A government attempt to wind up two residential investment clubs has been thrown out by the High Court, almost a year after the DTI shut them down.
Last week, the court ruled that evidence presented by the Department of Trade and Industry was “insufficient” to justify winding up Peterborough-based investment firms Portfolios of Distinction (PoD) and Turningpoint Seminars (TPS).
The companies, which were taken over by provisional liquidators in April 2005, said that the DTI’s six-month investigation was “flawed” and that potentially irreparable damage had been done to their businesses.
Their lawyer, Shilpen Savani, of Judge Sykes Frixou, agreed that the DTI’s action had “proved to be a very costly exercise” for all parties: “It is regrettable that a more measured solution could not be found.” Savani added that the case “highlights the draconian nature of the secretary of state’s powers”.
PoD and TPS were among eight linked investment clubs to which the DTI issued compulsory winding-up orders in May 2005.
The DTI accused them of misrepresenting their services to the public, alleging that PoD, which offered to build a £1m portfolio for a £50,000 fee, had helped only three clients to acquire such a portfolio.
However, the court held that directors Wendy Dowling and Alan Churchill did not “set about operating a scheme that was intended to deliberately deceive the public”, although “insufficient information was given to investors as to the risk”.
As a result of the court’s ruling, the provisional liquidators no longer have authority to continue separate claims against Dowling and Churchill for almost £3m that they allegedly took from company accounts.
The DTI will appeal the decision.
References: EGi Legal News 03/04/06
