A High Court judge has ruled against Arch Financial Products chief executive Robin Farrell after finding him guilty of guilty of dishonesty and his firm of negligence.
Mr Farrell told FTAdviser he would seek to appeal the verdict, despite being refused permission to appeal by the judge on the grounds of limited chance of success. Mr Farrell has said he will go directly to the Court of Appeal.
Judge Walker also refused Mr Farrell a stay of execution order, which would have stopped further proceedings until an appeals process is concluded, after he lost the case against him brought by SPL Guernsey, the incumbent manager of the former Arch Cru Guernsey cells.
Arch and Mr Farrell were ordered to pay the cells £24.2m in damages and an additional £2.4m to cover their legal costs, £1.4m of which is due in January.
SPL had initially sued for £150m, alleging Arch had been grossly negligent in its role as investment manager of the funds between 2007 and 2008.
However, the present ruling only refers to the failed Club Easy student accommodation group, held in shell company Lonscale, while other claims have been put on hold.
In April 2012, SPL Guernsey accused Mr Farrell of acting dishonestly and breaching his fiduciary duty by allowing Arch Financial Products to receive a total of close to £3.6m as part of a £6m “secret profits” deal related to the investment in Club Easy.
At the time, Mr Farrell said the allegations against him were “without foundation”. He has said he will appeal the verdicts on the grounds of the lack of specific evidence of wrongdoing.
Judge Walker found that Mr Farrell “dishonestly assisted” Arch in its breaches of fiduciary duty.
“To the extent that assistance must have some causative impact in facilitating the breach of duty, there can be no doubt whatever that Mr Farrell’s assistance did this”, the judgement states.
Mr Farrell had told the court that his and Arch’s available assets amounted to around £85,000 and stated that the ruling could potentially bankrupt him and force Arch into liquidation. The barrister acting for SPL suggested Mr Farrell was worth £150m in 2008, and that there was no good reason to think his assets are worth less than £24m now.
The judge ruled there was no satisfactory financial evidence on which to determine whether or not Mr Farrell would go bankrupt from the claim.
The Arch Cru funds were suspended in March 2009 by the Financial Services Authority after pricing and liquidity problems forced them out of trading.
This is the first of many litigation actions launched by SPL as it attempts to recover Arch Cru losses.