Tempted By an Exotic Investment Scheme? Is It Too Good to Be True?

7th August 2020 By

It is easy to be tempted by exotic investment schemes that promise spectacular returns. However, as a High Court case strikingly showed, they are often too good to be true and it is always wise to get an independent professional to check them out before parting with your money.

More than 100 small investors were persuaded to dig into their pension pots to buy 15-year leases of trees which had been inoculated with truffle spores. They spent at least £6.5 million on almost 9,000 leases, at a price of between £750 and £1,000 per tree. The scheme was, however, a one-way losing bet for investors.

After the Secretary of State for Business, Enterprise and Industrial Strategy launched proceedings, a judge ordered five companies involved in the scheme to be compulsorily wound up in the public interest. That was on the basis that there was never any reasonable prospect of the investors making a profit and that the scheme wholly lacked commercial probity.

With a view to ensuring that investors recovered as much of their money as possible and reducing the loss to the public purse, the Secretary of State sought further orders requiring the architect of the scheme – a businessman who was a director of three of the companies – personally to pay the substantial legal costs of the proceedings.

Ruling on the matter, the Court noted that the businessman had personally received at least £850,000 of the money invested. Funds paid into the scheme were rapidly dissipated in a manner designed to render them irrecoverable. Glossy marketing literature was deliberately confusing and obfuscated the truth.

The Court noted that the businessman was a repeat offender, having previously been involved in two other investment schemes which were shut down in the public interest. He had not cooperated in the Secretary of State’s investigation of the scheme and his claim to have acted in the best interests of the companies, their investors and creditors was entirely untenable. He was ordered to pay both the Secretary of State’s and the companies’ legal costs of the proceedings.

Source: Concious

Latest News

Award That Requires Borrowing Made Into Court Order

17th May, 2024 By

Disagreements between separating couples all too often result in litigation that substantially reduces the assets available to them, as was illustrated by a case that recently reached the High Court. At issue was whether awards made by arbitrators in financial remedy proceedings can be made into court orders even if that would require one of the parties to borrow money. The couple had previously had a relationship lasting a few years before resuming their relationship in 2015. They had two children before separating again in 2019. Following their separation, the...

Inheritance Disputes – Costs Risks Can Be Reduced

15th May, 2024 By

Arguments about what someone promised before their death can lead to significant legal costs. However, if faced with a claim against the estate, there may be steps the beneficiaries or executors can take to reduce the risks, as a recent High Court case illustrated. A man had left a farmhouse and agricultural land in Cornwall to his wife, with whom he had also jointly owned a neighbouring area of land. After his death, one of the couple's daughters and her husband claimed that he had told them he wanted them...

Share Rounding Error Does Not Prevent CGT Relief

13th May, 2024 By

There are often very specific rules that must be complied with in order to claim tax reliefs, but if a small mistake arises, the courts may be able to provide assistance. In a recent case, the First-tier Tribunal (FTT) found that an investor was entitled to Entrepreneurs' Relief on the disposal of his shares in a company, despite owning one share fewer than he needed to qualify for it. The investor had agreed to purchase 5 per cent of the shares in the company for £500,000. He wished to own...

Wife Entitled to Maintenance Until Sale of Family Home

10th May, 2024 By

When divorcing couples disagree on how assets should be divided, the courts will seek to arrive at a fair outcome for both parties. In deciding how the proceeds of sale of a former couple's home should be apportioned, the Family Court agreed with the wife that she should receive maintenance payments until the sale took place. The couple had married in 2006. Following a brief separation, they had reconciled for two years before finally separating in 2022. The husband and wife both contended that they should be entitled to about...