Category Archives: Financial Service Law

No preventative representations could get round failure to execute deeds properly

Where documents were not in fact executed in accordance with the Law of Property (Miscellaneous Provisions) Act 1989 (“the 1989 Act”), does the fact that documents were described as deeds and meant to be such prevent (“estop”) the signatories from denying that the defective deeds were validly executed?

Briggs & Ors v Gleeds (Head Office) & Ors [2014] concerned a pension scheme (“the Scheme”) for employees of partnerships and companies within the Gleeds group (“Gleeds”).

As will be seen later the case is an important one on the 1989 Act and estoppel and deeds – all of which play an important role in property law.

The Scheme’s case that the signatories could be prevented (estopped) from denying that the defective pension deeds were validly executed failed on factual and legal grounds.

The Facts

Gleeds argued that:

1. By supplying the draft deeds and, perhaps, instructions as to how they should be executed, the Scheme’s Pension Adviser (“Aon”) impliedly represented to Gleeds and Scheme members that, legally speaking, execution in the manner indicated by the drafts would suffice; and

2. Gleeds and Scheme members relied on the representations to their detriment; and

3. Aon were acting on instructions from the Scheme trustees at the relevant times and so the representations should be attributed to the trustees; and

4. In the circumstances, an estoppel had arisen precluding both the trustees and Gleeds and Scheme members from challenging how the deeds were executed.

Fatally to Gleeds case the court found that Aon could not be said to have made such representations for the trustees, or on the trustees’ behalf, to the Gleeds and Scheme members in relation to the execution of the defective deeds.

Main Legal issue

The main legal issue was “how far could the principle of estoppel be invoked to prevent a party from asserting that the statutory requirements for a deed (under the 1989 Act) have not been satisfied?”

The court concluded that estoppel cannot be invoked where a document does not even appear to comply with the 1989 Act on its face or, in any event, could not be so invoked in the particular circumstances of that case. For the following reasons:

i) Parliament had imposed the evidential requirement that an individual must sign “in the presence of a witness who attests the signature” otherwise his deed was not validly executed as such; and

ii) The “deeds” at issue here were not “apparently valid”. It could be seen from each document that it had not been executed in accordance with the 1989 Act.

Had it been otherwise a person can sometimes be estopped (or prevented) from denying due attestation.

But if estoppel could be invoked in relation to documents that were not “apparently valid” people would not know where they stood with them and there would be uncertainty. The validity of a deed may remain important for many years. In relation to older “deeds” people without personal knowledge of the circumstances in which they were executed would not know whether they were valid or not.

A party to a “deed”, who had not himself executed the document in compliance with the 1989 Act, would have an election as to whether the document should be regarded as valid. If the document turned out inconvenient to him he could deny its status as a deed. But if it proved advantageous he could invoke estoppel.

So, if a “deed” provided for a pension scheme to change to money purchase instead of a final salary scheme, an employer who had not had his signature to the document witnessed could wait and see whether the change had actually been favourable to him; and

iii) if estoppel could be invoked in circumstances such as these Parliament’s and the Law Commission’s aims, behind the 1989 Act, to address those kinds of issues would be seriously undermined.

So, the members of the Scheme were not estopped (prevented) from refuting that the defective deeds had been validly executed since (a) Aon could not be said to have made representations on the Scheme trustees’ behalf to Gleeds or Gleeds Scheme members as to the execution of the defective deeds; and (b) estoppel could not be invoked to get around the 1989 Act in circumstances where it was quite apparent that the documents were not validly executed as deeds.

This blog has been posted as a matter of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Court looked at Sales Speak and Reality when deciding on prohibited Property Collective Investment Scheme

Section 235 of the Financial Services and Markets Act 2000 (“FSMA”) controls sales of land, or arrangements relating to sales of land, which are “collective investment schemes” within the meaning of that section.

In Asset Land Investment Plc & Anor v The Financial Conduct Authority (FCA) [2014] the respondent was the Financial Conduct Authority (“the FCA”). By its claim, it alleged that certain so-called “land banking” schemes established and operated by Asset Land were unauthorised “collective investment schemes” within the meaning of Section 235 of FSMA and that certain of the defendants had been knowingly involved in such schemes in contravention of various provisions of FSMA.

A principal issue was whether there were “arrangements” within Section 235.

The court of appeal found that Sections 235(1), (2) and (3) are drafted in such a way as to justify the giving of a very wide meaning to term “arrangements”. It included understandings and agreements that were not legally binding.

Here “arrangements” came into existence through (i) the representations and statements made by brokers acting for Asset Land as to what the schemes entailed, coupled with (ii) understandings as to what the schemes entailed reasonably formed by investors (again based on what they had been told).

The test was to be approached objectively and was whether, based on what they had been told, reasonable investors participating in the scheme would have understood that the scheme involved arrangements of the type described under Section 235.

The Appellants’ argument that what investors were told was mere sales talk from which they made unjustified assumptions and formed aspirations, cut little ice.

“Arrangements” under Section 235 may subsist even in the case of inconsistent contractual terms.

In each case the judge must objectively decide what, in reality, were the “arrangements” between the operator of the scheme and the investors, and how the scheme was designed to, and did, operate in practice.

The mere fact that a contract had been concluded between the parties could not necessarily mean the “arrangements” were restricted to the terms of the contract.

As the Appellants accepted, the term “arrangements” extends to matters which are not contractually binding and are otherwise of no legal effect.

The differences in understanding of the Scheme as between the different investors were irrelevant because “each [investor] entered into [individual] arrangements with Asset Land that were covered by Section 235(1).

Also the mere fact that one or two individual participants had different intentions as to the future use of their individual land plots did not prevent the purpose of the scheme, as described by Asset Land’s representatives, from satisfying the purpose/effect requirements of Section 235(1).

What was needed was an objective assessment of the purpose of the arrangements. Here the arrangements which had been presented to all investors by Asset Land’s brokers were the acquisition of land for investment purposes. The fact that a limited number of investors may have signed up to the plan for reasons other than investment did not prevent “arrangements” within Section 235(1) from arising.

In ascertaining and determining the relevant “arrangements”, for Section 235, the court was not obliged to rely solely upon a strict view of the legal rights and duties of the parties as presented in the legal documentation.

The court had to look at the overall realities of the scheme, as it was designed to operate in practice, and, as it had been presented to investors.

The judge was perfectly entitled to find that, in truth, the essential features of the “arrangements” were those that had been represented in the oral, often telephone, sales pitch to investors, and not the artificial and misleading picture, attempting to negate “arrangements”, that Asset Land tried to present in the footers to some of its brochures and its contractual documentation.

That was particularly so as (i) it was only after an investor had paid the purchase price for his plot in full that he received a written contract containing those clauses; and (ii) any investor who did query the effect of those clauses, or otherwise raised the written contract’s terms with Asset Land representatives, was told not to worry about the provisions, they were merely legal requirements, or that the correct position had been as represented during earlier telephone calls.

So Asset Land’s appeal was rejected and the arrangements had been prohibited collective investment schemes.

This blog is posted as a matter of general interest. It does not remove the need to get bespoke legal advice in individual cases.