[2025] EWHC 2830 (Ch)

Mr Flanagan states at paragraph 43 that there were five members of the Cyan loan syndicate, being HPL, Galepso Limited, and the GM Companies. As the documentation sets out, the GM companies were not members of the syndicate (adopting for current purposes, Mr Flanagan’s language) when the lending was made to the Orex Companies in October 2020 or in April 2021. GM 1001 and GM 1002 were incorporated on 7 January 2021 and GM 1003 was incorporated on 3 December 2021. The original lending made in April 2021 did not come from any of the GM companies but came from other parties according to the documentation.

The documentation relied upon by Mr Flanagan relating to the Cyan transaction sets out the following. Cyan was acquired in around September 2020 changing its name from Lidney Ltd to WSL-Cyan Limited. The sole shareholder of Cyan is Wilton Nominees Ltd. The sole shareholder of Wilton Nominees Ltd is Wilton UK. Mr Flanagan relies upon a management agreement between WSLL ( as guarantor), Cyan and Wilton UK under which Wilton UK would provide administration services to Cyan. The agreement is unsigned and undated. Mr Flanagan accepts that the agreement is unsigned and undated and states in his written evidence that the failure to sign must have been an administrative error. The agreement itself does not take the issues before me much further as it relates to management services to be provided to Cyan by Wilton UK.

Mr Flanagan also refers to a loan management agreement dated 5 October 2020 between WSLL and Cyan. Whilst not defined at the start of the loan management agreement, under subsequent provisions, Cyan is the party called the ‘loan manager’ and the ‘client ‘ is WSLL. Mr Flanagan acknowledges that there is an error on page 10 where the ‘client’ is described as Wilton UK rather than WSLL. Under its terms, WSLL provided funding for bridging loans and Cyan, as the loan manager, facilitated the opportunity of WSLL to grant loans to borrowers referred to WSLL by Cyan as the loan manager. Cyan was to provide any such information that WSLL advises was required so as to make an informed assessment in relation to the offer of any loan. Cyan was to provide ‘full and proper administration services’ which included administrating the collection of any amounts due under any loan. The loan manager was entitled to charge a retainer and/or an arrangement fee from any borrower. As consideration for the services provided by the loan manager, the loan manager was to receive a percentage of the interest payable under any loan as agreed between the parties in writing at the time of granting the loan. The loan manager and the borrower were to enter into a separate facility agreement in relation to each loan.

Pursuant to clause 9.2,

Mr Flanagan then states in his written evidence that although the loan management agreement refers to Cyan as being the loan manager, in fact the agreement was not operated in accordance with its terms. He states that Cyan’s true function was that of a security nominee and that the loan manager was in reality WSLL. He also asserts that Cyan was the nominee holder of security for the syndicate members and that ‘everyone involved in the Cyan transaction understood that it was to be managed in the manner described above and no party ever questioned the operation of this arrangement’.

In support of the way he asserts the business was operated in relation to lending, Mr Flanagan describes and provides documents relation to other earlier transactions, including WSL High Road Limited. The documentation which is relied upon in relation to this earlier transaction does not provide for any documents expressly asserting that the members of the syndicate had the benefit of security over the fund which they lent onto the ultimate borrower through WSLL and using, according to Mr Flanagan, a different SPV nominee company, being WSL-High Road Limited. In relation to the WSL-High Road Limited transaction, there are also certain errors in relation to the names and parties referred to. Mr Flanagan explains that these are simply administrative errors. He accepts that some of the documents do not distinguish between the SPV and the loan manager. He and Mr Robson were directors of WSLL which he asserts was the loan manager for the Cyan transaction. He explains that previously, each SPV had its own bank account for the receipt of sums received via the loan manager, WSLL. This position changed when banks sought to close the bank accounts of smaller unregulated lenders effectively to reduce the risk of money laundering. From about December 2019, WSLL opened a single bank account with Hampden Bank which he states identified which money belonged to which client rather than having segregated client accounts.

Mr Flanagan accepts that the arrangements as between Cyan ( as he asserted being the security nominee or SPV ) and WSLL were imperfectly documented, but he asserts from his position in the Group and from his review of documents executed in respect of the Cyan transaction, he knows that WSLL was the loan manager and Cyan was the nominee for the loans and security in respect for the Cyan transaction. He relies on the accounts of those various entities to demonstrate that the loans were not listed in the accounts as assets of those companies.

Mr Flanagan relies on documents which he asserts evidence the lending from HPL and Galepso in relation to the Cyan transaction. In relation to HPL, Mr Flanagan states at paragraph 67 of his fourth Witness statement,

He states that WSLL issued, on headed WSLL notepaper, loan participation certificates, (with a heading of ‘Bridging finance confirmation of invested certificate’) interest certificates and loan redemption certificates. The certificates state, ‘We are pleased to confirm that you, the investor, have successfully invested [insert sum] into the below secured lending opportunity’. Mr Flanagan states in his written evidence that the reference in each of these certificates to ‘Cyan’ as borrower is incorrect and instead it should have referred to the Cyan transaction.

The documents in relation to Cyan show the following :-

According to these documents, a total of just under £10 million was provided by HPL for the Cyan transaction during the period October 2020 and September 2021. In relation to the further £5,000,000.00 forwarded by HPL, Mr Flanagan states that GM 1001 issued bonds to investors through a bond subscription with GM 1001 and the sums paid over under the bond were then used by GM 1001 to invest, including in the Cyan transaction. He states that the bond participation certificate for an initial funding of £5,485,921.56 is recorded by the transfer from HPL to a bank account held by GM 1001 from the bank account of WSLL on 7 January 2022. The bank statement does not identify that HPL was the payor in that the bank statement refers to WSLL GM Bonds. There is a document entitled ‘Bond Certificate’ with an issue date of 7 January 2022 which states that HPL is the holder of 5,485,921.56 of ‘unsecured bonds of nominal value of £1 created and issued by GM Secured Lending Opportunities 1001 Ltd’. The bond certificate is executed according to its terms as a deed and dated 7 January 2022.

In his written evidence he states that HPL then requested a redemption notice for the return of £485,867.56 and accordingly the funds provided by HPL totalled £5,000,054. He produces a bond redemption certificate for the sum of £485,861.56 which is £6 less than the total amount of funds actually returned to HPL. It is not clear as to the actual background to certain funds being returned to HPL in early 2022. Mr Flanagan produced a bank statement which he asserts shows that HPL was repaid back the sum of £485,861.56 on 16 February 2022. The entry on the bank statement states ‘HSAS SIPP redemption’. In my judgment, it is not possible on the evidence before me to ascertain the background to the transfer back to HPL of the sum of £485,861.56. The HPL Administrators challenge the other repayments made at later dates, but as stated by Mr Kubik, he is still in the process of his investigations.

A further bond participation certificate is then exhibited by Mr Flanagan, with this one being for £5,000,060. This certificate which is dated 16 February 2022 is unsigned and Mr Flanagan provided no explanation as to why it is unsigned. It does contain the same wording as the earlier bond certificate in that it states, “issue of unsecured bonds or nominal value of £1 each created and issued by GM Secured Lending Opportunities 1001 Limited”.

Mr Flanagan states that HPL therefore participated in the Cyan transaction and provided a total of £14,612.00. Mr Flanagan asserts that HPL has been repaid a total sum of £15,613,256.69 which represents its interest and principal. Therefore, Mr Flanagan asserts that HPL is no longer a lending syndicate member in relation to the Cyan Transaction. Mr Nuttall as well as the HPL Administrators dispute the validity of the repayments relied upon by Mr Flanagan including the provenance of the sums used for the payment of £13million.

As he accepted in his cross examination before me, none of these sums which were transferred from HPL to Wilton Group entities were transferred with authority of the beneficiaries, either the beneficiaries of the SIPPS or the pensions schemes held and managed by HPL. At the time of all the transfers, Mr Flanagan was a director of HPL. This admission made by Mr Flanagan was not in his numerous witness statements which had been filed in these proceedings. His witness statements all dealt with the various transactions on the basis that the investment by HPL, whether it was directly or through the bonds issues relied upon by Mr Flanagan, were all based on HPL having the authority to make the investments.

An example of this premise is noticeable in paragraph 73 of Mr Flanagan’s fourth witness statement whereby he explains not only HPL’s involvement, but also its preference to invest in bonds :-

He maintains, despite this lack of authority for the transfer of the HPL sums, that HPL has been repaid in full and therefore the lack of authority issue is not important.

The other member of the Cyan syndicate, according to Mr Flanagan was Galepso Management Ltd. There is an investment certificate with Galepso Management as lender and ‘Cyan’ as borrower with an amount loaned of £5,000,000.00 with a start date of the loan of 30/7/21 and redemption date 30/10/21 with interest of 5% per annum. According to Mr Flanagan, the £5,000,000 from HPL in relation to the bond issue was used to redeem and replace Galepso with GM 1001 on the basis of the HPL bond. There is a bridging finance redemption certificate which refers to Galepso as the lender , Cyan as the borrower with the amount loaned in the sum of £5,000,000 with the start dated of 30 July 2021 and redemption on 30 October 2021 with a payment of £5,062,500.34. Again, Mr Flanagan asserts that the certificate is inaccurate in stating that Cyan was the borrower. Mr Flanagan asserts that Galepso has been repaid by the sums provided under the bond by HPL and thereafter HPL itself was repaid so that the entity with an interest is the GM Companies. For current purposes it is not necessary to seek to ascertain how much is the value of the respective economic interests of each of the GM companies, including whether GM 1003 can actually assert any interest.

In support of his case that the GM companies had the economic interest in the funds, Mr Flanagan also relied on various ‘Bridging Finance Interest Repaid Certificate’ as follows:-

Reliance was also placed upon series of ‘Bridging Finance Redemption Certificate’ which show the following:-

Mr Flanagan refers to a WSLL ledger in relation to WSLL and Cyan which he states supports the repayments he asserts were made to HPL totalling £15,613,138.70. He also refers to the redemption certificates and interest certificates of the kind described above. These show the following :-

The bank statements relied upon by Mr Flanagan demonstrate that about three of these payments came from an account in the name of WSLL with references that the payments were made to ‘HSAS SIPP CYAN interest’

Mr Flanagan asserts that £13,000,000.00 was repaid to HPL from the GM 1001 bank account into the account in the name of Hartley Pensions Trustees Limited. The bank statement relied upon by Mr Flanagan for the period 1 April 2022 to 29 April 2022 is in the name of GM Secured Lending Opportunities Ltd ( and not GM 1001). The balance brought forward on that account prior 4 April 2022 is £140,601.63. On 5 April 2020 there were then three transactions, being a credit into the account from Wilton Secured Lending Limited V19 Bonds in the sum of £13,000,025.00, a transfer out to Hartley Pensions trustees Limited in the sum of £13,006,000.00 and a further transfer to Hartley Pensions Trustees Limited in the sum of £25. The bank statement also shows a series of transfer then made into the accounts on 20 April 2022 from ‘Hartley Pensions L GM Sec Lend Return’ in numerous payments of £50,000 and one £422,260.20 totalling £446,260.20.No explanation has been provided in relation to these sums transferred from ‘Hartley Pensions’ to GM 1001.

The background to the repayments which Mr Flanagan asserts were made to HPL need to be placed into their factual context.