The Financial Conduct Authority v London Property Investments (UK) Limited (t/a LPI Emergency Property Finance) & Ors

This is a judgment on a trial that took place before me, following an earlier judgment of Mr Recorder Richard Smith (as he then was) sitting as a Judge of the Chancery Division that was handed down on 11 November 2022 ([2022] EWHC 2862 (Ch)) (“the First Judgment”).

The First Judgment was given on the FCA’s claim against two limited companies, the First and Second Defendants (hereafter “LPI” and “NPI”), and those who controlled them, the Third and Fourth Defendants (hereafter “T Stevens” and “D Stevens”), in relation to contraventions by LPI and NPI of the general prohibition in the Financial Services and Markets Act 2000 (“the Act”). The contraventions were carrying on regulated activities without being either authorised to do so or exempt, and T Stevens and D Stevens were found to have been knowingly concerned in those contraventions by LPI and NPI. The two individual Defendants are father and son respectively.

The proceedings were brought by the FCA under statutory powers in respect of the cases of 45 sets of consumers (“the Original Individuals”), who had all suffered losses as a result of dealings with the Defendants.

The Recorder granted: declaratory relief regarding the extent of the contraventions in those 45 cases and as to the unenforceability of various agreements entered into by the Original Individuals with LPI and NPI; injunctive relief; and a remedial order made against LPI under s.380(2) of the Act in relation to restrictions in favour of LPI that had been and remained registered at HM Land Registry against some of the Original Individuals’ residential property titles. The question of what further relief by way of restitution order (essentially, compensation) or remedial order (essentially undoing or mitigating the effect of a transaction) should be made in each of those cases was adjourned to be dealt with at the trial before me.

In addition, at this trial, the cases of a further 26 sets of consumers (“the Additional Individuals”) were presented, so that the court can adjudicate – in the same way as was done in the First Judgment – on the extent of any contraventions and knowing involvement in their cases, and then consider – alongside the cases of the Original Individuals – what relief by way of declarations, remedial orders or restitution orders is appropriate.

The Original Individuals fell into two different groups, but what they had in common was that they were all in financial difficulties and at risk of having their homes repossessed by their home mortgagees or other lenders. In those very difficult circumstances, they found or were introduced to T Stevens and LPI, trading under the revealing name of “LPI Emergency Property Finance”. T Stevens assured each of the Original Individuals that he could and would rapidly arrange a re-financing that would enable them to keep their homes.

The first group of the Original Individuals underwent a straightforward re-mortgage, facilitated by LPI. The Original Individuals’ existing mortgagee, other secured lenders and in some cases other significant creditors were paid off out of monies advanced by a new unregulated lender that T Stevens sourced, and the new lender took a first legal charge over the property. These are referred to as “RMC” cases (regulated mortgage contract), and the individuals in that group as “RMC Individuals”.

The new lending was invariably on onerous terms, and LPI helped itself to very substantial fees for its trouble, usually by deduction from the advance. The fees were payable pursuant to the terms of one or more “irrevocable fee agreement declaration” that the Original Individuals were persuaded to sign without realising its terms. In some of these cases, the re-financing did not proceed, but LPI had at the outset procured a consent to entry on the registered title of a restriction in its favour (in many cases without the RMC Individual realising its significance or even what they were signing), and a restriction was very promptly registered against the property of the RMC Individual and then used as a means to obtain payment of the fees.

The second group of Original Individuals ended up selling their homes to NPI and taking an assured tenancy back from NPI (“SRA” cases (sale and rent back agreement) and “SRA Individuals”). NPI paid off the existing secured lender and fees to LPI. This exercise was usually financed by new secured lending from a bona fide third party lender, trading as “Together” or “LendInvest”. Any remaining equity in the property was thereby absorbed by NPI. In addition, NPI collected market rents from the SRA Individuals from the date of the transaction.

In this second trial, all the Additional Individuals are actual RMC, or intended RMC, cases and none is an SRA case.

In this trial, as at the first trial, all the Defendants were debarred from defending the claim, and they were not represented at any stage of it. In those circumstances, as he did at the first trial, Mr Fell KC on behalf of the FCA took considerable care to ensure that there was placed before the court any argument that the Defendants would have been able properly to raise about liability, remedies and quantum had they been present or represented, and to draw to my attention any arguable flaw in the FCA’s evidential case. I am particularly grateful to him for the thorough way in which he did so. I considered all of the points that he raised in reaching my decision on each individual case.

23 of the 26 Additional Individuals are cases of intended RMCs, i.e. intended transactions that did not complete, for a variety of reasons. In some cases, the Additional Individuals managed to extricate themselves from dealings with LPI without suffering any or any significant loss. Others were much less fortunate. Only 3 of the Additional Individuals completed their RMC transactions.

I shall have to make findings in relation to the 26 Additional Individuals as to whether and to what extent the Defendants contravened the general prohibition or were knowingly concerned in such contraventions. I then have to address the appropriate declaratory and remedial relief to grant in their cases, and the appropriate further relief in respect of each of the Original Individuals too. The FCA accepts that the remedy in all RMC cases will be a restitution order and seeks such an order in the case of each RMC Individual against LPI and against T Stevens and D Stevens personally. The FCA argues that the appropriate remedy in the case of all SRA Individuals is a remedial order made against NPI and against T Stevens and D Stevens, but not against LPI.

The exercise of deciding what relief is appropriate will involve considering both the amount of any losses suffered by each individual and – to the extent identifiable without complete disclosure from and participation by the Defendants – the amount of any additional profit that was obtained by LPI or NPI in each case. In the cases where RMC transactions took place, the assessment of loss principally involves comparing the debt that the RMC Individual had at the time of the re-mortgage with the debt at the later time when possession was given up, or the property was sold, and an adjustment for additional costs incurred or expenses saved as a result. Where no transaction took place, the focus is on payments that were made by the individual to LPI by way of fees or other expenses.

The SRA Individuals’ cases are more complex because of the question whether a remedial order, seeking to some extent to undo or ameliorate the impact of the transaction, or a restitution order for compensation, is more appropriate.

It will be convenient to address matters in this judgment in the following sections:

The “general prohibition” in s.19(1) of the Act is that:

Under s.31 of the Act, an “authorised person" means someone who has permission from the FCA to carry on “regulated activities”. Various persons qualify as exempt in various circumstances, which includes appointed representatives of authorised persons (s.39 of the Act).

A “regulated activity” is defined by s.22 of the Act:

By s.22(5) of the Act, “specified” means specified in an order made by HM Treasury. The relevant order that specifies the regulated activities is the Financial Services and Markets Act 2000 (Regulated Activities) Order (SI 2001 No.544) (“the RA Order”).

Apart from the power of the FCA to seek remedial and restitution orders against a contravenor, the consequences of non-compliance with the general prohibition, as between the contravenor and the consumer, are specified in s.26 of the Act. It provides (so far as material):

By s.28(3) of the Act, the court is given power to allow the agreement to be enforced, or money or property paid or transferred under it to be retained, if satisfied that it is just and equitable to do so, having regard to whether the contravenor reasonably believed that he was not contravening the general prohibition by making the agreement (s.26(5)). Subsection (7) provides:

Thus, where there has been a contravention of the general prohibition, the consumer can elect not to perform and recover money or property transferred under the agreement, but if they do so they must repay any money or property received under the agreement. These provisions are of some importance when it comes to deciding what remedial or restitution order is appropriate in the cases of the SRA Individuals, and I will return to them later in this judgment.

By art. 88 of the RA Order, a “regulated mortgage contract” is a “specified investment”. What amounts to an RMC is specified in art. 61. It requires the credit (which includes a cash loan) to be provided to an individual or to trustees, and for the obligation to repay to be secured by a mortgage on land. At least 40% of the land must be used, or intended to be used, as or in connection with a dwelling, by anyone in the case of an individual, or by an individual who is a beneficiary of the trust or a related person (in the case of trustees) (art 61(3)(a)).

There are various “carve outs” to these RMC provisions specified in art. 61A(1) of the RA Order, which include “limited payment second charge bridging loans”, “second charge business loans”, “investment property loans” and “exempt consumer buy-to-let mortgage contracts”. These loans are not RMCs and so are not specified investments.

These categories of exclusion were addressed by the Recorder and the definition of each of these types of lending is set out in para 35 of the First Judgment. It is unnecessary to repeat them here. The Recorder considered whether any loan fell within such an exclusion but found that none did. Only one of the loans in the 37 RMC cases that he had to address was not an RMC, but that was because it did not satisfy the 40% dwelling use threshold, not because it fell within any of the art. 61A(1) exclusions. All 37 RMC Original Individuals were entering into the agreements with LPI to attempt to save their own homes.

I will address in due course whether any of the loans made or agreed to be made to the Additional Individuals is not an RMC for any reason, including that it is a loan of one of these types of unregulated lending. In relation to these, the following conclusions are the important considerations:

Where the new lending is or would be an RMC, the following are specified activities pursuant to art. 25A of the RA Order:

All of these activities are subject to a rather narrower “acting by way of business” test than generally applies, by virtues of art. 3A of the CRAWB Order: a person must be “carrying on the business of” carrying on these activities, which implies a regularity of business in so doing. The Recorder held this requirement to be satisfied in each case in the First Judgment. As the same business model is in operation in the cases of the arrangements made with the Additional Individuals, it is beyond real doubt that, to the extent that there are specified activities that were carried on by LPI in their cases, this narrower business test will be satisfied in their cases too.

The activities in art. 25A(1) and art. 25A(2) are not intended to be mutually exclusive, and the meaning of “arrangements” has been held to be deliberately wide: see paras 41, 42 of the First Judgment. Both specified activities can exist even though no RMC is in fact entered into. In most of the RMC cases that I have to consider in this judgment, as with some addressed in the First Judgment, no RMC was in fact made. But that does not exonerate the Defendants if there were nevertheless arrangements made for that to be brought about (or with a view to it) or an agreement to do so.

The specified activity in art. 25A(1) is subject to an additional causation requirement, in that art. 26 excludes from that category “arrangements which do not or would not bring about the transaction to which they relate”. This has been described in the authorities as requiring the relevant arrangements to have “causal potency”, whether there was actual causation (because an RMC was entered into) or only notional causation (where no RMC is in fact made). The arrangements must have had (or be such that they would have had) a significant role, but not necessarily amount to a direct cause of the RMC being made.

The specified activity in art. 25A(2) (“making arrangements with a view to ....”) is not subject to this causative exclusion: see [43]-[45] of the First Judgment. It is concerned with the purpose of the arrangements, whether or not the arranger has the ability to bring it about or influence the decision for an RMC to be made.

There are a number of further exclusions that operate in relation to both these specified activities: these are in arts. 27, 29, 33, 33A and 67 of the RAO Order. These are narrow exceptions, such as providing only the means by which one party to the RMC communicates with another, and arranging for the borrower to be advised by an authorised person where any commission or other advantage is disclosed to the borrower. The exact requirements of each exclusion are set out in [47] and [48] of the First Judgment. I shall consider in relation to each Additional Individual whether any of the exclusions applies, though the business model that LPI was operating was generally inconsistent with any of them applying, because LPI was intent on charging large fees for its referral services.

The specified activity in art. 53A(1) is advice given to a person as borrower or potential borrower, which is advice on the merits of entering into a particular RMC. FCA Guidance states that advice includes making a recommendation. The article therefore requires consideration of whether a recommendation of a particular RMC has been expressly or impliedly made, which itself is concerned with whether, on an objective analysis, some comment, value judgment, or element of evaluation or persuasion has been provided (see Rubenstein v HSBC Bank plc [2011] EWHC 2304 (QB) at [80]-[86]). The assessment is to be made having regard to the regulatory regime and the course of dealing between the consumer and the defendant. In the First Judgment, the Recorder summarised the principles that emerge from the authorities at [129].

As none of the Additional Individuals entered into an SRA or made arrangements with the Defendants for doing so, it is unnecessary to consider here the regulations relating to SRAs. (They are set out at [55]-[60] of the First Judgment.)

In the First Judgment, the Recorder found that T Stevens and D Stevens were liable as accessories to LPI’s and NPI’s contraventions of the general prohibition, on the basis that they were knowingly concerned in those contraventions. I shall have to consider whether that is also the case in relation to the Additional Individuals where a contravention is proved. It requires that these Defendants knew of the facts that amounted to the contravention and were involved in it (whether fronting the business or in the back office). Whether such a person knows that the facts amount to a relevant contravention is irrelevant.

The Recorder set out his general findings as well as individual-specific findings. In his general findings (at [92]-[97]), he found that each of the Original Individuals were in distressed circumstances and that they were all (including a few who anticipated ultimately selling their properties) keen to avoid repossession of their homes. Initial introduction to LPI was achieved through its website, followed by a telephone conversation with T Stevens, and then within a few days a short, often hurried, meeting with him.

LPI provided the Original Individuals with paperwork to sign, without any proper explanation of it or time for the individuals to read the detail, and often documents were signed “in blank”. If the individual raised questions, they were not given a proper answer but were told that what was necessary was being done and that they had little time. In most cases, the Original Individuals did not appreciate that they had signed forms agreeing to pay large fees to LPI, or what those fees would be, or that they had agreed to a restriction being placed on the title to their property in favour of LPI.

LPI then set about sourcing a loan, enlisting brokers to help and taking steps in conjunction with the intending borrowers and others to facilitate the transaction. In most cases, the lenders intended the loans to be unregulated lending for business purposes. LPI consistently required the individuals to provide evidence of an address for them that was different from the property over which security was to be granted, to tell the valuer who attended that they did not live at the property, and even in some cases to sign “sham” tenancy agreements to give a false impression about who lived in the property. In many cases, LPI did not tell the borrowers whom they were approaching to lend or what the terms or even the amount of the loan would be. The loans were high cost and LPI’s fees substantial, so that the amount of the borrowing increased and the borrowers were in a significantly worse position at the end of the (often short) term of the new loan.

The Recorder rejected LPI’s pleaded case that it only facilitated the making of secured loans “on occasions”, that it explained the paperwork that it required the individuals to sign or told them that they would have to use a regulated broker or instead vacate their homes to use LPI’s services. LPI made “systematic efforts” to secure the grant of loans that it knew to be regulated lending, on terms that it knew that the borrowers did not satisfy, and hid the truth from the brokers and lenders.

In a number of cases, illicit methods were used to facilitate the loans, including the forging of bank statements, the witnessing of signatures and certification of documents by solicitors that the borrowers had not met, false documents suggesting to the court that properties had been sold when they had not, and sham tenancy agreements.

LPI’s lending-related activities were a central, regular and lucrative part of its business. It was a substantial and sophisticated business operation. LPI’s own website and standard documentation (including irrevocable fee agreement declarations, restriction entry consents and standard forms of authority) confirm this. It was a central part of its business model, and LPI carried on the business of arranging and agreeing to arrange, and advising on, RMCs within the meaning of art. 3A of the CRAWB Order. LPI therefore breached the general prohibition in all the ways summarised by the Recorder in table B and table C following [140] of the First Judgment.

In reaching his findings in individual cases, the Recorder considered carefully, in relation to each of the Original Individuals’ RMC cases, whether any of the exclusions was satisfied on the facts of their cases. The Defendants admitted (by their pleaded case) that LPI carried on a business of providing services to financially distressed individuals, whose homes were at risk of repossession or were being repossessed, and that it facilitated those individuals entering into loan agreements with third party lenders, secured by mortgages on their properties. However, the pleaded case denied that the transactions were regulated transactions or arose from regulated activity, and stated that LPI merely passed on the details of the individuals to other intermediaries, without advising them, and that those intermediaries then selected and contacted a regulated broker or lenders themselves.

The Defendants also pleaded that, where not completed through intermediaries and brokers in this way, the properties had been vacated, there was no intention to use them as the borrower’s residence but rather as investment properties, and that some charges were second legal charges.

In every case, the Recorder found that, despite some documents appearing to lend support to the case that the lending was business lending or the borrower was non-residential, none of the exceptions applied and so in each case other than one (where the criteria for an RMC were not proved) there was an RMC. In each individual case other than one, where there was only a finding of agreeing to arrange an RMC contrary to art. 64 of the RAO Order, the Recorder found that there was either a contravention because LPI had made arrangements for a person to enter into an RMC as borrower (35 out of 38 cases) or LPI had made arrangements with a view to the borrower entering into an RMC (37 out of 38 cases), and therefore in most cases both were found established.

There was also a finding that, in relation to every RMC case, there was an agreement to arrange RMCs, and in all but seven cases advice on a particular RMC.

As for the knowingly concerned issue, the Recorder had no hesitation in finding that T Stevens, who was “Head of New Business” for LPI, was “front and centre of” all its activities and knowingly concerned in each of the contraventions, even though the only director and shareholder of the company was D Stevens. As for D Stevens, the Recorder found that he had significant knowledge of and involvement in the individual transactions, e.g. by assisting in progressing the relevant loan applications, communicating with the Original Individuals about their applications and applying to enter and remove restrictions at HM Land Registry. If less extensive and more “back office” than his father’s involvement, D Stevens’ involvement was still extensive and critical, and he too was knowingly concerned in all the contraventions.

What the Recorder had therefore found was that LPI was carrying on the business of arranging for customers to enter into RMCs in circumstances where the intended or actual lending was clearly regulated lending, with no carve out or exception applying, and that any appearance to the contrary created by some of the documents was merely a pretence. In the course of carrying on that business, LPI agreed to make arrangements for RMCs to be entered into, acted with a view to RMCs being entered into, and arranged for RMCs to be entered into. In many cases, it also impliedly advised the RMC Individuals on the product that was presented to them.

Similar findings about T Stevens and D Stevens being knowingly concerned in relation to each of the SRA Individual cases were made.

At this trial, the cases of the 26 Additional Individuals require findings about the nature and extent of any contraventions by LPI; whether those activities were carried on by LPI by way of a business in those activities, for the purposes of art. 3A of the CRAWB Order; and whether either T Stevens or D Stevens, or both, were knowingly concerned in any contraventions found.

The evidence that was before me was principally in the form of a second reporting witness statement of John Bulmer dated 5 February 2024, which:

Mr Bulmer made two further witness statements for trial: his tenth statement dated 8 February 2024, which updated certain aspects of his evidence in the second reporting statement, and his eleventh statement dated 13 March 2024, which addressed certain issues that arose in the course of the opening of the FCA’s case. I gave permission for both additional statements to be relied on.

There were also signed witness statements of seven of the Additional Individuals: Mr Allan Toney dated 4 August 2023, Mr Pasquale Marioni dated 14 July 2023, Mr Paul Crann dated 21 July 2023, Ms Ashanti Bentil-Dhue dated 27 July 2023, Ms Lisa Hopkins dated 21 July 2023, Ms Jennifer Bower dated 23 August 2023, and Mr Phillip Greeney dated 20 July 2023.

Mr Toney, Mr Marioni, Mr Crann, Ms Bower and Mr Greeney came to court to confirm their witness statements, which allowed Mr Fell the chance to ask a few supplementary questions following the discussion in his opening of the FCA’s case and me the chance to ask some questions of my own, to elicit some further facts and test (in some respects) the evidence contained in the statements. Mr Toney, Mr Marioni and Mr Crann were the three cases among the Additional Individuals where an RMC transaction did take place.

I am satisfied in each case that these 5 witnesses were truthful, both in their written statements and in their oral evidence. They were all in very difficult financial circumstances, at risk of losing their homes, and were taken advantage of by T Stevens and D Stevens when they were vulnerable.

In the event, Ms Bentil-Dhue and Ms Hopkins were unable to attend court to give evidence and I gave permission to the FCA to serve a late hearsay notice and rely on their evidence. I treat their evidence in the same way that I treat the facts provided to the FCA by other individuals and recorded by the FCA in detailed attendance notes or questionnaires, namely as likely to be true in so far as they are supported by the underlying documents that are available, and also on the basis that they are broadly consistent with the evidence given by many of the Original Individuals at the first trial and the evidence given by the 5 witnesses that I heard.

Importantly, I accept as likely to be true the assertions (in many cases supported by other documents) that despite there being a form of documentary record of the actual or intended lending being for business purposes, or of the individual residing at a different address or having a tenant of the property, the truth was that each individual (except Mr Palitsyne) was living in their property as their residence and wished to continue to do so, at least for a time, after a re-mortgage and restructuring of their debts. I accept, where the witness said so or a hearsay statement or the FCA’s attendance notes state, that documents were signed either wholly or partly “in blank”, because T Stevens presented them in that form, or that they were completed by the borrower without having a proper opportunity to read what was stated in the documents. This seems to me to be consistent with the evidence in the first trial and therefore very likely to be true.

In short, the evidence relating to the 26 Additional Individuals establishes further examples of the same modus operandi (and business) of LPI, carried on at the same time, fronted by T Stevens and based on deception and dishonesty, with D Stevens playing a secondary but nonetheless significant role in the background. T Stevens was described by many of the individuals as knowledgeable and plausible, despite the suspicious things that he was asking them to do in suspicious circumstances. The truth is that these individuals were in desperate circumstances and had little option other than to trust that LPI would help them. Other individuals had suspicions and, fortunately for them, pulled out of the proposed transaction, or in a few cases could not be helped by LPI. But they still mostly suffered losses as a result of the registrations of restrictions in favour of LPI against their titles.

So far as the evidence of losses is concerned, this was principally the result of analysis done by the FCA, confirmed and explained by Mr Bulmer in his second reporting statement, and updated in some cases in his tenth and eleventh witness statements. In turn, this was based on documentary records that the individuals were able to provide and documents that the FCA obtained by requiring lenders to produce them, pursuant to its statutory powers. In some cases, there are gaps. In almost every case, there is a sufficient picture of the various losses that were suffered; in the few cases where there is an incomplete picture, it is possible to find, on a balance of probabilities, what the loss was.

I have come to broadly the same conclusions in relation to these 26 RMC Individuals as the Recorder did in relation to the 37 in the First Trial. The 26 cases fit a very similar pattern to the facts of the Original RMC Individuals.

The allegations against the Defendants in these cases are that LPI agreed with each Additional Individual to arrange an RMC, usually in the form of a written agreement signed (knowingly or unknowingly) by the Additional Individual, but also orally, and that T Stevens on behalf of LPI took steps to arrange or try to arrange an RMC, using his “network” of brokers and lenders, which in most cases resulted in a specific RMC (or sometimes more than one) being offered to the Additional Individual by the broker (and in one case at least, T Stevens appeared to procure an offer directly from a lender). It is also alleged that LPI advised the Additional Individuals in relation to an RMC, implicitly, by acting in this way. T Stevens was the front man, interacting with the consumers as the “Head of New Business”, and D Stevens operated in the office, writing correspondence as required to work towards the aim of an RMC transaction, and, materially to the loss suffered by many, applying to the Land Registry for the agreed restrictions to be registered against the property titles (and in some cases removed).

Given the considerable similarity of the facts in these 26 cases, I can state my conclusions in summary form, as follows:

T Stevens and D Stevens were knowingly concerned in all the contraventions that I have found relating to the Additional Individuals, just as they were knowingly concerned with all the contraventions found in the First Judgment.

As to the knowing involvement in these 26 cases, T Stevens was the front man in each case. D Stevens was also closely involved in running the business of LPI at the time, and to some extent in each of the cases of the Additional Individuals. It is material that D Stevens is the only director of LPI and he therefore dealt with the more formal aspects of running LPI’s business.

As to the role of D Stevens in the 26 Additional Individuals’ cases, the FCA was able to produce a table (at p.20 of its Closing Note) showing the nature of his personal involvement in each of their cases, to some extent. Although there is only evidence of his personally speaking to Ms Munden, Mr Jacob and Ms Bower, there is either an email or a letter from or to D Stevens, or alternatively a reference to D Stevens in transactional documents, in every Additional Individual’s case, and in 11 cases there is both correspondence and a reference. D Stevens is usually named as a point of contact for LPI in the legal authority forms that were signed, and where the applications to register a restriction are available, these were signed by him. The limited evidence that the FCA has been able to present does not mean that D Stevens was not involved to a greater extent in each case. In some cases, very little by way of documentation has been provided to or obtained by the FCA, and the Defendants did not provide complete disclosure. In some cases the dealings between the Additional Individual and LPI were short-lived. I find nevertheless that D Stevens was probably knowingly involved to a significant extent in the dealings with each of the Additional Individuals and therefore knowingly concerned in the contraventions that took place.

As regards the knowledge of T Stevens and D Stevens, it is material that the FCA warned LPI in the autumn of 2017 about the nature of the services that it was advertising, and Edward Marshall Solicitors responded on LPI’s behalf explaining that the way that it operated involved the use of regulated brokers. T Stevens and D Stevens were both aware of the FCA’s concern that LPI would be carrying on specified activities when neither authorised nor exempt. They both knew what LPI was doing and that it was neither authorised nor exempt. That is not disputed in the Defendants’ pleaded case. All that is alleged is that they were unaware of the legal status of what they were doing and were advised by solicitors that it was lawful. Ignorance of the law is no defence, and in any event, I find that both T Stevens and D Stevens knew that LPI was contravening the Act. The attempt to dress up the lending as business lending was primarily to deceive the lenders into making unsuitable lending products available, but it also served to give the appearance of regulatory legitimacy.

A summary of the relevant findings in the case of each Additional Individual is set out in the Additional Individuals Schedule.

In relation to those cases, the FCA seeks declaratory relief equivalent to that which was granted by the Recorder following the First Judgment, to the effect that LPI contravened the general prohibition in relation to the Additional Individuals in the ways identified in [62] above and in the Additional Individuals Schedule. In discharging his duty to the court, Mr Fell set out in submissions reasons why the court might decide not to make declarations about the extent of the transgressions of LPI, but I was not persuaded by any of them. These were each serious cases of contravention of the general prohibition in various ways, and the conduct deserves to be marked by a declaration of that kind. It would also be odd for declarations to be made in the case of 37 RMC Individuals whose cases were considered in the First Trial but not in the cases of 26 RMC Individuals whose cases were considered in this trial.

I will also, in consequence of my findings, declare that the irrevocable fee agreement declarations, the restriction entry consent agreements and any agreement for payment of fees associated with the properties of the Additional Individuals identified in the Additional Individuals Schedule are unenforceable against those individuals, by reason of s.26 of the Act.

There are, according to Mr Bulmer’s 11^th witness statement, only 4 properties where LPI’s restrictions remain registered against the title to the properties: the cases of the Burts (106 Lower Hanham Road), Mr Levy and Ms Dennis (3 Mathews Avenue), Mr Connolly (35 Hanover Gardens) and Mr Palitsyne (Flat 85, Globe View). In relation to each of them, I will make a remedial order that LPI and D Stevens (its sole director) must apply for each restriction to be removed and do whatever is required by the Land Registry to achieve removal. This mirrors the relief granted in the First Judgment and is obviously appropriate, to avoid any further loss being caused to the relevant individuals.

Section 380 of the Act provides, so far as material:

Section 382 of the Act provides, so far as material:

For losses to “result from” a contravention, the infringing conduct must have been “an efficient cause but it need not have been the sole or dominant cause”: The Financial Conduct Authority v Avacade Ltd [2021] EWCA Civ 1206, per Popplewell LJ at [76]. The amount of any restitution order made is not necessarily the amount of the relevant loss or value of the adverse effect resulting from the contravention, nor the amount of any profit accruing, if that is identifiable – but the amount of the restitution order, which is required to be “just”, must have regard to these matters, if known.

However, the default position ought to be that the sum specified in a restitution order includes all proven losses, if that is just: The Financial Conduct Authority v Capital Alternatives Ltd [2018] 3 WLUK 623 (Ch) at [1327(4)].

Importantly, remedial and restitution orders are not mutually exclusive categories. The facts of a given case might be appropriate for either: The Financial Services Authority v Martin [2005] EWCA Civ 1422, per Sir Andrew Morritt at [20]. Equally, there is no obstacle to making a remedial order and a restitution order in relation to the case of a particular consumer, or consumers, provided of course that it does not amount to a double benefit or double counting. A remedial order may well be appropriate where it is still possible to unwind the transaction that amounted to the contravention, or to remove its effect or mitigate its effect (other than by monetary compensation). However, as recognised by s.28(7), if a consumer elects to treat an agreement as unenforceable, they must repay money and property received by them under the agreement. A remedial order, if granted, should in my view respect the same quasi-restitutio in integrum principle, and may therefore be inappropriate where such restitution of benefits obtained can no longer be achieved.

The FCA submitted that, in fashioning an appropriate remedy in these circumstances, the court should bear in mind the overall purposes of the Act, which include a consumer protection objective. This takes account of the differing degrees of risk in various transactions, the differing degrees of expertise and experience that consumers have, their need for timely and appropriate advice and information, and the expectation that service providers should provide consumers with a commensurate level of care: ss. 1B, 1C of the Act. To pursue these objectives, the FCA has made rules applying to the residential mortgage lending business, with which authorised providers must comply.

Under s.55B of the Act, there are threshold conditions imposed when the FCA authorises persons to carry on regulated activities, and it is obliged to ensure that the provider will satisfy and continue to satisfy these threshold conditions in relation to regulated activities. These conditions include that:

In other words, the general purpose of the Act is to protect consumers from the risk of suffering loss through lack of knowledge and absence of suitable advice, and from being exploited by unsuitable or unscrupulous persons.

Against that background, the FCA summarised the right approach to granting relief as follows:

In most RMC cases where a transaction occurred, the property has since been sold by the consumer or by the new lender, and so losses have crystallised. In other cases, the property has been re-mortgaged again, paying off the new lender, and the loss has similarly crystallised. Where an RMC transaction did not occur, the consumer has either paid fees to LPI and the restriction has been removed, or the restriction remains in place.

In the SRA cases, the SRA Individuals still remain tenant under the assured shorthold tenancy (or a successor tenancy) granted as part of the transaction: some are paying rent and some are not. The property in all such cases has been mortgaged by NPI to Together or LendInvest. The FCA accepts that Together’s interest in the property binds NPI and anyone else with an interest in it. The property therefore cannot currently be transferred back to the consumer without redeeming the new legal charge. When that charge may be redeemed or the tenancy may end, and how much further rent or other sums may be paid before then, is uncertain.

In the light of this approach, the FCA submits as follows.

In all such cases, the FCA accepts that it is difficult for the amount of any profit made by LPI or NPI to be identified, and in all RMC cases the financial benefit to LPI is likely to be the obverse of the loss suffered by the RMC Individual. Save in one unusual case, the FCA does not therefore seek any restitution order based on profits made by LPI or NPI.

The one exceptional case is Mr Baylis and Ms Kreuder, where it appears that their loss was caused because they elected to seek a refinancing solution with another person, unconnected to LPI, which led to their property being transferred out of their ownership. LPI was not responsible for that, but the new owner evidently had to pay money to Richards Solicitors, acting for LPI, in order to remove the restriction on the property’s title. That means that money was diverted from the alleged fraudsters to LPI, in the sum of £42,380. LPI thereby made a profit, even though its contravention did not cause Mr Baylis’s and Ms Kreuder’s loss.

The RMC cases fall into essentially two categories, though there are a few outliers where the facts are unusual: Moroney, Bower and Baylis and Kreuder.

The first category is where the agreements made with LPI in contravention of the general prohibition led to a re-mortgage transaction. In these cases, the RMC Individuals made agreements with LPI that resulted in substantial fees being incurred, which were paid to LPI out of the re-mortgage advance, and in consequence a much higher liability to the new lender on terms that were exorbitant for a loan to a residential occupier secured by a first legal charge. Not only that, but the term of the loan was often for a short period only, usually 6 months, resulting in a demand by the new lender for repayment that the RMC Individual was unable to afford at that time. In most cases, in consequence, the new lender repossessed the property, incurring further costs and fees, with any remaining equity (if any) coming back to the RMC Individual. In a few cases, the RMC Individual themselves took the decision to sell, or were able to remortgage on better terms.

In these cases, therefore, the RMC Individual became indebted in a much larger sum as a result of the transaction, made up of the capital advanced (including LPI’s fees), rolled up interest and the costs of repossession or sale.

The second category is where, despite an agreement being made with LPI in contravention of the general prohibition, no transaction with a new mortgagee followed, for one of various reasons. Typically, in these cases, the RMC Individual made an agreement to pay LPI fees and signed a consent to the restriction on a disposition of their property being registered in favour of LPI, as a means of securing payment of the fees. The RMC Individual generally paid the fees to LPI, either up front or at a later time, when they had to do so as the price of being able to sell or re-mortgage the property.

In these cases, typically, the loss suffered by the consumer is the amount of the fees paid. However, in a few cases, no loss was suffered. The fact that the fees were paid “voluntarily”, at a later time than entering into an agreement that amounted to the contravention, does not mean that the loss did not result from the contravention. In reality, the RMC Individuals had no option but to pay off LPI, and some were professionally advised to that effect.

In both these categories of case, the FCA seeks a restitution order, the amount of which in each individual case is based on the loss suffered by the RMC Individual as a result of the contravention(s), if any.

I agree that a restitution order is the appropriate order to make, where a loss has been suffered. It is appropriate in these distressing and exploitative cases for the sum to be paid to the FCA to reflect the total losses suffered by each RMC Individual. I do not consider that the fact that the Defendants appear to have assets that are worth less than the aggregate total losses is a good reason to reduce the sum that they should be ordered to pay. These were very serious contraventions, conducted over an extended period, involving high levels of culpability including deception of the consumers and the lenders, and which took advantage of the consumers’ vulnerability.

As for LPI’s profits made from the contraventions, it is difficult, in most cases, to establish the amount of the profit made by LPI, owing to non-disclosure of its financial documents, but it is likely to be lower than the total loss suffered by each LPI Individual, as a result of the high rate of interest and fees payable to the third party lender. Further, with the exception of the Baylis and Kreuder case, the profit made by LPI based on the fees charged will be at most only a mirror of the amount of loss suffered by the RMC Individual in incurring those fees, so no additional sum on account of that profit would be appropriate.

In RMC transaction cases, the property ended up being sold at a later date by the new mortgagee, or by the RMC Individual, whose replacement mortgage was redeemed at that time. The amount required to redeem the existing mortgage and the amount paid to redeem the new mortgage are known in each case. I accept Mr Bulmer’s evidence about these figures, as they are supported by documents obtained by the FCA.

In these cases, the FCA argues that the starting point should in principle be the difference between the amount required to redeem the new mortgage (which included any repossession and sale costs, where these were incurred) and the amount required to redeem the original mortgage (“the differential debt figure”). This will take account of the fees paid to LPI because these were “released” to LPI directly from the amount of the new loan. This measure is accordingly based on the increase in the debt that the RMC Individual suffered as a result of the transaction. That would be precisely so if the RMC Individual did not pay any interest under the new mortgage, or if (which was not the case) the interest rates were at a market rate for a RMC secured by a first charge, but some RMC Individuals paid interest at an excessively high rate. The FCA’s approach does not identify or try to analyse these cases in that way, perhaps for the practical reason that it was difficult to identify accurately the interest payments made in each case, or perhaps for reasons of proportionality.

The FCA accepts that credit then has to be given against the differential debt figure for the benefits (relatively speaking) that accrued to the RMC as a consequence of the same transaction. These are that, in the assumed counterfactual, the RMC Individual would have incurred costs of repossession and sale of their property in any event, if the re-mortgage transaction had not taken place, and would have had to incur (in most cases) costs of renting a different property in which to live. The FCA therefore proposes that a deduction be made for repossession costs that would have been incurred anyway, if the transaction had not taken place, and for the costs of alternative accommodation for the period from the RMC transaction to repossession or sale of the property.

I agree that the contravention cannot be said to have caused the RMC Individual to incur costs of repossession and sale, because that is exactly what they were facing when the contraventions by LPI took place. In some cases, the contraventions caused those costs to be only deferred to a later date, but in some cases they were avoided, where the RMC Individual sold the property without incurring them. I therefore agree that a deduction from the differential debt figure for the costs of repossession and sale is appropriate, as a means of stripping out from the differential debt figure the repossession costs that would have been incurred if the RMC transaction had not occurred.

It being impossible to identify either the actual repossession costs incurred in each individual’s case by the new lender or the exact costs that would have been incurred in the hypothetical world, the FCA has calculated, based on figures that are known in some cases, an average sum for the total costs of repossession and sale. The known costs vary considerably, but they average out at £29,827. I accept that is an appropriate and proportionate way of seeking to identify the costs that would have been incurred on a repossession and sale by the existing lender. That figure will be deducted in each RMC transaction case.

As for costs of renting alternative property in which to live, these costs might or might not have been incurred by any RMC Individual in the counterfactual world. I agree with the FCA that the right counterfactual to assume, for the purposes of assessing what losses resulted from the contravention, is the sale of the property by the existing mortgagee. It is inherently unlikely that these distressed individuals would have obtained conventional lending from another source that was more affordable, and the lending products that were obtained by LPI in their distressed cases were procured by misrepresenting the facts to the lenders. The obvious outcome in their cases was therefore that the RMC Individuals would have been evicted and had to pay rent for other living accommodation.

In some cases, the FCA advances a case based on evidence from the individual that, in the counterfactual world, such rental costs would not have been incurred because that individual would have gone to live with a friend or relative. In those cases, no deduction for accommodation costs is made by the FCA against the differential debt figure. Otherwise, the FCA deducts a sum that represents the cost of renting a hypothetical property to house the RMC Individual for the relevant period. That sum is calculated by reference to the letting value of the property, which in some cases is known because the new lender required a rental valuation; otherwise, it is assumed to be 4% of the capital value of the property (which is known in every case from the valuation done for the new lender). However, since the RMC Individual could not afford to finance living in their existing property, the level of rent for the hypothetical property is assumed by the FCA to be at a rate of two-thirds of the rental value of the existing property (i.e. the rent likely to be paid for a more modest property).

I do not consider that this is the right approach. The benefit that was secured by the transaction, which otherwise increased the amount of the RMC Individual’s debt, was that they were able to continue to live in their own home for a longer period. Although the debt increased, the RMC Individual had the benefit of the loan that enabled them to avoid eviction at that time. What should be set against the increase in the amount of the debt is accordingly the value of the occupation of the existing property for the period in question, not the cost of finding somewhere else to live if the RMC Individual would have had to incur it. The question here is whether all the loss apparently represented by the differential debt figure was caused (legally and factually) by the contravention. The fact that, but for the remortgage transaction, the RMC Individual would have become homeless, tells one that some allowance needs to be made for the financial benefit of avoiding that outcome. A reduction is therefore appropriate. But the right way to adjust the loss is to credit the benefit that was in fact enjoyed, not what (if any) cost of mitigating the RMC Individual’s homelessness would have been incurred in the counterfactual world.

Accordingly, in each case where there was a remortgage transaction, I will credit against the differential debt figure (in addition to the £29,827 of repossession costs) a figure for the relevant period based on the rental value of the existing property of the RMC Individual. I do so even if, in the hypothetical world, that individual might have gone to live rent-free with a relative. In reality, that individual had the real benefit of continuing to live in their own home. I accept the evidence of Mr Bulmer as to the rental values of the properties: he has used the best evidence available, and where there is no evidence of rental value has taken a conventional 4% of the capital value of the property.

To take one worked example, in the case of Mr Harrington Thomas, £120,949.33 was paid out of the new 4Syte advance that LPI arranged to redeem his existing mortgage and other charges, which are identified in the financial statement sent to him by Jacobs Law Solicitors. The total amount required to redeem the 4Syte loan later was £224,045.40. None of the new lending was paid to Mr Thomas for his benefit (a common feature in all these cases). Mr Thomas’s debts therefore increased by £103,096.07. Valuers had assessed the rental value of his property at £1,400 per month, so for the 5 month period following redemption of the original loan before Mr Thomas sold his property there should be a credit of £7,000, in addition to the £29,827 for the costs that would have been incurred on repossession and sale of his property by the original lender in any event. The total credit is therefore £36,827 and the net loss is £66,269.07.

I will adopt the same approach in principle to all the RMC transaction cases, though in some cases there are additional factors that need to be taken into account, such as compensation payments made by the Solicitors Regulation Authority. The cases of Mark and Louise Moroney and Mr and Mrs Kershaw are more complicated, as there was first an RMC and then an SRA, and I will deal with the approach to quantum and calculation in those cases in the next section of the judgment.

In the RMC Individual non-transaction cases, the losses (if any) are the fees that the individuals paid to LPI or to others, as legal costs or valuation fees. The figures in each case are set out in the second schedule below (“the RMC Losses Schedule”). The exceptional case here is Baylis and Kreuder, where LPI made a profit of £42,380 from its restriction but its contraventions did not cause the losses that those RMC Individuals suffered. I am satisfied in this case that LPI should not benefit from the contravention that enabled it to have the restriction in place and earn that profit. There will be a restitution order in that amount in the Baylis and Kreuder case.

I will hear from Counsel when handing down this judgment whether there is any jurisdiction to award interest on the losses or part of the losses suffered, and if so how that might be exercised in these cases.

Subject to that, the RMC Losses Schedule sets out the calculation of loss in the case of each RMC Individual who suffered a loss. The first section of the RMC Losses Schedule deals with the RMC transaction cases; the second section with the RMC non-transaction cases.

In four RMC cases where no transaction took place, LPI’s restriction remains registered against the title to those RMC Individuals’ properties. Regardless of whether there is also a restitution order in relation to loss suffered by those RMC Individuals, a remedial order requiring LPI to remove the restriction is appropriate and will be made in those cases.

The FCA argues that a remedial order is the more appropriate remedy in these cases, for various reasons that I will explain below. One reason why such an order might be appropriate is that the transaction that resulted from the contravention has not ceased to have effect, which therefore raises the question in each case of whether it is possible to unwind it or otherwise mitigate its effect. The principal difficulty with unwinding or mitigation is that innocent third party rights have intervened: the FCA does not contend that Together or LendInvest, NPI’s mortgagee of the SRA properties, is amenable to any remedial order.

The first question is therefore whether it is feasible and appropriate to make a remedial order in these circumstances. That depends initially on whether there are steps that could be taken to remedy the contravention, which includes mitigating its effect.

The contraventions found in each of the 13 SRA cases were that LPI made arrangements for the SRA individuals to enter into an SRA as agreement sellers and made arrangements with a view to their doing so (arts. 25E(1) and 25E(2) of the RA Order) and in all but one case advised them on SRAs (art 53D); and that NPI in each case entered into an SRA as agreement provider (art 63J(1): see at [55]-[59] and table D following [172] of the First Judgment). In each case, the finding was that this was done by way of a business of doing such matters. In some cases, there was also a finding that LPI and/or NPI had administered an SRA by way of business (art 63J(3)(b)).

There can be no doubt, based on these findings, that both LPI and NPI were efficient causes of the losses that the SRA Individuals incurred as a result of these contraventions.

The core facts relating to the transactions are essentially the same in each SRA case and were summarised by the Recorder at [154]-[155] of the First Judgment. The SRA Individual would contact LPI and T Stevens would tell them that he knew a company that could buy their properties and rent them back, without disclosing his connection with NPI. LPI made the arrangements, and the consumers signed documents, sometimes in blank, without knowing their content or being advised about them, and they were often unaware of the sale price and other terms. The sale and tenancy documents were prepared in such a way as to suggest to the lender that the sale and rental transactions were separate, whereas in fact there was no intention that the property would be sold to NPI with vacant possession, despite the terms of the sale agreements. The SRA Individual was often not provided with copies of any of the documents they signed.

As a result of the contraventions by LPI and NPI found by the Recorder in these cases, it is clear that, in almost all cases, a real loss has been incurred by the SRA Individuals and, conversely, profits will have accrued to NPI and LPI, though the full extent of the profits is hard to identify, given the Defendants’ lack of participation in these proceedings. The SRA contraventions occurred with regularity between March 2018 and July 2020 and were serious in nature. As found in the First Judgment, NPI sought to conceal the true position with the occupation of the SRA Individuals because of its awareness of the regulatory scheme and the requirements of its lender. The SRA Individuals were all vulnerable individuals; in many cases they did not give properly informed consent when entering into the SRAs.

I will take one case, that of Mr and Mrs Tsormetsri, as an example of these conclusions and of further facts that are relevant in deciding what order to make.

Mr Tsormetsri, who was a witness in the first trial, said that T Stevens called him and told him that the eviction was cancelled and that it was all “sorted”, and that he should pay £795 a month. Remarkably, T Stevens did not tell him whether this was rent or a mortgage interest payment (LPI had previously been trying to source a new loan in his case). Mr Tsormetsri had, without realising it, signed a sale agreement with NPI for a sale price of £215,000, with vacant possession, with the deposit to be used to discharge LPI’s fees and no further sale monies to be paid to Mr Tsormetsri, but the secured loan was to be paid off in full from the proceeds of sale. Some time after contracts had been exchanged, assured shorthold tenancy agreements were signed at a rent of £795 per month, but the Tsormetsris were unaware that that was what they had signed. Mr Tsormetsri started to pay that monthly sum in May 2018.

Documents obtained by the FCA show that on 4 December 2018, NPI obtained a loan of £144,470 from Together. In this case, it appears that, owing to conveyancing failings by LPI’s solicitors, Edward Marshall Solicitors, title was not transferred to NPI and the lender’s mortgage has not yet been registered. The most recent Land Registry official copy of the title of the property shows the Tsormetsris as the registered proprietors. It appears that one of the pre-existing lenders, Elderbridge, might not have been fully repaid out of the proceeds of sale, though the majority of its debt has been repaid. The value of the property at about the date of the transaction was £195,000 and the total secured debt to Elderbridge was £142,460.56. Accordingly, the Tsormetsris had equity of £52,539.44 at the time of the transaction with NPI.

The Tsormetsris paid total rent of £23,728 to NPI between May 2018 and August 2021. The FCA contends that, but for the transaction with NPI, the Tsormetsris would have been evicted and would have had to pay rent for another property, assessed as likely to have been about £650 per month, and that up to the date that the calculation was made they would have paid a total of £26,866.67 in rent. The FCA has calculated that if the original secured lender had repossessed and sold the property, costs of £29,827 would, on average, have been incurred. The losses that the Tsormetsris have incurred (assuming that in due course NPI is registered as proprietor of the property) are therefore calculated by the FCA at £19,573.77 (being the equity of £52,539.44 less £3,138.67, being the difference between the rent for the property actually paid and the rent that would have been paid for a different property following eviction, and less £29,827, being the costs resulting from the repossession.

What the FCA proposes, instead of a restitution order in that amount, is that the property should in due course be sold, and that any net proceeds of sale after repaying the mortgagee and the costs of sale will be paid to the Tsormetsris, together with a refund of the rent of £23,728 of rent paid to NPI. When that will take place is uncertain, and whether the Tsormetsris will continue to pay rent in the meantime is unknown.

While a remedial order is most likely to be appropriate where a defendant has wrongly taken property from a consumer and it can be restored, it is less likely to be an appropriate order if restitution cannot be achieved. That is because s.28(7) of the Act requires restitution to be made if money paid or property transferred is reclaimed. The FCA accepts that s.380 of the Act (remedial orders) should be applied consistently with the regime in ss. 26 and 28. In these SRA cases, restitution cannot be achieved because the SRA individuals are unable to finance the repayment to NPI of the sums that NPI paid their lenders to discharge the security over the property.

Each of the Defendants wrongly caused each SRA Individual to enter into an SRA transaction with NPI. As a result of the transaction, each SRA individual did not lose their home (in that they have continued to live in it), nor in a real sense did they lose ownership of their property because (as the FCA acknowledges by its assumed counterfactual) they would have lost ownership of their home anyway, upon repossession and sale by the existing mortgagee. Although a remedial order may be appropriate where the transaction that amounted to a contravention can be “unwound”, it is recognised in these cases that that cannot happen at this stage. That is, first, because of the bona fide third party rights of NPI’s mortgagee; and second, because no SRA individual is in a position to pay off that mortgage, or indeed – as the “price” of having a re-transfer of their property – repay to NPI the amount of their pre-existing debt that NPI discharged, as s.28(7) of the Act in principle requires.

What the FCA therefore proposes is that the remedial order will only take effect when each property is sold. To accelerate the time at which the sale takes place, it is proposed that there be an order that a property must be sold when the tenancy agreement ends and the consumer vacates the property, or when the secured loan to NPI is discharged. Thus, in the meantime, each SRA individual will have the ability to continue to live in the property, either paying rent, if they are content to do so, or electing not to be bound by the SRA and not paying rent. If rent is not paid, NPI as landlord will in principle be entitled to seek a possession order, thereby accelerating the time at which the property must be sold. (It does not seem to me that the consumer could both deny NPI’s claim as landlord under the tenancy agreement, on the basis that they are not bound by the agreement, and resist NPI’s claim to possession, but I do not need to decide that question.)

There seem to me to be a number of difficulties with the remedial order that the FCA seeks:

Mr Fell submitted that although a restitution order was the FCA’s alternative case in relation to the SRA Individuals, it is not an ideal solution in these cases, for the following reasons:

I am not persuaded by the first argument. Whatever happens from the date of this judgment, the SRA Individuals who are still in possession of their properties have it within their power to avoid further losses – either by ceasing to pay rent, if the amount is considered to be excessive, in which case the consequences may be that they ultimately have to leave the property; or by continuing to pay and remaining as tenant, if they consider that they have a reasonable deal and wish to stay in their homes. Since there is no evidence that those who are paying rents are paying unreasonable sums to NPI, there is no further loss that will be incurred. Any difficulty with the registration of NPI at the Land Registry is most unlikely to have consequences adverse to the SRA Individual.

It is true that in 5 cases (Waters, Tsormetsri, Dann, Rameshwar and Moroney) NPI has not yet been registered as proprietor of the properties. It seems more likely than not, however, that these title defects will eventually be resolved and that NPI will be registered, or at least that Together will obtain its security. None of the SRA Individuals is in a position to oppose registration on the ground of the unenforceability of the sale agreement, which would require restitution of the benefits they received. The FCA did not say that it would be wrong to assume that NPI would be registered, and it seems to me appropriate to assume that, by subrogation or otherwise, Together will be able to assert its security.

One area of doubt is whether any SRA Individual remains liable for their original debts, as a result of Edward Marshall Solicitors’ failure to discharge the existing charges or other debts secured on the property. It is likely that the lenders will be able to look to Edward Marshall to comply with their undertaking, or, if not, to the Solicitors Regulation Authority for compensation, if the purchase monies were not used to discharge those secured debts.

If for any reason an SRA Individual remains at risk of debt being enforced against them, that debt should not be deducted in calculating the loss resulting from the SRA transaction. The appropriate way to deal with uncertainty about that position is to stay enforcement of a restitution order to that extent, pending completion of enquiries, and to give the FCA liberty to apply to vary the amount of the order in that SRA Individual’s case if it subsequently appears that the debt in question has been discharged.

As for the second argument in [123] above, the 10^th witness statement of Mr Bulmer dated 8 February 2024 shows that there is substantial equity in each of the SRA properties. They are not the only assets of NPI. If the consequences of the FCA seeking to enforce a restitution order against NPI are that one or more of the SRA properties are sold, or charging orders are registered against their titles, any sale will not overreach the tenancy of the SRA Individual. A sale might even present the SRA Individual with the opportunity to buy the property back. A sale by Together or LendInvest as mortgagee might have priority over the SRA Individual’s tenancy – I make no decision as to the priorities between Together or LendInvest and the SRA Individuals, which might arise at a later time – but any enforcement by Together or LendInvest, if it has priority, will not cause additional loss to the SRA Individuals, who would have been evicted by their own mortgagees years previously but for the SRA transaction.

For these reasons, despite the able arguments advanced by Mr Fell, I do not consider that making a remedial order relating to the equity in the properties at a future date and the rent paid by the consumers is the most appropriate order to make in these SRA cases, and I will make a restitution order instead.

The starting point for the FCA’s assessment of loss is the loss of any equity in the properties at the time of the sale to NPI. This is based on a valuation of the property for Together and the aggregate amount of the SRA Individual’s secured debt that was paid off on completion. To that, the FCA then adds the total amount of rent paid to NPI, on the basis that the consumer is entitled to treat the SRA as unenforceable and recover money paid. It then deducts repossession and sale costs that would otherwise have been incurred by the original lender and the costs of alternative accommodation that would have been incurred had there been a repossession instead of the SRA.

In my judgment, the loss of equity in the property at the date of the SRA transaction less the costs of repossession and sale that were avoided as a result of the SRA are the correct measure of loss in all these cases, save where there is some additional loss (such as payment of fees) that was also incurred. Although in principle the SRA Individual would be entitled to claim recovery of the property and the rent paid, under s.26 of the Act, no SRA Individual has elected not to perform the SRA (or at least there was no evidence that they have), and they could not do so without giving up the tenancy agreement and making restitution: s.28(7).

Similarly, the rent paid could only be recovered if the SRA Individual returned to NPI any money and property received by them under the SRA. That would require them to return the benefit of the tenancy agreement, for which they had been paying the rent. Restitution is mandatory under s.28(7). In those circumstances, I do not accept that the rent paid (which is not alleged to be excessively high) is part of the loss that resulted from the SRA.

The justice of this conclusion is impliedly recognised by the FCA, in that although they include the rent paid in their calculation of loss, they provide for deduction from the total losses of the accommodation costs that would have been incurred by the SRA Individuals if the SRA transaction had not occurred. It seems to me that, where the effect of the SRA was that the SRA Individual was able to stay as a tenant of their existing property, the rent payable for that property rather than the rent that might hypothetically have been incurred is the appropriate measure of the benefit that needs to be set against the loss, and that accordingly the amount of rent paid to NPI can simply be omitted from the calculation.

Accordingly, save in the case of Sharon Lea, the loss in these SRA cases is the value of the equity at the date of the SRA transaction less the sum of £29,827 for costs of repossession and sale that would have been incurred but for the SRA transaction. (In Sharon Lea’s case there is an additional loss of £395 to be added in respect of fees paid directly by her to LPI on 30 March 2019.) The amount of equity is calculated by reference to the value of the property at the date of the SRA transaction and the amount of the individual’s debt that was repaid as a result of the transaction. Accordingly, in the case of the Tsormetsris, which I have explained in detail above, the loss is £52,539.44 less £29,827, namely £22,712.44.

I set out in the third schedule to this judgment (“the SRA Losses Schedule”) below the calculation of the loss in the case of each SRA Individual. In all but three cases, the calculation is straightforward and is based on the evidence of Mr Bulmer, documents that the FCA has obtained as to the valuation of each property, and documents showing the amount of the SRA Individual’s debt discharged on completion of the transaction.

The first more complicated case is that of Mark and Louise Moroney. They underwent an RMC re-financing first, and then, when the new loan fell to be repaid, an SRA transaction. However, this was one of the cases where Edward Marshall Solicitors failed to effect the registration of NPI, and Mr and Mrs Moroney remained the registered proprietors and FBSE the mortgagee until FBSE evicted the Moroneys on 12 December 2022, notwithstanding the unregistered sale to NPI on 19 October 2019. As a result, the Moroneys’ debt to FBSE was not discharged and now amounts to £761,901.86. The Solicitors Regulation Authority paid the Moroneys compensation of £303,215.35 in respect of Edward Marshall Solicitors’ breaches of duty.

The redemption sum for the original loan on the Moroneys’ property was £117,544.41. The remortgage to FBSE completed on about 12 July 2018, with £176,000 being borrowed from FBSE to cover the redemption sum and LPI’s fees and legal costs. By May 2019, the FBSE debt had risen to £201,725.80. By the date of the sale to NPI on 18 October 2019, the FBSE debt was £238,269.51, as specified in its redemption statement for the completion of a £300,000 sale to NPI. None of the sale monies were received by the Moroneys.

The FCA provided two different calculations of loss resulting from the RMC transaction, depending on whether in consequence of the SRA transaction a remedial order or a restitution order was made. The loss up to the date of the SRA transaction is therefore the difference between the then existing debt of £238,269.51 and the original debt of £117,544, namely £120,725.10, less £17,500 for the value of occupation of the property from July 2018 to October 2019 and £29,827 for the costs of possession and sale, giving a loss figure of £73,398.10.

The loss caused by the SRA cannot be assessed as simply the loss of equity in the property at the date of the SRA because the existing debt to FBSE was not extinguished at that date so as to release equity. The debt remained in place and has continued to attract interest at punitive rates. Although Edward Marshall Solicitors’ failure to redeem the FBSE charge was an efficient cause of the loss suffered by the Moroneys after the date of completion, the contraventions of LPI and NPI were also efficient causes of the whole loss occasioned to the Moroneys.

Accordingly, in this case, the right assessment of the loss resulting from the SRA transaction is the current debt, £761,901.86, less the debt figure of £238,269.51 already taken into account, less the sum of £303,215.35 received from the Solicitors Regulation Authority as compensation for the failure of Edward Marshall Solicitors to account to FBSE for any of the purchase monies. As compensation has already been paid to the Moroneys for that defalcation, it must be assumed that no further compensation will be provided. A deduction already having been made for the repossession costs in calculating the RMC loss, no further deduction is appropriate here. The total loss resulting from the SRA is accordingly £220,417.00. That loss is in addition to the RMC loss of £73,398.10.

The second more complicated case is that of Angela Waters, as in her case her original mortgagee, Elderbridge, has asserted that its charge was not redeemed, and Ms Waters and Elderbridge remain registered as proprietors of the property and the registered charge respectively. In Ms Waters’ case, the property was valued at £185,000 and other secured loans amounting to £64,861.03 were discharged out of the purchase monies, but Elderbridge’s secured debt of (at that time) £75,488.52 was not discharged. Accordingly, Ms Waters’ loss as things stand is £120,138.97, but that sum will reduce to £44,650.45 if and when it is clear that Ms Waters is no longer liable to Elderbridge for its secured debt. The Solicitors Regulation Authority has confirmed the rejection of a claim for compensation in her case. Enforcement of the additional amount of £75,488.52 will accordingly be stayed until the position in relation to Elderbridge is clear.

In the case of the Kershaws, who like the Moroneys had an RMC remortgage first before an SRA, the loss for the RMC has been calculated separately from the SRA loss, with the redemption figure for the RMC being used as the base for calculating the loss of equity resulting from the SRA, to avoid double-counting.

In some other cases, the Solicitors Regulation Authority has paid compensation to individuals, and these amounts, which flow from the contraventions, are therefore credited against the amounts of loss resulting from them.

In cases where the SRA Individual has not paid rent, or has paid little rent, the SRA Individual is for the time being better off by virtue of not having paid it – which they were entitled not to do. The rent cannot be enforced by NPI against the SRA Individuals: s.26(1) of the Act. Given that the rent is unenforceable, it would be wrong in principle to credit the unpaid rent against the amount of loss, as that would be to require the SRA Individual to bring the unenforceable rental liability into account. It is unnecessary in this judgment to address what consequences non-payment may have for the right to possession or any other remedy of NPI or its mortgagee.

I will invite Counsel to address me on interest at the handing down of this judgment, as in the case of the RMC Individuals.

The FCA seeks a restitution order in relation to each RMC Individual against LPI, T Stevens and D Stevens. I will grant such an order. Save in relation to Baylis and Kreuder to the extent of £42,380, the order is made in respect of the losses suffered by the RMC Individuals, not profits accruing to LPI.

In relation to the SRA Individuals, the FCA contends that the restitution order should be made against NPI only, not against LPI or T Stevens and D Stevens, even though LPI contravened the general prohibition in each case and T Stevens and D Stevens were knowingly concerned in all contraventions.

The reason for that suggestion is that there are fewer SRA Individuals who have suffered losses, and the assets of NPI appear to be greater than the remaining assets of LPI and the Stevens (see 10^th witness statement of Mr Bulmer at paras 10-23). Accordingly, if an order were also made against LPI, or T Stevens and D Stevens, in relation to the SRA Individuals, it could have the effect of diluting the compensation that in due course would be available for distribution to the RMC Individuals. This could benefit the SRA Individuals, but they have prospects of a greater dividend from recovery against NPI.

An alternative way of approaching the matter would be to make the restitution order in relation to SRA Individuals against all the Defendants but give directions at a later time about how any recoveries are to be distributed – the FCA accepts that this is a matter on which the court should give directions in due course. However, the FCA is better able to judge which approach is likely to work out most fairly and, if it does not seek a restitution order against LPI, T Stevens or D Stevens in relation to the SRA Individuals, it would not be right for the court to impose one. The Act gives the FCA the primary responsibility of acting in the best interests of consumers.

I will therefore make a restitution order against NPI only, as requested, in relation to the losses suffered by the SRA Individuals.

There will also be declaratory relief in relation to the SRA transaction involving Toniya Richardson, one of the Original Individuals, against whom declaratory relief was not granted by the Order made following the First Judgment. This will be in accordance with the findings of the Recorder at [146]-[155] of Annexe B to the First Judgment.

The injunction granted in para 4 of the Order of the Recorder following the First Judgment will continue and apply also in relation to contraventions that I have found proved in relation to the Additional Individuals. It is agreed that the restraint order of Nugee J dated 22 July 2020, which was continued by para 8 of the Order of the Recorder, will be further continued at least until the consequential matters arising from this judgment have been addressed and a final order made.

Part I

Part II

SRA LOSSES SCHEDULE