ASIC is assisting the Financial Conduct Authority of the United Kingdom (FCA) in seeking to identify investors who may be eligible for restitution in the failed Reforestation Projects carbon credits scheme intended for land in Sierra Leone, Brazil and Australia.
Following action in the High Court in relation to a series of unregistered collective investment schemes, the Financial Conduct Authority of the United Kingdom (FCA) is seeking to identify investors who may be eligible for restitution.
It is not known how many Australian lost money in the scheme.
ASIC is assisting the FCA to share this information, which may be of interest to Australians who had invested in either:
- African Land (also known as Agri Capital) which offered investments in rice farm harvests in Sierra Leone and was run by African Land Limited; or
- Reforestation Projects (also known as Capital Carbon Credits) which offered investments in carbon credits intended to be generated from land in Sierra Leone, Brazil and Australia and was run by Reforestation Projects Limited.
This link contains information about the matter, including steps that can be taken to notify the FCA of details in relation to investments made. The FCA requires these details by 31 March 2019.
The High Court decided in February 2014 that the schemes were collective investment schemes which could not be lawfully operated by the defendants.
Some of the defendants appealed this decision.
In March 2015 the Court of Appeal rejected the appeal.
On 28 July 2015, the Supreme Court refused to give the defendants permission to make a further appeal.
Following these rulings, the Court gave directions for a further trial to consider misleading statements, the extent of the defendants’ liability and the orders the Court should make.
This trial took place over 22 days in July and October 2017 and the judgement was handed down on 26 March 2018.
The High Court initially ordered the defendants to pay £16.9 million in restitution.
Following further applications by the FCA to take into account further losses from the African Land scheme, the Court has increased the amount to £18.7 million.
The defendants applied for permission to appeal the High Court’s decision. In a hearing on 24 April 2018, the trial judge refused the defendants’ applications for permission to appeal.
Some of the defendants then applied to the Court of Appeal for permission to appeal, and these were all refused in October 2018.
On 1 March, The High Court of Justice sentenced Robert John McKendrick to six months imprisonment for contempt of court.
McKendrick had diverted funds and failed to disclose information about his assets in breach of freezing injunctions obtained by the Financial Conduct Authority (FCA).
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:
"In this case, Mr McKendrick misled investors and then, in contempt of court, failed to comply with court orders requiring him to properly account for the losses. The FCA will ensure that defendants who mislead investors are held to account to the fullest extent possible."
The FCA launched legal action in July 2013 in respect of four unauthorised collective investment schemes promoted mainly by Capital Alternatives.
McKendrick was the main Director and sole shareholder of African Land. The scheme was unlawfully promoted and operated without authorisation from the FCA.
The Court found that McKendrick made misleading statements to investors and was knowingly concerned in misleading statements made by others.
McKendrick was also knowingly concerned in the Capital Carbon Credits scheme in Sierra Leone, which was also operated and promoted unlawfully.
The losses across the schemes in which McKendrick was involved exceed £15 million.
In March 2018, the Court gave Judgment in the FCA’s claim and ordered McKendrick to pay the losses to the FCA so they can be paid back to investors.
McKendrick has since been declared bankrupt.
When the FCA took action in 2013, it obtained a freezing order against McKendrick. Upon Judgment in March 2018, the Court made a further freezing order requiring McKendrick to disclose all his assets and preventing him from disposing of them.
In breach of the freezing orders, McKendrick appointed his wife to manage his portfolio of buy-to-let properties at a commission rate significantly higher than he had paid to his previous letting agents. He then diverted the rental income from these properties to his wife. He did not disclose these arrangements.
As a result, the FCA brought an application to Court with the primary aim of discovering what had happened to the money so it could recover it for investors. In response, McKendrick admitted his breaches of the freezing orders and finally provided an account of where the money went. The FCA will ensure that as much of it as possible is recovered for investors.
In sentencing McKendrick, Justice Marcus Smith noted that McKendrick had admitted, and apologised for the breaches but they were many, varied and deliberate, and intended to thwart orders of the court. Monies were paid away and used by McKendrick for his own benefit.
The Court indicated that McKendrick would have received a 12 month sentence but for his admissions and his genuine attempt to remedy his failures to provide full and accurate information.
The defendants in the proceedings were:
- Capital Alternatives Limited
- Capital Secretarial Limited
- Capital Organisation Limited
- Capital Administration Services Limited
- MH Trustees Limited
- Marcia Hargous
- Renwick Haddow
- Richard Henstock (case settled)
- African Land Limited (in liquidation)
- Robert McKendrick
- Alan Meadowcroft
- Regency Capital Limited
- Reforestation Projects Limited
- Mark Ayres/Eyres
- Mark Gibbs
- the estate of David Waygood (case settled)