Regulation  

Troubled legal fund at centre of £110m fraud claim

Receivers of the troubled Axiom Legal Financing Funds have brought claims against a number of parties in London’s High Court which are “considered to have acted fraudulently” in relation to “sums up to £110m”.

In February 2013, Grant Thornton was appointed receiver of the £100m fund after its suspension in 2012, following the resignation of the director of the Cayman Islands-based investment manager, Tangerine Investment Management. At the time external auditors were appointed to review the fund’s assets.

In an update on the receivership, the three receivers at Grant Thornton said the High Court claims include “unlawful means of conspiracy, breach of fiduciary duty, dishonest assistance, unconscionable receipt and procuring breach of contract for sums up to £110m”.

Worldwide freezing orders were also obtained against a number of the defendants preventing them from dealing, disposing or realising substantial assets, the receivers said.

The fund lent money to ‘no win, no fee’ lawyers and was marketed to UK investors and advisers. Mike Saville, one of two appointed receivers at Grant Thornton Specialist Services Ltd, indicated that 92 per cent of the loans advanced were to UK law firms, some of which have now initiated their own administration and liquidation proceedings.

Settlement has been concluded with one law firm and negotiations are ongoing with the remainder of the borrowers, the receivers said.

In May 2013, FTAdviser reported the receivers had acknowledged “frustration” among investors they have not been able to identify and are therefore prevented from communicating with directly.

The three receivers said they were trying to contact investors in the feeder fund, Axiom Legal Financing Fund Segregated Portfolio, but many were not ‘registered’ shareholders identifiable in the share register.

The latest update said following applications by the joint receivers to formalise a communication process with investors a ‘receivership committee’ has been established and it meets with the joint receivers on a quarterly basis.

“The Joint Receivers’ efforts are now focused on advancing the existing UK litigation, considering action against parties involved in the funds’ insurance arrangements as well as establishing whether any rights of action exist against any other parties connected with the funds.”

Hugh Dickinson of Grant Thornton Specialist Services Ltd and James Earp of Grant Thornton UK LLP were also appointed joint receivers of both the master, Axiom Legal Financing Fund Master Segregated Portfolio, and the feeder fund.

In June, the UK-based distributor of Axiom was placed into liquidation and Sheffield-based P&A Partnership was appointed as liquidator.

At the time, Brendan Guilfoyle, partner at P&A, said: “Taylor Moor raised substantial investment for the Axiom fund over the course of 2011-12. However following [media reports] alleging fraud and mismanagement at Axiom, investors sought immediate redemption of their funds, resulting in significant lost revenue for Taylor Moor.

“Taylor Moor spent in the region of £150,000 in legal fees trying to protect its position and ensure the appointment of receivers at Axiom. However it was unable to replace the lost revenue and exhausted its reserves.”