A solicitor has been found liable for fraudulent trading in connection with misleading selling and advertising by mini-bond issuer London Capital & Finance (LCF).  

The High Court heard in London Capital & Finance PLC (in administration) and Anor v Thomson and Ors that LCF issued 16,706 bonds to 11,625 members of the public, who collectively invested more than £237m. LCF told investors it would generate returns on the sums raised from bondholders by the onward lending of those sums. It advanced the money it raised to a small number of connected companies, associated with four individuals, including its chief executive. The company was placed into administration at the end of 2018.

In a 341-page judgment, Mr Justice Miles found solicitor Robert Sedgwick, along with co-defendants Michael Andrew Thomson, a director of LCF, his business associate Spencer Golding, company Surge, salesman John Russell-Murphy, and company Grosvenor Park Intelligent were liable to LCF for their knowing participation in the fraudulent conduct of LCF’s business.

The judgment also found Thomson and Golding liable for breach of duties owed to LCF. 

LCF had established equitable proprietary claims against Thomson, Golding, Surge, its owner and director Paul Careless, Russell-Murphy, Grosvenor Park Intelligent and Sedgwick. Sedgwick, Careless and Russell-Murphy are also liable to LCF for dishonest assistance in breaches of duty by Thomson and/or Golding.

The judge said: ‘Mr Sedgwick was involved in the backdating of numerous transactional documents. This was done to conceal the true position from the auditors of LCF and third parties.’

He said other backdating of alleged documents was done ‘to enable Mr Thomson and others to mislead the FCA (after the closure of LCF’s business at the end of 2018) about the receipts by Mr Thomson of sums derived from LCF. Despite his professional position as a solicitor, Mr Sedgwick was therefore prepared to produce false documents’.

Read more

The judge said Sedgwick knew ‘numerous aspects of [the] transactions showed them to be uncommercial and artificial’. He added that Sedgwick ‘furthered and facilitated LCF’s fraudulent trading’ and was ‘centrally involved in creating and implementing a series of artificial, uncommericial transactions, which were designed and used to channel funds from LCF to [Thomson, Golding, Careless and Russell-Murphy] and others’.

Sedgwick received £559,781 in payments. The judgment highlighted that the claimants had identified further payments bringing the total to £779,643 which Sedgwick, who did not give evidence, did not comment on.

The judge rejected the argument that ‘Sedgwick…received these sums for good consideration, i.e., the extensive legal work he undertook for the London Group and others and that this cannot amount to participation’.

The judgment added Sedgwick ‘at all material times…had (at least) a targeted suspicion that LCF was operating as a Ponzi scheme’. It said: ‘He did not make any enquiries to satisfy himself that it was not. I find that this was deliberate as Mr Sedgwick did not want to confirm what he suspected.’

Finding Sedgwick liable for fraudulent trading, the judge said: ‘I have found that Mr Sedgwick knew that these were uncommercial, artificial transactions which served to conceal the improper payment of LCF’s assets to Mr Thomson, Mr Hume-Kendall, Mr Barker and Mr Golding in agreed ratios.

‘I have found that Mr Sedgwick had actual knowledge of the means by which each of these transactions was fraudulent and was designed to conceal the misappropriation of LCF’s assets. Mr Sedgwick knew that these activities were wrong, and he was prepared to create dishonest and misleading documentation in order to conceal the reality of what was going on.’