The Connaught Income Series One fund has failed in its bid to claim back more than £744,000 from a firm of solicitors.
The unregulated fund - which was suspended in March 2012, followed by Connaught entering administration in September 2012 - took Hewetts Solicitors to the High Court over allegations of breach of duty and negligence surrounding the purchase of a leasehold on a property.
The fund claimed it relied on a certificate of title produced by Hewetts in authorising a drawdown of funds under a loan facility by Tiuta International Limited which was, in turn, advancing cash to Mansfield Road Freehold Limited to fund the purchase of a leasehold on 11-17 Parker Street in Liverpool.
Tuita Lending Limited, a short-term bridging lender and wholly-owned subsidiary of Tuita Plc, was the mortgagee-in-possession after City Retail Investments Limited defaulted on a loan from it and became insolvent in 2008.
Connaught provided credit lines to stricken bridging lender Tuita, a firm that also went into administration in September 2012
Among the allegations was that the property was sold at an undervalue and this should have been reflected in the certificate of title and that the sale history of the building should have been reported to the fund so it could seek an independent valuation if it wished.
Addressing the issue of the undervalue, deputy judge Mark Cawson said: “There would, as I see it, have been no difficulty if the factors pointing to a potential undervalue had been raised in dialogue between Hewetts and TIL.
“Irrespective of any eagerness on the part of TIL to lend to the borrower so that TLL could effect a sale to the latter, TIL was well aware of the difference between the purchase price and the [valuation in 2008] and, in any event, the difference in question fell within its own lending policy.
“TIL would not, in my judgment, have seen it as an issue at all.”
He dismissed Connaught’s other allegations and the claim as a whole.
In March 2015 the FCA said it decided to investigate the activities of Capita and Blue Gate in connection with their roles as operators of the Connaught fund.
It also announced it had withdrawn from negotiations aimed at securing an agreement to address the losses for investors in the Connaught fund.
Capita Financial Managers was operator until September 2009 when it was replaced by another company.
The fund went into liquidation in 2012 and its liquidator had bought a claim against both former operators.
Earlier this year it emerged Capita had paid £18.5m to settle the claim against it.