Robin Farrell, Arch Financial Products founder and chief executive, has today hit back in the High Court showdown between his company and six cell companies who are suing to recover losses of almost £20m.
Mr Farrell – who is representing himself and Arch in the four week trial – opened his defence before Mr Justice Walker in the action in which six cell companies that took part in a property investment seek to recover losses put at almost £20m.
The case involves one of eight investments in respect of which claims are made in overall proceedings against Arch brought by 18 incorporated cells of SPL Guernsey ICC Ltd.
In an earlier court ruling it was held that today’s claim - which involves six of the cells - should be heard first, together with a related claim against Mr Farrell.
The cells all formed part of the structure established by Arch through which UK investors took part in investment funds, known as the Arch-Cru funds, marketed to them by independent financial advisors.
The six say that they invested £20.2m to finance the acquisition by Isle of Man-based special purpose vehicle Lonscale Ltd of the Club Easy group, a business involved in the ownership and management of student accommodation.
However, they allege that the amount due on completion was only £13.2m and that Arch caused them to invest the additional money so that Lonscale could make unauthorised payments of £6m, including £3m to Arch.
Outlining his case to the judge, Mr Farrell said that the claim against him was “without any evidential foundation and should not have been made”. He added that he was “outraged at the allegation of dishonesty”.
He said: “Having worked in the financial industry for 25 years with an unblemished track record, to have an allegation of dishonesty based purely on circumstantial evidence is horrifying. All such allegations having been made purely on the basis of inference with no contemporaneous fact, evidence or element of personal gain shown by the claimants.
“The defendants dispute all claims and note the paucity of evidence of the claimants. The claimants’ case is almost entirely made up of circumstantial evidence and supposition.”
Mr Farrell argued that none of the claimants’ current directors or advisers were involved at the time, and so they have no knowledge or the contemporaneous facts.
Describing his case in summary, he said: “There was no breach of fiduciary duties. The fee paid to Arch was pre-agreed prior to any investment by the cells being contemplated. The transaction and fees were disclosed to the claimants. The investment itself was considered a good investment and a reasonable investment for the claimants at the time.
“Club easy was asset-rich cash-poor which made a good turnaround investment in the best interest of the cells.”
Of a total investment of more than £26m, the investors claim that they have suffered total losses of £19.7m.
In the larger overall claim, it is said that around £463m was invested in all of the cells managed by Arch, primarily by UK retail investors, with an estimate of 6,400 investors in total, many of which suffered heavy losses. The Arch-Cru funds are said to have collapsed in 2009.
Mr Justice Walker is expected to reserve his judgment in order to give it in writing when the case ends.
