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England and Wales High Court (Chancery Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Secretary of State for Business, Enterprise & Regulatory Reform v Charter Financial Solutions Ltd & Ors [2009] EWHC 1118 (Ch) (22 May 2009) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2009/1118.html Cite as: [2009] EWHC 1118 (Ch), [2011] 2 BCLC 788 |
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and 6556 of 2008 |
CHANCERY DIVISION
COMPANIES COURT
Strand, London, WC2A 2LL |
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B e f o r e :
(sitting as a Judge of the High Court)
____________________
Betweeen: The Secretary of State for Business, Enterprise and Regulatory Reform |
Petitioner |
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- and - |
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(1) Charter Financial Solutions Limited (2) Charter Financial Solutions (UK) Limited (3) Finance Select (UK) Limited (4) Bounce World Limited (5) Trash Express (UK) Limited |
Respondents |
____________________
The Respondents appeared by Mr Christopher Lake, a director, with the permission of the Court
Hearing dates: 11/3/09 – 16/3/09
____________________
Crown Copyright ©
Sir Edward Evans-Lombe:
The background facts
(i) acting as a broker in the sale of financial products to the public (and, in particular, those members of the public who would usually struggle to be accepted by the suppliers of such financial products ("the subprime market"). On the successful completion of an application for finance obtained by a customer of CFS, CFS would receive a commission from the supplying finance company.(ii) recruiting sales agents throughout the country to help CFS find more customers. There were three levels of agent position available: Agent, "Top 100 Agent" and "Regional Agent". Agents would receive a commission from CFS on the successful completion of a finance application by a customer of CFS introduced to CFS by the agent. To be appointed an agent required the payment of a fee by the agent to CFS, latterly, £40 for an Agent, £299 for a top 100 Agent and £795 for a Regional Agent.
(iii) the sale to members of the public of franchises of the CFS business concept. In return for a fee, latterly of £5,995 plus VAT, franchisees were trained and were promised "leads", advice and support in order to help them market finance products in the subprime market. "Leads" were the contact details of individuals thought to be likely applicants for loans ("customers"). All customers who applied to franchisees had to be referred to CFS, through which company negotiations to arrive at loan agreements with finance providers were conducted. The franchisee was promised a 50% share of any commission received on successful completion.
"In September 2006 I purchased a franchise from the Defendant. This franchise contained many promises and obligations and also guaranteed income.
None of the promises or guarantees have been fulfilled and letters to the company are not answered.
I have requested the return of my money but the company has not replied."
(i) In the course of their conduct of the affairs of CFS and FSUK, Mr Lake and Mr Knight used different personal names.(ii) In completing application forms for consumer credit licences Mr Lake and Mr Knight had knowingly or recklessly concealed that they had used different names and that CFS had been the subject of judgments in the County Court.
(iii) The publication of a fictitious and misleading testimonial for the services offered by CFS.
These are all matters of complaint by the Secretary of State in the petitions before this court.
"Amanda Jackson's success Story/
with Finance Select (UK) Ltd.
"Hi, my name is Amanda Jackson and I purchased a franchise opportunity nearly a year ago from Finance Select (UK) Ltd. and I'd like to tell you my success story…
I had been looking to start my own business for some time but lacked the knowledge, know how and money to do this, but I knew I had to work for myself.
I wanted to be free to come and go when it suited me, take the family on holiday, etc and buy my husband his dream car one day (Ferrari 348GTS).
These things were beyond me in my present job as a coordinator, all those hours and not really being appreciated for what I did and for little pay was not my idea of life! So I spotted Finance Select (UK) Ltds.'s advert and asked them to send me some information.
It seemed just what I was looking for: training, on-going support etc and business from day one! All this and much more, but I also appreciated what they had to offer the customer as myself had many debts that had built up over the years from my modest income, which had left me black listed and struggling to cope.
So in February 2006 I purchased a franchise from Finance Select (UK) Ltd. after they arranged the finance for me to do so. I was amazed they managed to do this as no one else wanted to help me, but in their own words "that's what we do".
I went for my training and a week later I received my first cheque.
I was 100% committed and I got stuck in. They sent me agents who in turn sent me business. Finance Select (UK) Ltd. did everything else for me. I recruited my own agents as they showed me and I got paid for them too, and received more business.
People required my services everywhere I went, most of the time they just didn't know I could help them or these services were available, just like I thought myself a few months ago. Now I have twenty two agents and plenty of business and it's still growing!
Now nearly a year on as I write this story I have bought my husband's dream car. Life is really good for me. I have quit my old job and have taken the family on holiday to Mexico in August just six months into my business opportunity with Finance Select (UK) Ltd. I have managed to pay off most of my debts now which added up to over £20,000. I'm in control of my life again and have the freedom I so much wanted. I'm also looking to upgrade my house, and all this has happened to me in under a year"
Amanda has now opened offices and taken on staff as part of her expansion.
You could join her today and share in our success!"
"2. An application for a consumer credit licence was submitted by the Appellant [FSUK] dated 26 September 2007 and received by the Office of Fair Trading on 2 October 2007. Due to concerns that the Office of Fair Trading had in relation to the application, an adverse marker should have been placed on the Office of Fair Trading's new database "PROMOD" against the name of the Appellant, the purpose of the adverse marker being to prevent a licence being issued without full consideration of the Appellant's fitness to hold a licence including concerns about its associates.
3. Unfortunately, problems were being experienced with the new system with the result that on 30 November 2007 a licence was said to have been issued in error to the Appellant."
"51. In answer to the preliminary issue, the Tribunal therefore find that the notice procedure followed by the Office of Fair Trading in seeking to revoke the Appellant's licence failed to comply with the provisions of the Consumer Credit Act 1974."
"Charter Financial Solutions Ltd: Obligations
1. CHARTER FINANCIAL SOLUTIONS LTD agree to supply to the Franchisee a brand new lap top computer with twelve months warranty, and software needed to run the Franchise.
2. CHARTER FINANCIAL SOLUTIONS LTD agree to supply to the Franchisee with [sic] all the ongoing support and training they may require.
3. CHARTER FINANCIAL SOLUTIONS LTD agree to supply the Franchisee a complete fully hosted website, automated answering system, 0870 number (0870 numbers sometimes charge a small fee per month of £5 to operate, this must be paid by the Franchisee after six months, as the first six months are paid upfront by ourselves).
4. CHARTER FINANCIAL SOLUTIONS LTD agree to supply the Franchisee with agents recruited from our national advertising for the first year.
5. CHARTER FINANCIAL SOLUTIONS LTD agree to pay the Franchisee £40.00 for every agent introduced to the Franchisee for the first year.
6. CHARTER FINANCIAL SOLUTIONS LTD agree to pay for all costs needed to set up the Franchise including hotel accommodation for one night (two day training course if needed) Consumer Credit License for a sole trader, lap top computer, automated answer system for six months, website hosted for twelve months and recruiting for agents for twelve months.
7. CHARTER FINANCIAL SOLUTIONS LTD accepts no responsibility for the conduct of the Franchisee as the Franchisee operates solely as an independent business.
8. CHARTER FINANCIAL SOLUTIONS LTD agree to process all applications provided to them from the Franchisee as long as the agreement is in operation, and pay all commissions due (50% of the gross profit) on completion to the Franchisee within five working days from when payment is received by CHARTER FINANCIAL SOLUTIONS LTD.
9. CHARTER FINANCIAL SOLUTIONS LTD agrees to supply all of the above after receipt of £5995.00 + vat."
"DISCLAIMER
I confirm that I have now fully completed my scheduled training session at Head Office and confirm I am fully confident in the operation and processes relating to the information and programs that I have received as part of my Franchise Package.
I also understand that I may at any reasonable time contact Head Office for help or assistance if needed and that ongoing support and training will always be available to me if required.
It has been explained to me that all applications for Head Office processing must be completed in full showing a minimum of 3 years trackable Residential and Employment history before any application can be processed.
I have been instructed to only ask Head Office for updates on the applications sent in once a fortnight for Vehicle Finance and once a month for Mortgages/Re-Mortgages and secured loan applications.
The Franchisee shall be notified of any updates within the agreed time frame as and when they are received by Head Office.
I fully understand that I am now in control of a business opportunity purchased from Charter Financial Solutions and that the success of this business opportunity is solely based on my effort and the efforts of the agents I receive from Charter Financial Solutions and the ones I recruit myself and any further efforts that I may implement into my business myself. Charter Financial Solutions shall have no direct influence for the success of my business, this is solely my responsibility"
"I fully understand that I have purchased a business opportunity from Charter Financial Solutions Ltd and I am now in control of my own business. The success of this business opportunity is solely based on my own efforts and the efforts of all sub-agents that I recruit myself and the leads I receive from Charter Financial Solutions Ltd. Also any further efforts that I may implement into my own business myself. Charter Financial Solutions Ltd have supplied me with everything advertised and contractually obliged to and shall have no direct influence for the success of my business, this is solely my responsibility."
"Charter Financial Solutions Ltd
Specialists in Motor Finance – Commercial Mortgages / Re-mortgages – Secured Loans – Commercial Loan …Telephone: 0870
Full Franchise Option with Charter Financial
The Market Place
Guaranteed finance is big business…fact! One in four people have credit problems… fact! Charter Financial Solutions Ltd specialise in this market place. We help people re-start their credit by obtaining a line of credit they require. This is a multi billion pound industry in this country and it's getting even better, so now is the time to have a slice of the action. This is why we are franchising it to people like yourself, so we can all profit from this booming market place, which will always be required, so we'll all have a secure future.
What we offer
- Car finance-lease-contract hire/ vans
- Secured loans-unsecured loans
- Commercial mortgages / re-mortgages
- Commercial loans
- Credit cards
- Bank accounts (business & private on and off shore)
- Company formations
- Credit repair
- Name change by deed poll (see our web site for a full listing)
The Company
Charter Financial Solutions Ltd is a privately owned family business headed by Christopher Lake and Stephen Graham who have been involved in the finance industry for over thirty years between them. They formed Charter Financial Solutions partnerships in 1989 and expanded tenfold over the next ten years into the successful limited company they are today. In order to expand to a national competitive finance organisation, it was decided to franchise the business.
How the Charter Financial Solutions partnership works
You as a potential franchisee have requested this brochure because you've been thinking that you would like to start up your own business but are unsure what and how to do it!
That's where we as a franchise comes in. We charge you a fee to set you up in business from day one, so you don't make all the mistakes we've made along the way. By learning from our mistakes, you won't make them.
This will mean you will make money from day one, giving you confidence and the will to succeed. All you have to do is what we tell you and you can't fail. We know because we've done it.
You will receive initial in house training and any further ongoing training you need. A fully set up website of your own including your own 0870 number (low national rates) along with a professional electronic answering service to redirect calls or take messages. It's just like having your own secretary when your [sic] not there. All linked to your brand new lap top computer supplied by us.
Your website will be sent to all the major search engines, so after a few weeks it will start generating business for you and while your[sic] asleep or at your day job, people will be completing applications on your website, so when you wake up/get home you simply access your site, download your applications and send them for processing … easy!
We will process all your applications for you, so your job is just to find the customer, that's all. Your website is just one way of generating business. Another one is Charter Financial Solutions, will also supply you with business, and pay you at the same time, again to make sure you succeed.
We supply you with direct links to companies who arrange some of our products, like credit cards/bank accounts etc. This means you get all the commission and you don't have to share it with anyone. Also we supply you with computer software which will print off deed poll change of name for you… You charge what you like, the money is all yours!! We will directly link these and many more products to your website, as a national company, when you succeed we succeed, which is the name of the game.
As a company we guarantee to recruit agents for the first twelve months. We advertise every week on a national basis to ensure you receive a good regular supply of agents (just tell us to stop if you have too many). This will make sure you have plenty of business coming in. Not only do we supply you with agents, but we also pay you for everyone we send you!! We pay £40.00 per agent. So if we supply you with five agents in a month, that's £200.00 guaranteed before you even start. This is for the first twelve months and is renewable yearly at only £1,200 + vat (optional) but we know you will want to because it's a fantastic way of advertising, so just think how many thousands of pounds those agents are going to make you in return.
Now what can you use this money for? Easy… Advertising!!!
This will create even more business for you and us, hence why we guarantee it! It works brilliantly…
Everything we do for you, benefits us… Hence why it makes for a good partnership, where everyone is a winner.
Everything you will need to start we will supply, from training to computers, all computer software/website/telephone system and information you will need. All you have to do is what we tell you and for a few hours work per week (15-20 hours per week) more if you wish, you could be earning over £1,000.00 per week … fact!
Charter Financial Solutions Ltd Business Plan
(15-20 hours per week)
Weekly income
Very conservative outlook
- Two completed car deals @ £300.00 £600.00
- One completed commercial mortgage £500.00 £500.00
- One completed bank account @ £50.00 £50.00
- One completed van lease @ £200.00 £200.00
- Two agents supplied to you by ourselves £80.00
- Total £1,430.00
These are based on low rate applications for realistic figures. Commercial mortgages can pay many thousands of pounds e.g. £250,000 commercial mortgage with sub prime rate with payment protection can pay up to £2,500.00 in commission.
(15-20 hours per week)
Weekly outgoings based on working from home
Phone bill £20.00
Electricity £5.00
Heating (winter time) £10.00
Stamps £5.00
Advertising up to you
But these figures are based on us just supplying agents to you and them bringing you three deals per week
Total £40.00
Net weekly profit £1,390.00
Allowing four weeks holiday but remember that your website will be working for you while your [sic] away!
15-20 hours per week = £72,280.00 per annum
These figures are based on 15-20 hours per week 5 days a week!
The income/profit is increased if weekends and longer days are worked.
What the Company does for you
- Full in house training on all aspects of the business.
- Brand new lap top computer.
- Establish[sic] customer base.
- Supply full website will all set up fee's covered, links and Google boost, along with credit card acceptance, all arrange for you. [sic]
- Supply deed poll direct link information/bank account/credit cards/company formation/credit repair.
- Supply all computer software needed to run your business including accounts package.
- Assistance with expansion plans.
- Supply comprehensive marketing/agents
- Supply ongoing business through agents.
- On going support.
- Guaranteed income.
- Supply 0870 national rate number.
- Supply fully automated answering service.
- Company discounts on all our finance products.
Cost of the franchise
The cost of the franchise is very cheap compared to many franchises out there, simply because our franchise fee only covers the cost of the franchise, not the big profits that are normally associated.
Cost of franchise £5,995 plus VAT
Includes everything listed inc hotel accommodation
Full list
- Two nights hotel accommodation (home training can be arranged).
- Full two day training course.
- Brand new lap top computer.
- On going training and support.
- Guaranteed income from day one.
- Guaranteed advertising for one year (renewable yearly which is optional).
- Assistance with expansion plans.
- All software needed inc accounts package (runs all your accounts/invoicing etc (full training given).
- Consumer credit licence fee inc.
- Website.
- 0870 number (which will move anywhere you do).
- Answer system.
- Company discounts on all our finance products."
Later in the document, under the heading "Questions and answers", there was a question and answer as follows:-
"Q. Do I need to register for VAT?
A. The choice is entirely yours but you don't have to until you have turned over more than £57,000 per year so you should just get away with it in your first year or most of it."
"Finance Select (UK) Limited is part of the FSUK Group and have been established for over 22 years. We have plenty of experience in the sub-prime finance market. Due to fantastic growth we have decided to franchise our finance business nationwide."
"Part of the FSUK Group
The franchise package
We as a company will set up your business for you. Everything you need to run your own successful sub-prime finance brokerage business, from websites to business cards, and we even supply a minimum of £100,000's worth of high quality leads from our national lead generator, this will ensure you are kept busy and the results will come in to earn you a fantastic income, either part time or full time, from home or office, it's up to you! We even advertise on national websites for people looking for business opportunities and we pass these people on to you as your own finance introducers, to help build your business. This business is a numbers game, so the more finance introducers you have, the more business they bring in, and the more money you will make. So this free advertising will help generate some fantastic finance introducers for you, and we will train you how to deal with them too, which is all part of the package and our commitment to you. So there you have it, we will set you up as a finance brokerage, we'll advertise for finance introducers, give you full training and on going support, along with £100,000's worth of hot leads supplied direct to you on a regular basis, guaranteed… and much much more! (see our full listing).
The franchise is designed to be run part time, around just 2 hours per day. If you wish to work full time then that's fantastic, the more you put in the more you'll get out. We have years of experience, so with our help and your input, we'll make plenty of money together. We process all applications, so as soon as we get the application we see it through to completion then pay you… simple! This leaves you the time to concentrate on the leads and the general day to day running of your business, follow our structure given to you in training and you'll be soon working your way to a profitable and successful future.
So if your [sic] looking for a part time or full time business working from home or office, with a small investment with unlimited rewards, then this is the business for you! Keep reading…
We supply everything you'll need…
Here is the full list of everything we supply to you:-
- Minimum of £100,000 worth of hot leads… this comes with our money back guarantee!! supplied from our national advertising lead generator. These are genuine leads from our national advertising for all types of finance, supplied to you on a regular basis for 1 year as part of this package.
- Full website, inc design, with optional paypal service, to take credit card payments (credit card or debit card needed).
- 1000s of business cards, letter heads, compliment slips and flyers, in you own business details including full design and print, to help promote your business in your own area.
- New laptop computer, including operational programs, to help run your business.
- Accounts package.
- Data base program to help store and control your business.
- National cheap rate number (so if you move, it moves with you).
- Fully programmable digital operator system.
- 60% commission and direct links on smaller products (credit cards, bank accounts, un-secured loans etc) to boost your commissions to 100%.
- Advertising on a national premier business opportunities website, which receive thousands of hits from people looking for business opportunities. Anyone interested in being a finance introducer for you, we will recruit them for you and pass them directly to you… This is a fantastic way of generating more finance introducers to you, to help generate more business.
- Sole trader Consumer Credit Licence.
- Full training.
- Full back up and support and ongoing training if required.
- OTE £100,000 + per annum.
I think, as you can see, you receive everything you can imagine to help your business take off and create a fantastic income and security for your future.
It's important to us that we have an excellent relationship with our franchisees, so there are only limited places available for the right people, who enjoy this type of environment, appreciate our products and are prepared to work at least 2 hours per day.
If that's you! then please call the office on: 0844 804 4023 to make an appointment and discuss your needs further. Please write down any questions you may have or please read on.
The full cost of this fantastic business opportunity is £6595 + VAT.
Franchise Holding Deposit - £1,000
Business plan & guide to fantastic earnings
The following is an illustration of your potential earnings from this fantastic business opportunity.
This business has no limits on the earnings you can achieve, depending on the effort you put in, in response from hot leads, your finance introducers and advertising will determine how much you can make. Unlike most franchises which offer £200 or £300 per week for a large investment, we offer unlimited earnings for a small investment, we know from experience that the system works well, and if you follow it, the sky's the limited [sic].
Based on 60% commission, which is the highest rate available.
Re-mortgages, pay on average £2,400.00, one of these a month is most people's monthly wage.
Secured loans, pay on average £2,000.00, again one of these per month.
Car finance, pay on average £300.00 a few of these would add up nicely and there [sic] quick and easy.
Credit cards, Bank Accounts etc, 100% commission, how many of these can you complete in a month. It's up to you what you charge but on average we charge £150.00 per card/account, the higher the card the more you can charge (see our website for pricing).
Unsecured loans average £100 per loan. You will sell these all day!
Commercial Loans, well, get these right and the big money comes in…£1,000,000 commercial loans happen every day, get one of these a year and you'll be laughing! Never mind one a month @ 2% that's £20,000.00 just for introducing this type of deal.
Imagine, when you have many finance introducers working for you, and the regular supply of leads from our lead generator, along with your own efforts, I'm sure you'll agree that your [sic] well on your way to making well over £100,000 per year. You'll have self satisfaction knowing it's your business, working for yourself, and together we'll do everything we can to make sure it happens, as your success is our success.
Here is an average monthly income based on the above.
4 x average car deals £1,200.00
1 x average Mortgage £1,000.00
1 x average Secured loan £2,000.00
10 x Credit Cards/Bank Accounts £1,000.00
10 x Unsecured loans £1,000.00
3 x IVA's £600.00
Total monthly income £6,800
There are many more products that you can sell, but we'll leave it there for now, but I think you can now appreciate the potential income with these easily achieved monthly figures.
OTE £100,000 + per year
Funding?
The cost of the full franchise introducer package is £6595 + VAT. If you do not have the funds available for whatever reason, then allow us to help you! We have many different lending options to offer and having credit problems is obviously no problem for us.
County Court Judgments
Arrears
Retired
Defaults
We can help!!
Please speak to one of our advisors, if you need any help financing your franchise or any other financial needs.
Loan Example: £7500 x 120 monthly payments of £93.75 APR 9.9%
Subject to status your home is at risk if you do not keep up the repayments on a mortgage or other loan secured on it.
Thank you for taking time out to read through our franchise details. If you wish to move to the next level or just have some more enquiries, please do not hesitate to contact us. Remember it helps to write down any questions you may have.
Call: 0844 804 4023 (low rate call)"
The petition
"a) The whole business model was misleading to the public and flawed. Far from being a successful business model, the business operated by FSUK of selling finance on behalf of third parties and franchising the same, was the successor business to the business of CFS which had ceased to trade because of the County Court judgments registered against it."
Paragraph e) reads as follows:
"e) Additional misleading statements are made on the FSUK website. The website claims that 'Finance Select (UK) Ltd is part of the FSUK group and have been established for over 22 years'. However checks on Companies House reveal that there is no UK incorporated business with the name FSUK Group or any registered companies with a similar name. FSUK itself was not incorporated until 11 July 2007."
"Misleading statements have been made to franchisees: members of the public have been induced to pay for a franchising opportunity which advertises a highly inflated projected income on its website and in its marketing material."
I have quoted above extensively from material appearing on FSUK's website, part of which is devoted to a forecast that a franchisee could look forward to obtaining an income of more than £100,000 a year from a franchise "designed to be run part time around just two hours per day." There is no evidence that any of the franchisees of either CFS or FSUK have ever made an income approaching £100,000 in any year of trading. CFS accounts show that, when franchising income is removed, its gross receipts from trading never reached £100,000 in any year or came near that sum.
"FSUK makes misleading and exaggerated claims in that it promises training, assistance and thousands of pounds worth of leads to assist in the success of the franchise. However, the promised leads are not actually existing leads, they are merely a hope of what can be achieved through national advertising."
"Minimum of £100,000 worth of hot leads… This comes with our money back guarantee!! supplied from our national advertising lead generator. These are genuine leads from our national advertising for all types of finance supplied to you on a regular basis for one year as part of this package."
"In addition to exaggerating the potential benefits to franchisees, a misleading reference, supposedly attributable to a successful franchisee of FSUK, but which was in fact traced to the wife of a director without that link being disclosed to the public. Further, as the testimonial has simply been amended to replace CFS with FSUK it states, "So in February 2006 I purchased a franchise from FINANCE SELECT (UK) LIMITED". This is despite the fact that FSUK wasn't incorporated until 11 July 2007, didn't hold a consumer credit licence until November 2007 and wasn't trading according to the directors until at least February 2008."
"The FSUK website states that the secured loans and mortgages it now offers are provided through Norton Finance Limited and Bright Finance Limited. The FSUK website appears to show a typical APR of just 6.6% on the application form. However, the websites for Norton Finance Limited and Bright Finance Limited advertise typical APRs of 13.9% and 11.9% respectively for their secured loans."
It is then alleged that the above was a misleading statement because it is "extremely unlikely that any of FSUK's customers will ever see an APR of 6.6% and in any event this rate could not be described as typical for customers of FSUK." This follows from the fact that the websites of Norton Finance Limited and Bright Finance Limited advertise typical APRs of 13.9% and 11.9% respectively and typical APRs for secured vehicle finance are 19.9%.
"The overall cost for comparison is 6.6% APR. The actual rate available will depend on your circumstances. Ask for a personalised illustration. The APR is variable and based on a usual case."
I was not taken to any other published representation stronger than this that the usual APR available from FSUK was 6.6%. In my judgment the inclusion of "6.6 % APR" in the note is not necessarily to be interpreted as suggesting that such a rate will be available for most loans offered by FSUK. Thus, in my view, this complaint of the Secretary of State is not made out.
"Mr Lake and Mr Graham have also misled the Abbey National plc when completing two separate application forms for bank accounts. On 31 October 2007 Mr Lake and Mr Graham completed an application form for a business bank account for FSUK with Abbey National plc and ticked "no" when asked whether they had ever been associated with a business that had had a court order for debt registered against it. On 28 November 2007 Mr Graham signed an application form for the partnership bank account for Clean Machine UK. The form asks the same question and again Mr Graham ticked the box marked "no". However by 31 July 2007 two franchisees had already obtained County Court judgments against CFS. Mr Lake admits to having knowledge of one of these, as he had been served personally in relation to that County Court judgment on 25 October 2007. Since FSUK was set up deliberately by directors to take forward the business begun by CFS because CFS could no longer trade due to problems with complaining franchisees and County Court judgments registered against it, it seems incredible that the directors would forget to mention this fact on application forms for bank accounts for FSUK and its related business and the inference is that the false statement was deliberately misleading."
"In a determination and notice dated 23 June 2008 (subject to appeal) [at the time of the presentation of the petition] the OFT revoked FSUK's consumer credit licence and found that the directors of CFS, Mr Graham and Mr Lake, had knowingly or recklessly provided false information to the OFT"
and that
"the record of deceit, contravention, transgression and unfair business practices outlined above indicates a business and a set of directors and controllers (Mr Graham and Mr Lake) who are quite prepared to act beyond the boundaries of the law and regulation until they are either forced to stop or significantly alter their business practices. Consumers are entitled to expect complete honesty, a transparency and fair business practice from licensees, especially those dealing with vulnerable clients in financial difficulties. In my view (FSUK) cannot be trusted to act to these standards.
There is a lack of probity throughout the dealings of the directors' companies."
FSUK's case
The law
"Where it appears to the Secretary of State from –
(a) any report made or information obtained under part XIV…of the Companies Act 1985 (Company Investigations etc), …
that it is expedient in the public interest that a company should be wound up, he may present a petition for it to be wound up if the court thinks it just and equitable for it to be so."
My attention was drawn by Mr Westwood, for the Secretary of State, to authorities on the exercise by the court of the power to wind up companies on the petition of the Secretary of State on "public interest" grounds. In particular, he drew my attention to a judgment of Mr Justice Norris in Re Amway (UK) Limited [2008] EWHC 1054 (Ch). That was a case which had some similarities to the present case where the court was considering a company conducting a pyramid selling business which, although it had conducted its own affairs in a manner which could not be criticised, had failed to supervise and control the representations and promotional material used by members of the public, called independent business operators, who sold Amway's products on its behalf. The material issue in the case was whether it was open to the judge to decline to make a winding up order on the basis of undertakings offered by the company as to its future conduct which had been offered to the Secretary of State and declined. In the result, the judge found that it was open for him to do so and, accepting the undertakings, refused to make a winding up order. The Secretary of State appealed the judge's decision. In the Court of Appeal the lead judgment was given by Lord Justice Rix, handed down on 29 January 2009. This judgment helpfully conducts a review of the authorities on section 124A and, in particular, those which deal with the question of whether a company, against whom the Secretary of State has launched a public interest petition to wind it up, and in which facts have been established, relating to the company's past conduct, which would justify the making of a winding up order, can nonetheless avoid such an order by proffering undertakings to the court which are not acceptable to the Secretary of State.