The judge in the Collateral trial that alleges two brothers misled thousands of investors by claiming to be authorised by the FCA has told jurors the authority is not on trial, a court heard.
Accusations levelled at the Financial Conduct Authority suggested they engaged in a “face-saving exercise” as they failed to adopt a “robust clear position” on the-then boom of peer-to-peer lending, jurors were told.
But they were also reminded the case hinges on whether the two defendants were deceiving investors or whether they had made an honest mistake – and not to take into account the FCA’s actions.
Collateral (UK) Limited was a finance company which facilitated investments crowdfunded by members of the public. The firm and two related companies entered administration in April 2018.
The two defendants, Andrew Currie, 57, and Peter Currie, 59, both deny two charges under the Fraud Act 2006 and one charge under the Proceeds of Crime Act 2002 in this criminal prosecution brought by the Financial Conduct Authority.
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Contemporaneous reporting by Joe Morgan who tweets @nottherealjoe
CLOSING ARGUMENT DEFENDING PETER CURRIE CONTINUES
Colin Aylott KC, defending Peter Currie, continued his closing speech by levelling criticisms at how the FCA handled Collateral’s applications.
In previous hearings, jurors were told the defendant had attempted to consult with the authority before the name change was made but due to changes in case handlers Peter Currie became ‘frustrated’.
He said: “The prosecution’s stance is crystal with Collateral with it suggested that during the application period the application permissions changed frequently and it is also said that the company undertook activities that were beyond the limited pawnbroking interim permissions that had been granted originally to Regal.
“We ask you whether in fact there is an element of retrospective face-saving in play. In particular when we look at what was going on in the correspondence, we suggest whether that reveals fault lay principally with the FCA rather than Collateral?…
“There is an element to adopt a robust clear position which we say had been absent from the FCA’s approach for weeks, if not years.“
Mr Aylott continued: “What did you make of those legal skirmishes that were taking place from June/July 2016 to January 2018? If he were alive now, it might be that Charles Dickens might have found this merry-go-round reminiscent of the fictional case of Jarndyce vs Jarndyce around which his novel Bleak House revolved.
“Do the words he wrote in 1853 resonate with what you have heard over the last few weeks in this court room? He wrote this: ‘Jarndyce and Jarndyce drones on. This scarecrow of a case has, in course of time, become so complicated that no man alive knows what it means. The parties to it understand it least, but it has been observed that no two lawyers can talk about it for five minutes without coming to a total disagreement as to all the premises.’
“Well we say perhaps a review of the correspondence might make you think of it that way and possibly watching us all working in this courtroom over the past few weeks it might be a sentiment you might agree with.
“But in all seriousness, we suggest if any criticism should be levelled here it should be in the direction of the FCA.
“In particular we submit the evidence demonstrates the FCA did not understand its own regime. They did not have the people to police it. They did not have the people to deal with the applications. The peer-to-peer explosion that took place in this era, we suggest, exposed the singular lack of knowledge and personnel capable of dealing with applications like Collateral’s.
“We ask these questions of you: if it was so clear and obvious that Collateral didn’t have the required permissions, why weren’t they stopped? What did you make of the intertia that we suggest had taken hold of the FCA?“
Mr Aylott said the FCA never responded to a legal opinion in 2016 written by Collateral’s legal advisor Richard Tall in what he suggests was a “face-saving exercise“.
“We do say, why not? Why did it take this long? The FCA realising trying to get their ducks in a row, trying to get their opinion down, trying to make it appear there was real certainty about their position in law was. If that was so clear in 2016, 2017, what were they doing? This is what their jobs are, they are the overseers of this market.“
Mr Aylott added: “For Peter Currie, Collateral’s application was locked in a state of purgatory.“
He continued: “It was suggested in the Crown’s speech that Collateral is gaming the system, changing the application somehow moving the goalposts. If one is being fair, trying to give the FCA the benefit of the doubt, it’s not this to-ing and fro-ing, both sides are trying to figure this out what the actual position was.
“In the same way as I have been scrutinising the FCA’s conduct at this time, I want you to look at what Peter Currie and Collateral were doing because their conduct is beyond criticism.“
The defending barrister said engaging with DWF, a costly legal solicitor, was because Peter Currie wanted to “get the best advice that he could“.
“A man who has been dishonest goes to Joe Bloggs solicitors on the high street, someone who would have been out of their depth and had no idea how to deal with the FCA…but still has provided that vaneer of respectability of having a lawyer on board… The reality is here he sought the best advice he could get.
“We say the conduct that is important here is the honesty in instructing the best legal advice he could. When he got the advice, he relied upon it… It’s never rejected… he never lost the spirit of cooperation.“
Mr Aylott then asked jurors to consider the moment of the FCA letter being sent in January 2018 and Peter Currie’s state of mind.
“There’s one conclusion you should reach and that is Peter Currie was dedicated to this business. He was…driven and desperate to make a success of the business. You can draw his own conclusions about his commitment and his wish to create a family business. When he became emotional in his evidence, he thought… all the work and investment might have been for nothing. We ask you to accept his evidence that when Collateral started to unravel it led to a rapid deterioration in his mental health.
“We also say at the same time he’s having to deal with a regulatory body that is on his case. Fairly, we say. It’s not to say the FCAs actions was not the exactly right thing to do. It was pretty uncompromising…the message that was going to be communicated by the FCA had to be as clear as day.
“It had a profound impact on Peter Currie. He was told it may become a criminal investigation. We accept at this time in 2018 mistakes were made. It’s clear errors of judgement occurred and with the benefit of hindsight he made calls that are accepted by him to make the wrong calls to make.”
Mr Aylott continued: “At the time when he was faced with demands being made from him from the FCA, demands from his own lawyers, demands from his staff, demands from his compliance, demands from his family, and demands from his brother. You may think it’s important to take into account his mental state and judgement. We’re not saying he lost it, far from it, but he lacked the clarity of thought and mistakes were made. Mistakes do not account to criminality.“
He said when it came up in cross-examination that Peter Currie failed to communicate with the clients of Collateral, “he should have done“.
“The question was…how they should be told when they should be told and what they should be told. There’s no suggestion I hope that he was trying to stop the customers from finding out what was happening. When the questions was put to him [by the FCA], he must have thought…damned if I do, damned if I don’t.“
Mr Aylott then went onto the appointment of Gordon Craig as their choice of administrator months before the FCA sought a High Court ruling to appoint their own.
Summarising the Crown’s case, he said: “Collateral should not have contacted Refresh in the first place, the fees that were paid should not have been paid, the staff wages of £40,000 should not have been paid, having instructed Refresh Peter Currie of Collateral should have informed the FCA, and finally the report from Refresh is said to be inaccurate suggesting that Peter Currie sought to mislead even Refresh Recovery. We suggest in a fair analysis that there is nothing to these criticisms.“
He said this “conveniently ignores the wind down policy submitted to the FCA in 2016” which he said was followed by Collateral and set out fees payable if they went into administration months before it happened.
“The idea that it was paid…on a whim is wrong.“
Mr Aylott added: “It is Peter Currie’s case that he did not know [Andrew Currie] received £40,000 back from Refresh Recovery hence my putting to Andrew in cross-examination why he hadn’t returned that money to Collateral, to which he replied, ‘well I took the money because I was still owed money from broker fees’.“
The defence barrister said that Peter Currie had relied on his brother, who knew Mr Craig as a qualified insolvency practitioner, to carry out those plans and so “it is unfair to criticise Mr Currie for the content for this report“.
He then went onto count two, the Auri Development charge, which he said the evidence relating to both defendants is “quite different“.
“Peter Currie took the view it would be a valuable asset for Collateral. The decision we say to pursue the Auri deal at this time needs to be viewed in the context of the deal with [platform creator] Tony Lambrou, the need to get assets onto the books…
“When Peter Currie gave evidence on this he told you that his knowledge was pretty much limited to the information contained in the valuation and sale agreement and accepting he knew of the connection between Auri and Sarah Gayton. As to what then actually happened…we say in relation to the property side of things, that falls at Andrew’s door… he stated Andrew Currie never told him… that was the price that had been paid.
“Remember here this is a man who only paid himself a small wage over a short period this company was up and running…around £70,000 in total… there was a clear difference of opinion here between the two brothers about what happened here and what should happen. Peter Currie we say did not share the views of Andrew Currie expressed about this, saying ‘it’s business’. Given Collateral had failed to pay the second tranche…there was no obligation on Sarah Gayton or account for the balance. We’re dealing with Peter Currie’s mental health on these days.
“In relation to Auri we must accept that he made fundamental mistakes. One of those mistakes we say plainly to pursue and close the Auri deal in February however good this deal was, however wonderful the profit margin would have been, we have to accept given what was going on it was not the right thing to do. It should not have been pursued at all.
“The reality is even if it was a good asset to have on their books, what was going on in with insolvency issues looming, that decision to press on we accept was ill-judged. Even if perhaps he had been justified in pushing on…we accept on behalf of Peter Currie he was duty-bound as a director to ensure the position of Collateral was protected when this deal went through. At the very least he should have instructed Ratio Law to ensure Collateral’s interests were safe-guarded.”
Mr Aylott reiterated that jurors should only consider count three, the converting of credits charge, if they find the defendant guilty of count one, the fraud by misrepresentation.
“As for the timing of this, can it only be a part of desperate but contrived attempt by the Currie brothers to get money out of the business that they knew was about to have the shutters metaphorically brought down by the FCA or is there equally explicable legitimate reasons?“
He said that Andrew Currie was a “substantial creditor” that was still left to be paid.
“Imagine the atmosphere between the two brothers in the days after that [FCA] letter,” he said. “Andrew was sympathetic…but the pressure he put on Peter Currie to be paid was relentless and robust. He rejected that [in the witness box], of course.”
JUDGE SUMMING UP
Judge Martin Griffith took the jury through the indictment on each counts, the routes to verdict, the important dates, and summarised the Curries’ evidence in the witness box.
“We start with Collateral and Regal Pawnbrokers. Two companies. Every time you set up a company it’s a legal entity, it’s its own existence and these two companies had their own existence. If they are going to be trying to get interim permission, they are regulated by this new creation the Financial Conduct Authority, as Mr Aylott put it on April Fools Day, 1 April 2014. Those with a bit of a historical bent might like to remember it as the 96th anniversary of the birth of the Royal Air Force as it happens.“
He added: “The FCA has featured an awful lot in this trial, it should not come as a surprise to you that I say this: they are not on trial. You are not being asked to consider whether the FCA did the right thing or the wrong thing… you are here to determine if [the brothers] misled Joe Public.“
“We are not here to judge the FCA. We are here to judge these two defendants at the time the representation ‘we are authorised and regulated by the Financial Conduct Authority’, was made. That’s the thing you’re looking for.“
He asked jurors to elect a foreman and, for the time being, to deliberate with the aim of delivering a unanimous verdict.
Both Curries deny two charges under the Fraud Act 2006 and one charge under the Proceeds of Crime Act 2002.
The first count of fraud alleges they dishonestly made a false representation to investors and potential investors that the company Collateral UK Limited was authorised and regulated by the Financial Conduct Authority.
The second count of fraud claims the Curries abused their positions, in which they were expected to safeguard, and not act against, the financial interests of the company by transferring £275,000 from Collateral to Auri Developments Ltd.
The third charge relates to converting criminal property, suggesting the Curries converted credits to the total value of £372,299.52 to bank accounts owned by Andrew Currie, knowing or suspecting it to be proceeds of crime, namely fraud by misrepresentation.
Deliberations continue tomorrow.
Both Curries deny two charges under the Fraud Act 2006 and one charge under the Proceeds of Crime Act 2002
The first count of fraud alleges they dishonestly made a false representation to investors and potential investors that the company Collateral UK Limited was authorised and regulated by the Financial Conduct Authority.
The second count of fraud claims the Curries abused their positions, in which they were expected to safeguard, and not act against, the financial interests of the company by transferring £275,000 from Collateral to Auri Developments Ltd.
The third charge relates to converting criminal property, suggesting the Curries converted credits to the total value of £372,299.52 to bank accounts owned by Andrew Currie, knowing or suspecting it to be proceeds of crime, namely fraud by misrepresentation.
Case details:
Courtroom 12 Southwark Crown Court
Before His Honour Judge Griffith
17th May 2023
Case number: T20220056
CURRIE Andrew
CURRIE Peter
The Financial Conduct Authority are represented by barrister Stuart Biggs, assisted by Thomas Coke-Smyth.
Peter Currie is represented by barrister Colin Aylott KC, assisted by Ashley Hendron.
Andrew Currie is represented by barrister Henry Grunwald OBE KC, assisted by Oliver Renton.
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