[2025] EWHC 2830 (Ch)

Both Mr Rossier and Mr Garwood gave extremely limited evidence. Neither of them were involved in the Cyan transaction. Neither of them had dealings in relation to the lenders to the Cyan transaction. At its highest, their evidence was to corroborate how secured lending transactions were structured by the Wilton group and WSLL by relying upon what occurred in earlier transactions. In my judgment, Mr Garwood’s evidence does not provide support for the GM Companies case that they had an economic interest. It is clear that Mr Garwood was not aware of the details of the Cyan transaction. Neither he or his wife were involved in that transaction. The documents he was referred to in relation to the transactions which he and/or his wife were involved in as investors takes the issue no further. None of those documents actually set out that as an investor, the Garwoods would obtain security over the ultimate borrower’s property.

Mr Garwood’s assertion in his witness statement as to his understanding that he and his wife were entitled to the benefit of security taken over the property that was used to secure the repayment of the loan is not substantiated by the documents. Mr Garwood refers to a conversation with Mr Robson and to his understanding. In considering his evidence before me, Mr Garwood was hazy about the details of the structures of the transactions he and his wife had entered into. He had invested because he trusted the individuals at the Wilton Group and he had previously obtained what he said were good returns on his investments. In my judgment, I do not consider that he actually gave much thought to the structure of the transactions. His interest was in the returns which were being offered and his trust in those he had dealt with before. I note that he admitted that his witness statement had been prepared for him. In my judgment Mr Garwood’s evidence does not support the GM companies’ case that Cyan acted on behalf of an undisclosed principal. I do not accept that Mr Garwood’s previous dealings support such a determination by me.

In my judgment, Mr Rossier’s evidence takes the GM companies’ case no further. In giving his evidence before me, he displayed a real lack of understanding and comprehension in relation to the documents which were exhibited to his witness statement. He accepted that he was not involved in the structure of the transactions and additionally he accepted that the documents he had produced did not evidence the security nominee’s position relied upon by the GM Companies or that there was an agency position or that the lender had security over the property from the ultimate borrower. As the GM Companies’ case relied effectively on the evidence of Mr Flanagan as to how these transactions were structured rather than a reliance on the relevant security documentation, Mr Fossier’s evidence provided no support at all to the GM Companies. He had, on his own admission, no knowledge as to the structure of these transactions.

As I have set out above, Mr Flanagan’s evidence consists of his assertions set out in his numerous witness statements as to the structure of the Cyan transaction which he stated was in line with the loan transaction operations (described by him as the loan management business) of the Wilton group. He also relied on certain documents which he asserted supported the GM companies case as set out in Mr Flanagan’s witness statements.

He asserts that there were five members of the Cyan loan syndicate , being HPL, Galepso and the GM companies. In my judgment, the GM companies were not the original lenders who provided funds for the Cyan transaction. The date of the first loan ( October 2020) pre dates the incorporation of GM 1001 and GM 1002. The date of both loans ( October 2020 and April 2021) predate the date of incorporation of GM 1003. The documentation relied upon by the GM companies does not support their assertion that the funding provided at the time of the Cyan transaction came from the GM Companies. The evidence shows that the funding came from Galepso and HPL as is set out in the documents relied upon by Mr Flanagan.

The GM companies relied upon a loan management agreement dated 5 October 2020 between WSLL and Cyan where Cyan was defined as the ‘loan manager’ and WSLL defined as the client. Mr Flanagan accepted, despite relying upon this document, that the document was incorrect in referring to Wilton UK rather than WSLL. In my judgment, there were other terms in this management agreement which had clearly, on the evidence before me, not been executed. By way of example, by its terms, it provided for the loan manager to secure each loan by way of a legal charge and thereafter the loan manager would on completion, execute a deed of assignment by way of a TR4 in favour of the client ( being WSLL). In his evidence Mr Flanagan does not deal with the terms of this agreement which effectively provide security to WSLL by way of a deed of assignment. No deeds of assignment were relied upon by the GM Companies. Moreover, what is set out in the management agreement contradicts Mr Flanagan’s evidence in that the agreement envisaged that WSLL obtained security in relation to the loans under a deed of assignment rather than the lender. What he asserts is that the structure of the transaction was one of undisclosed principal and agent as between the lenders ( HPL and Galepso and thereafter the GM Companies) and Cyan. Mr Flanagan produces no evidence of any agreement as between WSLL and the lenders. He provides no evidence relating to any how the structure of the transaction was even communicated to the potential lenders.

Whilst Mr Flanagan accepts in his evidence that the management agreement was not operated in accordance with its terms, he provides no evidence to support his assertion that Cyan’s role was one of a security nominee and that the loan manager was WSLL. The role of WSLL is not that set out in the management agreement.

Mr Flanagan relies on earlier transactions which he states support the assertion that Cyan, in its transaction, was acting as a security nominee and also that there was a principal and agent position as between Cyan and the lenders. However the documents relied upon by Mr Flanagan in relation to previous non connected transactions including WSL -High Road also contain errors. He accepted that. There is also a failure to distinguish as between a loan manager and the SPV.

Ultimately, in my judgment, the evidence as to the relationship as between Cyan and the lenders is one which relies entirely on the evidence of Mr Flanagan. The investment certificates do not support the asserted relationship of being principal and agent or that the lenders effectively would obtain the benefit of the security which was granted to Cyan. Those certificates also refer to Cyan as borrower which is another matter which Mr Flanagan accepts is incorrect. He accepts that the certificates should have referred to the Orex Companies as the borrower. The wording used in the investment certificates, the interest certificates and the loan redemption certificate provide, in my judgment, no support at all for the assertion made that the Cyan transaction was one where Cyan was acting as a security nominee and that that the lenders had the economic interest in the secured lending. Equally, as I have already stated and as is accepted by the GM Companies, the security documentation itself as between the Orex Companies and Cyan provided no support at all for the GM Companies’ case.

The interest certificates provide evidence that interest payments were made. The redemption certificates provide, at their highest that redemptions were made but in this context I note Mr Kubik’s concern relating to his ongoing investigations in relation to payments made to HPL members’ accounts.

Reliance on the management agreement dated October 2020 is, in my judgment, hopeless in that it is riddled with errors as admitted by Mr Flanagan. In any event, on its face, it supports a very different type of transaction.

In his evidence, Mr Flanagan also relied on the later management agreement dated 2022 between Cyan and the GM Companies. As the lending was made in 2020 and 2021, it is difficult to see how that management agreement was relevant or valid. It also contained errors.

In my judgment, Mr Flanagan’s evidence was not truthful. His reliance on the documents highlighted above which showed a different position from that one he was asserting made his evidence unreliable. When he was presented with a document which was inconsistent, his explanation was that there must have been an error at the office and that these were effectively just administrative errors. His reliance on the 2022 management agreement is another reason as why I consider he is not truthful. That document clearly post dates the Cyan lending and yet Mr Flanagan relied upon it. The earlier management agreement provided for a different scenario than thn one Mr Flanagan sought to establish.

As part of my assessment of Mr Flanagan, I have considered what he set out in his evidence, being that HPL provided the substantial lending in relation to the Cyan transaction. In his evidence, he also asserted that, effectively, HPL increased its lending after the initial £10 million lending by acquiring bonds form GM1001 and taking over the pending position of Galepso. Mr Flanagan set out in his evidence as to why HPL preferred bonds over the direct lending. All of this were clearly not true in that, as he admitted during cross examination, the sums taken from HPL were taken without the authority of the beneficiaries. There is a stark difference between what Mr Flanagan sets out in his written evidence and what he admitted was the position in relation to HPL lending. I reject his evidence as being untruthful and unreliable. Accordingly, I reject the GM Companies’ case to have an economic interest. I reject that the structure of the Cyan transaction was that of undisclosed principal and agent. Ulitmately as I have set out above, the GM Companies’ case depended upon the credibility of Mr Flanagan and his evidence being accepted by the court. Without needing to consider in more detail the legal principles relating to undisclosed principal and agent, I have rejected the evidence provided by Mr Flanagan, that on the facts of this case, this was the basis of the Cyan transaction. Accordingly, there is no need to consider the law further as the case fails on the facts. There is no evidence which supports that case.

Turning to the assertion made that the sums taken from HPL were repaid in full (which would have to include interest), I am not satisfied on the evidence before me that such payments were made and in particular were made by the GM Companies. In my judgment, as is set out by Mr Kubik, there are certain unsatisfactory aspects relating to the alleged repayment by GM 1001 to HPL. The sum of £13 million which Mr Flanagan originally asserted was a payment made by GM 1001 clearly did not originate from that company. This was accepted by Mr Flanagan in the witness box as well as in his sixth witness statement. There is no documentary evidence which actually demonstrates that the £13 million represented funds to which GM 1001 actually owned. What the evidence does show is attempts made to present this sum from having come from GM1001. That is also clear from the exchange of emails which Mr Kubik attaches to his skeleton.

There is no evidence as to the terms upon which the Voula Settlement provided the funding. Mr Flanagan admits that there are legal proceedings but provided no further detail save that he expected it to settle. In my judgment, there is a lack of evidence that the sum provided and alleged to have been used to repay HPL belonged to the GM Companies. No evidence has been produced which establishes the GM Companies’ entitlement to those sums before they were transferred over, it appears, to HPL members accounts.

The repayment of sums to HPL would, in my judgment, affect whether HPL is able to claim an interest in the funds. This is recognised hy Mr Kubik in his witness statement. Mr Kubik raises concerns in his witness statement which relate to the provenance of the sums attributed to GM 1001. Mr Kubik states that he is unable to state that repayment has been made to the HPL beneficiaries and he has not completed his investigations. In my judgment, despite Mr Kubik not being available to give evidence, I do not consider that little or no weight should be given to his evidence. Even if he had attended and had been cross examined, his replies would not, in my judgment, have altered the rejection of the GM Companies’ case.

The difficulty with the position of Mr Kubik is that he is not in a position to be able to assert positively that HPL has an economic interest in the funds. This is because he is still investigating the matters.

The trust claim of HPL is in any event a complicated one. Ms King’s additional skeleton sets out the claim at law, but there are facts which may well affect that analysis. Even if HPL asserts a trust claim, the funds arose from secured lending provided to third parties, being the Orex Companies. Whilst Cyan, as parent of the Wilton group would be imputed with the knowledge of the provenance of the sums taken without authority from HPL for the lending purpose, the Orex Companies may well assert to not have that knowledge. Until Mr Kubik completes his investigations, it is not possible to ascertain whether HPL can assert an economic interest in the Funds.

Before me Cyan asserted an economic interest in the funds based upon the security documentation. Its position is, in my judgment, in direct conflict with that of HPL. Cyan is in a position to establish its claim to the economic interest and did so before me. As the GM Companies’ claim has failed, Cyan’s position is that it has the economic interest. HPL is not in a position to assert its claim to the economic interest in order to defeat the Cyan claim. Before me, Mr Shaw for Cyan accepted that position and also submitted that based on the evidence before me, it was simply not possible to determine that HPL’s claim was valid.

In my judgment, it is not possible on the evidence before me to determine whether HPL has the economic interest. Mr Kubik has not been able to complete his investigation’s according to his evidence. This leads to the unsatisfactory position as to whether I determine that as HPL has failed to establish its claim to an economic interest before me, its claim stands to be dismissed. That would leave Cyan succeeding on its claim to have the economic interest in the Funds. All parties should have been ready to deal with the preliminary issue which had been directed a considerable time ago, in May 2024. It is, in my judgment, no real justification for Ms King to submit that HPL was not represented before Chief ICC Judge Briggs on 21 May 2024 when the preliminary issue was directed. The order made was served on HPL and directions given relating to HPL being able to serve evidence which it did so by two witness statements of Mr Kubik. The same solicitors who act for HPL also act for Cyan who was represented at the hearing in May 2024. No application to adjourn the preliminary issue hearing was made by Mr Kubik.

Cyan is the entity which is prejudiced by a further delay, not only as to costs but also because Cyan is ready and able to establish its economic interest. That is part of the conflict as between HPL and Cyan. I need to weigh up the prejudice to Cyan as against the prejudice to the HPL beneficiaries in the dismissal of their claim now. In my judgment, it is not in the overriding interests of justice to dismiss the HPL beneficiaries claim to the economic interest.

I have no reason not to accept Mr Kubik’s evidence that he has not as yet completed his investigations. It is clear that the transactions between the Wilton Group companies and HPL are complicated. The issue of the Voula settlement and the basis upon which those sums were provided to GM 1001 or another Wilton entity are serious issues which need to be dealt with. The prejudice to HPL if I reject their ability to assert an economic interest is serious. Moreover, based on the admission made by Mr Flanagan in relation to the sums having been taken from HPL accounts without authority is a very serious issue. HPL should be allowed to complete its investigations and assert its claim under the trust principles summarised above. That will protect, in my judgment, the beneficiaries whose funds were taken from their accounts without authority. Accordingly, I will adjourn that part of the preliminary issue to be determined at a later date as between Cyan and HPL.

Currently the funds are in the hands of Mr Barnett as administrator of the Orex Companies. As Mr Barnett, as administrator of the Orex Companies, has no economic interest in the Funds, it seems sensible that he transfers the Funds to HPL on the terms set out below. It is unnecessary for further expenses to be incurred by him relating to this issue. Until that further hearing can take place, it seems to me that the funds should be handed over to the Joint Administrators of HPL who will hold them separately and not as part of HPL estate. In so far as a trust is established over the funds, then the funds are not part of HPL assets, but need to be dealt with under the relevant trust deeds and rules of the pension schemes. It may well be that further directions are necessary and I will hear the parties on that when this judgment is handed down. It may also be appropriate to transfer the adjourned preliminary issue to one of the Chancery Masters. I will also hear Cyan and HPL on that issue.

I should add that after I reserved judgement, Mr Augousti wrote a letter to the court seeking to rely further matters to the Court. I have not taken into account in this judgment the contents of his letter or any attachments thereto. They were not served on any of the other parties and there was no reason for the consideration of any further evidence after I had reserved judgment.