Eridge-based London Capital & Finance [LCF] fell into administration early last year, owing around £237million to more than 11,500 bondholders.
LCF’s collapse followed an investigation by the Finance Conduct Authority [FCA] into the marketing of minibonds, which led to the firm’s bank accounts being frozen.
Investors had been told the money they paid for the bonds, which offered interest rates as high as eight per cent, would be spent on low-risk loans to small companies, but according to administrators it went to just four men in what they termed ‘highly suspicious’ transactions.
Last year five men were arrested by the Serious Fraud Office in connection with LCF’s collapse, but no charges have yet been brought.
But now a High Court judge has paved the way for administrators to sue four of these men.
LCF was originally set up in 2012 by for Tunbridge Wells Conservative chairman Simon Hume-Kendall, under the name South Eastern Counties Finances.
The company changed its name and directorship in 2015, but 66-year-old Mr Hume-Kendall went on to become the largest borrower of money from LCF.
Through his company London Oil & Gas [LOG], he borrowed £91million from the bond firm. LOG also fell into administration last year.
The High Court judgement granted last week means Mr Hume-Kendall, along with fellow LOG director Elten Barker of Hadlow Down, LCF Director Andy Thomson, and Crowborough businessman, Spencer Golding, can now be pursued by LOG’s administrators, CMB Partners, for £32.6million.
Administrators say money LOG borrowed from LCF was lent to another firm called London Group, which handed the cash to Hume-Kendall, Thomson, Barker and Golding.
Mr Hume-Kendall and Mr Barker were directors of London Group, which is also now in administration.
The administrators also claim Mr Hume-Kendall tried to shield himself and the three other men from legal action, by signing agreements which made it appear as though they did not owe investors any money.
But Judge Mark Mullen last week declared these agreements void, saying Mr Hume-Kendall and LOG’s company secretary, Robert Sedgwick, a former partner with Tunbridge Wells law firm Buss Murton Law, had produced ‘misleading documents’.
He said: “I am unable to accept Mr Hume-Kendall and Mr Sedgwick’s account in the absence of independent corroborating evidence, given their willingness to produce misleading documents.”
Lane Bednash, of CMB Partners and joint administrator to LOG, said: “Because of the legal obstacles placed in our path it has taken administrators over a year of litigation to get to this point.
“This is an important judgment in the course of unravelling the big picture and is significant in clearing the way for administrators to recover monies for the ultimate benefit of the LCF bondholders.”
