Professional Documents
Culture Documents
18 December 2014
Permission to
appeal was refused. The Cells were represented by Richard Gwynne, Caroline Houghton
and Donna Newman of Stephenson Harwood LLP and by Richard Coleman QC and Giles
Wheeler of Fountain Court Chambers.
On behalf of the Board of Directors of the ICC, its Chairman, Hugh Aldous, said This is
an exhaustively detailed judgment that is not only a devastating critique of Arch and Mr
Farrell, its CEO, but is an exemplary commentary on fiduciary duties. It is of remarkable,
contemporary relevance for investment managers. It reminds them of their duty of care
and that integrity matters. This action has taken a number of years to bring to trial and
has been fought against considerable obfuscation. The ICC comprised over twenty Cells
whose shares, listed on the Channel Islands Stock Exchange, were used by the fund
managers, Arch, as a conduit for investments which would not have been authorised for
retail investors in the United Kingdom. In other words, this was an example of regulatory
arbitrage, as well as deplorable failure of fiduciary duties.
ultimately suffered by UK investors. For that reason we remain in close contact with the
All Party Parliamentary Group of MPs representing many UK investors and we continue to
pursue other parties who caused those investors so much loss. We have no further
comment other than to thank an excellent legal team.
ENDS
Note for Editors
The full judgment handed down on 18th December 2014 is available in PDF from SH.
The Arch-Cru affair erupted in 2009 with investigations in the UK by the then FSA and in
Guernsey by the GFSC (the Guernsey Financial Services Commission). The ICC and the
Guernsey Cells who have brought this action, were part of a structure, established by
Arch, through which investors in the UK invested, primarily through open-ended
investment companies ("OEICS") in investment funds (known as the Arch-Cru Funds)
that were marketed to them by independent financial advisors.
were ordinary members of the public investing their savings. In excess of 500m was
invested by them. Losses were huge; the FSA Decision Notice of 12 th September 2012
(currently under appeal to the Upper Tribunal with judgment awaited) found that Arch
breached FSA Principles and recklessly failed to manage conflicts.
The ICC and the Guernsey Cells appointed new directors on 31st December 2009.
Those
directors became first curious and then began to investigate the investments and
matters that they had inherited.
Arch (the Cells' former investment manager) in the English Commercial Court. This was
followed by a claim against Mr Farrell personally which was issued in the English
Commercial Court on 16 March 2012.
being for a total sum of over 150m from just those investments investigated.
The
claim against Mr Farrell concerned his conduct in relation to one particular investment by
the Cells; their investment in a company called "Lonscale Limited", a company formed to
invest in lettable housing intended mostly for student accommodation.
also the subject of part of the claim against Arch.
Lonscale was
advanced far exceeded the recoverable assets and insurance cover of the defendants,
the part of the Cells' claim against Arch dealing with Lonscale, and the Cells' claim
against Mr Farrell were joined together and selected to be tried first.
This "Lonscale"
trial commenced in November 2013 and is the subject of the court's judgment of 18 th
December 2014.
Although there were 18 Claimant Cells across the Arch and Farrell
Claims, only six of the Cells invested in Lonscale Limited - these are the six Claimants in
the Farrell Claim and they are six out of the 18 Claimants in the overall Arch Claim.
Actions continue against the former directors of the Guernsey Cells, against the former
administrators, against the former administrators of subsidiary companies and against
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other parties. The case against the former auditors was settled to the current directors
satisfaction.
All the Particulars of Claim, or Summons as they are known in Guernsey, are public
documents and publicly available.
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