basis rather than simply dismissing exit strategies at this point. “



Stay safe everyone.


MP2P

Update to 5% Issue. CMC Hearing 16.10.2020 in Manchester Courts



Yesterday (16.10.2020) was the Case Management Conference (CMC) over the 5% fee issue, held before His Honour Judge Halliwell in Manchester.



This was classified as a “public hearing”.



These points below are taken from my notes and what I heard or believed to have heard, as sometimes the connection was not so great where I was, hence cannot be guaranteed accurate. Also, I am not a typist, nor trained in shorthand, so there will invariably be a fair amount that I did not manage to take down. Anyone who was present and wishes to correct these notes, please do so.

Pertinent points below:



- Mr Mark Cawson QC for applicant/ FundingSecure (in administration) [MC],

- Mr Sam Cheesbrough for respondents, 3 FS investors [SC],

- Mr Andrew Shaw for respondent (Raj Kumar, Ex-Director and shareholder – seeks to be joined as a respondent) [AS].



The judge had a preliminary read-through of the bundle to get a gist of the matter.



MC: Common grounds between applicants and Mr Kumar so far as directions are concerned.



The application seeks directions on behalf of administrators for the company, in particular for clause 6.2.4 of the company’s T&C, and a question as to whether the company has an entitlement to deduct 5% out of realisations.



Background of the company and how the funds were maintained then described.



Reference was made to Creditors Committee minutes and the position of charge holders and an agreed Deed of Waiver from the charge holder in Feb 2020 where the charge holders agreed to waive their rights in so far as to objecting to the assets being administered on the basis that they are subject to a binding trust.



The investors complained if this was the proper construction and the administrators took legal advice from 2 firms of Solicitors and acted in accordance with that advice.



Administrators thought the best way forward was to seek directions from the Court as to the proper construction of the T&C, hence the application.



Two secured creditors were put on notice together with unsecured creditors.



Only Mr Kumar wished to be part of this application.



The key question of whether 5% should be deducted, is between investors and ordinary creditors on the other hand. Administrators adopt a neutral position and assist the court as best they can.

At this stage estoppel by convention is mentioned, as various things had been stated previously by the company that matters should be handled in a certain way.

Mr Kumar and respondents offered 28 days to obtain their evidence. The other parties have the opportunity to respond, with the application then being listed on the first available date after the exchange of evidence. Estimated to be another 28 days.



Issues are:



1. Some form of disclosure at this stage.

2. Should the administrators be required to make further witness statement over discussions with the FCA.

3. Can the court in some way say to the administrators not to use any part of the 5% that is being deducted until the issue is resolved.



SC: Estoppel by convention based upon how 5% was treated prior to administration, there is also the question of estoppel by representation, as investors have had several representations, statements made to them by the company prior to the administration, that the 5% won’t be taken from the lenders until they received their money. Company Directors always considered it due, but decided to waiver it.



Does not want to burden the court with huge amounts of evidence.



Estoppel by representation due to promises.



Judge: Sounds as if you are relying upon promises rather than representations of fact.



Promissory estoppel takes effect in equity.



There is a range of different possibilities.



Mark Cawson identified the following issues according to the Judge.



SC: Accepts these are issues + wants to add the estoppel issues.



MC: Have not seen the investors' evidence yet. So cannot talk about these estoppels until they see the evidence that is being relied upon to make the case to formulate the issues.

Judge: Seems more like promissory estoppel rather than estoppel by representation.



AS: As a sensible starting point, but once evidence is filed, once issues are listed, a more detailed list of issues might be needed! [My thought: Raj is possibly preparing something for future inclusion.]



Judge: Next issue - the period in which the evidence to be served. Are administrators required to submit further witness statements?



SC: 5% on the FAQ is mentioned and stated that investors have relied upon this as a statement of fact, and needs to know the administrators' point on this view.



SC: The respondents do not know what the administrators' position is on this point, and it needs to be dealt with in the respondents' statement.



SC: Wanted to avoid the position that the applicants do not deal with it in the detail that the respondents require.



MC: We have no position in respect to the FAQ, Mr Kumar might know more as to what happened at the company than the administrators.



Judge: Questions to all on sequence and delivery and timescale of evidence delivery. MC is mentioning 28 days.



SC: Keen to be resolved ASAP.



Everyone is happy with MC timetable.



Next issue: Disclosure issue.



SC wants directions for disclosure. Excel spreadsheet is mentioned and referred to the estoppel point, and explains where if ever the 5% was deducted from a particular loan.



Lengthy discussions now follow about the 5% pre-administration. Mr Hackett treated the loans in a particular way and it was these loans that the 5% fee was purportedly applied to prior to administrators appointment, but the company decided to waive the 5% on occasions and make good the shortfall by the company's own funds. Convention and promissory estoppel now discussed again, and also if the 5% was applied but never communicated to investors. Huge problems with swathes of info due to this witness statement and also unnecessary. If disclosure of a straightforward list is not provided, the lenders have to presume the best and worst of the case. And a waste of court time. Applicants suggest the task is time-consuming and unduly disproportionate.



The 5% needs to be determined at a very early stage to allow the parties to focus on the main issues.



Judge discusses laws on disclosure.



MC view until issues are defined: does not want to get into the issues of disclosure; disclosure is a blunt instrument. Cost to prepare list is a manual review as records are not in a good state, some 3000 loans [My note, only if sub-tranches are taken into consideration] need to be reviewed to see what has happened, at 20-30 mins per loan, is estimated at 1000-1500 hours of manual time, and could be £100,000+ to produce the list. Investors have made a list showing that very few loans did have the 5% deducted, so if submitted as evidence then the administrators will have to respond accordingly.



AS: As Mr Kumar is a secured creditor, he wants the expense of the administration kept to a minimum.



Judge: Not inclined for disclosure this time, due to extent of the disclosure at this stage.



SC: continues argument for a truncated list of the 5% as it's in the knowledge of the company, and it would go a significant way to avoid significant costs for all parties. The client does not want to pay for a list of all the loans but prepared to pay £1000 for a list of 50 loans. Other parties are not happy with this, and the judge wants everyone to go away and discuss this matter for next hearing.



MC: Needs to take instructions on the practicality and dialogue between the parties and agreement between the parties for a robust sample of loans. MC does not want an order at this stage.

AS: Also not keen, as first to third parties have produced a spreadsheet and it's open to the administrators to respond to that. It's not immediately clear to AS what looking at 50 loans would show!



Judge: Urges cooperation on this issue. To be recorded in the recital.



Will expert evidence be necessary, such as a forensic accountant?



SC mentioned 2.5% + VAT for fees. The administrators realise that this is insufficient monies. Hence, looking at the contract to see how further monies can be raised for the benefit of the administration prior to the waterfall payments. Various discussions about this matter follow. Respondents are concerned about a substantial amount of money being used for the administration and will be unable to recover these amounts at a later date. Mentioned cashflow issues or administration grinding to a halt. There is no indication of how much of the 5% is being retained in the pot or used for the administration.



Concerns are raised if the respondents are left with a judgement in their favour and cannot get the cash back.



The discussion follows over the monies being trust monies or contractual rights to these monies.



It was argued that the client has a contractual right to the monies.



SC seeking an injunction to restrain MC client using funds.



SC: the complexity of the situation requires a restraint. Requests monies held in a place where all monies can be handed back, even if it entails the administration to be paused for a time. Always option to revert to Creditors Committee to resolve the situation.



MC continues argument of 5% and Mr K receiving it or separate issue of funding administration.



Judge won’t make an order on this term.



28 days to file evidence and then 28 days to the hearing.



Judge: SC to draw up the first draft.

Lender Support / Opt-in Action Required



RESPONSE BY Wednesday 26th MAY REQUIRED, OR INCLUSION IS NOT GUARANTEED



Correspondence to the FCA/MPs/Treasury and/or other groups holds more weight if it’s supported by a united group, rather than individuals, hence we need to show a united front.


We are now at the stage where we have to declare who is signed up to FSAG and ideally LAG group, and importantly, that we have their unequivocal permission to write/communicate on their behalf.


We are to write to the above letters of complaint highlighting the multiple failures of the FCA in regards to both Lendy and Funding Secure and seeking a Public Inquiry into the purported lack of Supervision demonstrated by the FCA in regards to both these companies.


This is especially pertinent for Funding Secure, where the FCA approved a Change of Control procedure in October 2018. We can only hypothesise that not all the protocols could possibly have been followed by the FCA prior to granting the Change of Control.


Will all those lenders that wish to have their names associated with these proposed letters, please give FSAG your written consent to add your name at the bottom of the letters we are to write.


The letter will be signed “FSAG Administrator(s) / [other FSAG member(s)]” followed by a list of all people’s names that have opt-in.


THIS OPT-IN PERMISSION NEEDS TO BE CONFIRMED BY EMAIL (LEGALITY).


• Please send your approval in writing to   [email protected]   


• In the basic form of “[your name] gives my full support to FSAG”


• Please include:


(1) your first and last name. This is 100% required to opt-in.


(2) the name of your MP, his political party and constituency (saves us time later on in hunting out 100's of MPs),


(3) if you have funds in FS or Lendy, and if you want to divulge the amount you have currently frozen (1st May 2021) in each company. This will give us a cumulative idea as to how large the problem is compared to other FCA regulated and non-regulated collapses recently. [This amount will NOT be divulged outside of FSAG, unless needed, at which time your written permission will be requested.]


Should you be aware of anyone who is not signed up to FSAG [maybe other family/friends], please forward this post to them for their consideration to opt-in.


If you are NOT fully satisfied with the proposed way forward, please do NOT respond to this request. If you do not want to share your info, then only share what you are comfortable sharing.

We have a very small team here and doing what we can with quite literally zero resources.


A copy of the letter(s) will not be published on FSAG or P2Pindi, as last time a letter was published in good faith on the FSAG platform for the lender’s info, the joint administrators quoted the letter in court.

Any questions, please post here on the forum for all to see.


The above is done purely as a goodwill gesture on our part. If you do not feel happy, or are not in agreement by 100% support in providing your name, or concerned about any ramifications, then please don’t support.


The above is not an alternative to everyone making their own representation, you must also continue to chase up the FCA on your own accord. Literally, every letter they receive will add to our + your chances of success.

All the best,


MP2P & FSAG Team


E&OE

LATEST UPDATE: www.casemine.com/judgement/uk/606aa15f2c94e02990ded5f8

Many hundreds have opted in, I cannot give you the exact amount yet, as we do not wish to give advance warning on the numbers available as this board is being watched.



Please also let your friends know, as I assure you every name will matter as the representation is being made on everyone’s behalf equally.



Importantly, I and everyone at FSAG are honoured and amazed at the incredible amount of support we have received in the last 2 weeks. Its what keeps us going, your support.



A million thx to everyone.



MP2P & FSAG Team

I have not logged into the forum for many months and when I do I find that I have just missed responding to the FSAG.
There's nothing I can do about it now so I have not read the whole thread, but can I just clarify:
Does this mean that I am disqualified from any further payments (I have had a few to date) or is it more a question of solidarity to get a better deal?