High Court orders two companies into liquidation that facilitated a dishonest £1.5 million land banking scheme
Two Liverpool companies found to be the ‘bookends’ of the transactions to sell plots of undeveloped land to investors, one company being the land owner and the other being the ‘developer’, have been ordered into liquidation in the High Court on grounds of public interest following an investigation by the Insolvency Service.
The court heard how the land owner JDG Properties Limited benefited by 100% from each plot of land mis-sold by a marketing company called Gilbert Webb Estates Ltd and how Tithebarn Trading Ltd encouraged those sales by appearing to be a developer of the site.
JDG Properties Limited traded under the umbrella of ‘Liverpool Investment Solutions’ and had bought land in Cheshunt Hertfordshire connected with a Mr Carl Ballard in April 2011 for £130,000. It retained a quarter of the site and divided the rest into 390 plots for sale to the public.
The plots were marketed and sold to the public by Gilbert Webb Estates Ltd and was ordered into liquidation on grounds of public interest on 18 December 2014.
The ‘development company’ Tithebarn Trading Ltd entered into 5 year option agreements for 50p with some investors to buy back their plots of land at a price of £52.43 per square foot equating to a supposed overall site value of over £20 million.
The companies’ director Mr Elster admitted in court that planning permission for the site was unlikely and that obtaining it would be like him ‘winning the lottery’.
Welcoming the court’s winding up decisions Chris Mayhew, Company Investigations Supervisor, said:
Whilst neither of Mr Elster’s companies was directly involved in the sale of plots of land to members of the public, they were symbiotic to the land banking scheme and fortified the mis-selling of plots of land by Gilbert Webb Estates Ltd enabling all involved in the scheme to profit apart from investors.
The scheme made no commercial sense and was once more calculated to part honest people from their money.
The Insolvency Service will not allow companies to operate in this way and will investigate abuses and close down companies if they are found to be operating against the public interest.
Notes to Editors:
JDG Properties Limited (05440837) was incorporated on 29 April 2005. The registered office of the company from incorporation to 31 August 2007 was 32 Hope Street, Liverpool, L1 9BX and from 31 August 2007 to present date 33-35 Cheapside, Liverpool, Merseyside, L2 2DY. The recorded directors have been David Joseph Case from incorporation to 23 August 2007 and Jon Farley Elster from incorporation to present date. The secretary is shown to have been Mr Case from incorporation to 23 August 2007 and from 23 August 2007 to present date Helen Jane Housley. The company’s share capital is shown to be 3 £1 ordinary shares all held by Mr Elster.
The company’s most recently filed accounts for the year ended 30 April 2014 reported fixed assets of £491,729, current assets of £490,432, creditors of £869,774, accruals and deferred income of £104,317 and shareholder’s funds of £8,120.
The company is shown to have given legal charges over the following properties:
- 32 Hope Street, Liverpool
- 66 Dale Street, Liverpool
- Clachan Public House, 184-186 Smithdown Road, Liverpool
According to Mr Elster the company’s assets currently have an open market value of between £1.5 million and £1.75 million.
Tithebarn Trading Ltd (07690126) was incorporated on 01 July 2011. The registered office of the company throughout has been 33-35 Cheapside, Liverpool, L2 2DY. The recorded directors have been Jon Farley Elster from incorporation to present date and Christopher Michael Dunford from 15 March 2012 to present date. No secretary is shown to have been appointed. The company’s share capital is shown to be 1 £1 ordinary share held by Mr Elster.
According to the company’s website http://tithebarntrading.co.uk/:
Tithebarn Trading Ltd is a Property Development Company based in North West England. Its directors are experienced property professionals skilled in enhancing land values through planning gain. Our team includes architects, developers, planning and environmental consultants, whose brief is to advance a strategy which would lead to an increase in the land value of our subject sites. Our Directors and Consultants with their background in the property profession are experienced in the acquisition of strategically located land and buildings, adding value through development and planning gain. They have successfully developed numerous residential, office, retail and mixed use schemes in the UK. Presently, Tithebarn Trading Ltd is at the preliminary stage of an eventual planning application for 2 sites: Flax Lane (West Lancashire) and Goffs Oak (West Cheshunt, Herfordshire). Please see Our Developments www.tithebarntrading.co.uk/our-developments/ for more information.
Dormant accounts were filed for the period up to 31 July 2013. No further accounts have been filed.
The petitions to wind up each company were presented in the High Court on 30 July 2014 (together with the related matter of Gilbert Webb Estates Ltd) under the provisions of section 124A of the Insolvency Act 1986 following confidential enquiries carried out by Company Investigations under section 447 of the Companies Act 1985, as amended. Gilbert Webb Estates Ltd was ordered into liquidation in the High Court on 18 December 2014.
The grounds to wind up JDG Properties Limited and Tithebarn Trading Ltd were their lack of commercial probity by making misleading and unfounded statements and their involvement in trading contrary to the public interest
The petitions were opposed by both companies, initially with legal representation. The petitions were heard on 21 and 22 May 2015. At the hearing the companies were represented in person by their director and shareholder Mr Elster.
In a reserved judgement handed down on 3 July 2015 ordering JDG Properties Limited and Tithebarn Trading Ltd into liquidation Ms Registrar Barber said:
… Whilst acting in person by the time of the trial, Mr Elster had the benefit of legal assistance up to trial and from his opening speech was clearly very well prepared. As a witness, however, it became increasingly clear that he had a distorted and somewhat self serving view of the truth … Moreover his evidence on some issues was frankly incredible … JDG was the land owner … Tithebarn played the role of an ‘interested developer’ and was used to create the impression that the land was of interest to developers … Mr Elster was at all material times a director of both JDG and Tithebarn and the sole shareholder of both companies. Gilbert Webb, the mis-selling company, has already been wound up in the public interest for, inter alia, trading with a lack of commercial probity and for continuation of a method of trading which is contrary to the public interest (the plots marketed and sold having been carved from the same parcel of land as plots previously marketed and sold by other companies wound up in the public interest, including Century Property Group Limited (formerly Century Land Group Limited) and Hildon Property Limited. The question before me is whether the Secretary of State has made out his case against JDG and Tithebarn as well and if so whether each of those companies should be wound up in the public interest … Mr Elster has been involved in the property business for over 30 years and has interests in a number of companies in addition to JDG and Tithebarn … A property developer known to him, Mr Alan Stockton, had purchased some greenbelt land in Flax Lane, Ormskirk, West Lancashire (‘Flax Lane’) in 2004. In 2008/9, Mr Stockton asked for Mr Elster’s help in marketing the land as single large tracts of agricultural land to potential developers. Mr Elster says that at about this time, he noticed an advertisement in the Estates Gazette inviting contact from owners or introducers of land that might have residential development potential. The advertisement was placed by Mr Ballard on behalf of himself or one of his companies. Mr Elster responded to the advertisement and met Mr Ballard. Mr Elster claims that he asked Mr Ballard whether he would be interested in purchasing Flax Lane and was told that Mr Ballard ‘was not interested in acquiring the land itself as a whole, but he did want to take an option over it.’ Mr Elster continues ‘Although Mr Ballard did not want to buy the land at Flax Lane, I personally believed that it potentially represented a decent business opportunity. So I personally purchased 50% of Flax Lane for £100,000. The land in question was then reversed into Aughton Land Limited’. The reason why Mr Elster, who had no familiarity with selling agricultural land at the time, suddenly felt moved to purchase part of Flax Lane himself became clear at trial. During the course of the trial, Mr Elster explained that Mr Ballard had told him that he could put a marketing plan in place for the sale of individual plots of land at the Flax Lane site. He told me ‘As I came to understand the scheme, I was concerned about the probity’. Mr Elster went on to say that Mr Ballard convinced him that it was legal by showing him a letter from SJ Berwin dated 11 December 2009. I have read the letter. It was not a letter about the propriety of land banking as such. It simply addressed one issue which occasionally arises in the context of land banking, namely, the regulation of collective investment schemes. It was not, therefore, of itself, an entire answer. In the event, Mr Elster told me that, having considered that letter and having also, he claimed, taken his own advice (although he did not name the solicitor he consulted or state what advice was received), he decided to go ahead with ‘the scheme’ at Flax Lane. Pursuant to an agreement reached in 2010 between Mr Ballard, Mr Stockton and Mr Elster, it was agreed that (1) Mr Elster, via Aughton Land Ltd, would grant Mr Ballard (or a company incorporated by him) a 3 year option to purchase plots of land at Flax Lane for £2.20 per square foot. On average each plot was 1000 square foot. As a result, Aughton Land would receive £2,200 per plot of land; and (2) Mr Ballard or his company (whoever it was that took the option) would market the plot of land for sale … In the event, the scheme at Flax Lane appears to have followed a similar pattern to that subsequently followed at Cheshunt. A ‘developer’ company emerged, called Betta Build Ltd (‘Betta Build’). This company would approach the ultimate plot owners and buy options for 50 pence to purchase the plots for £32 per square foot in the event that planning consent was granted. I gather that Betta Build has since been wound up in the public interest. Mr Elster told me that it was an employee of Betta Build, a Mr Chris Dursford, who came to him after the director of Betta Build had a heart attack in 2010 and suggested Mr Elster and Mr Dursford ‘carry on doing what Betta Build had done’. It was this, he told me, that led to Tithebarn being set up as an SPV … Mr Elster went on to explain to me that in about April 2011, Mr Ballard then told him that he had some other land in Cheshunt which he ‘had acquired’ and that he was going to do ‘a similar scheme’. Mr Ballard asked Mr Elster if he was interested in acquiring approximately 50% of the land for £130,000. The sale of the Cheshunt land to Mr Elster was palpably artificial from the outset. Mr Ballard already owned the land through one of his companies. There can be no legitimate reason (and certainly I was provided with none) why, having purchased the land through one of his companies, Mr Ballard would want to sell the land to Mr Elster and then buy it back, over the next 3 years, for 100% more than the selling price … Mr Elster decided to buy 50% of the Cheshunt land for the asking price of £130,000 and used JDG for the purpose. JDG was not an SPV. It had assets of its own. Mr Elster cannot recall why he used JDG rather than an SPV but says that he assumes that it had funds at the time. An option was granted to one of Mr Ballard’s companies to purchase plots amounting to 25% of the Cheshunt land. The plots had each cost JDG £333 but the option price was £666, representing a gross uplift of 100% … The gross mark up of 100% was, he maintained, modest and after payment of costs (such as the costs of fencing the land) was less than that. He further asserted that the sale of the land at the Cheshunt site represented a modest proportion of JDG’s business overall. In relation to Tithebarn, Mr Elster accepted that Tithebarn approached investors who had purchased Cheshunt plots and sought to purchase, for 50 pence, 5 year options to buy the plots back at a price of £52.43 per square foot. Taking an average sized plot of 1000 square feet, this would equate to a price of £52,430 per plot, in respect of plots which had been purchased by JDG for £333. Mr Elster stressed, however, that Tithebarn made no contact with investors pre-sale; the only contact was after sale. Accordingly, he argued, it was wrong to suggest that Tithebarn was actively encouraging sales. He also disputed the suggestion that Tithebarn had not been actively engaged in seeking to develop the land. Mr Elster also claimed that he genuinely believed that the Cheshunt land had development potential in the medium to long term … I have listened carefully to all that Mr Elster has said. I have also closely considered his written evidence. On the evidence before me, it is clear to me that these three companies were all part of the same land banking scheme. In my judgment, on the facts of this case, it would be wholly artificial to separate out JDG and Tithebarn from Gilbert Webb and to treat Gilbert Webb as the sole wrongdoer. Mr Elster was aware at the outset that his purchase through JDG of the Cheshunt land from a Ballard company, back to back with the grant of an option over part of that land in favour of another Ballard company, was part of a ‘scheme’. He used the term himself on several occasions during the course of the hearing before me. The artificiality of the scheme was obvious from the start … I find that Mr Elster knew full well upon entering into the Cheshunt scheme that it lacked commercial probity. As a seasoned property developer he must have known (and I so find) that Mr Ballard would only be offering him £666 per 1000 per square feet for this land (already a marked uplift on its then value) if he planned to be selling on for even higher sums. He must have known, or at the very least strongly suspected, that inappropriate sales techniques would be involved in this process. Mr Elster’s later conduct fortifies this conclusion. Even after, on his own evidence, learning of the misrepresentations being made by sales agents to individual investors in order to persuade them to purchase the Cheshunt plots, he did nothing to correct the misleading material on Tithebarn’s own website. Nor did he post a warning on Tithebarn’s website. Moreover Tithebarn continued to send out to post sale investors misleading correspondence as to the steps being taken towards development of the site. Indeed, having considered one pacifying email sent out by his colleague at Tithebarn to assuage the concerns of one investor over the lack of progress, Mr Elster jokily responded to that colleague by email ‘YOU SILVER-TONGUED BASTARDO. VERY NICE’ : At all material times, Mr Elster was the controlling mind and sole shareholder of both JDG and Tithebarn. In the circumstances it would be wholly artificial to separate out the two. Mr Elster was both sides of the equation. JDG did very well from the scheme. According to Mr Elster’s own schedule, JDG received a total of £160,333 from sales of the Cheshunt plots in the year ended 30th April 2012, a figure which represented 94% of JDG’s turnover as disclosed by its accounts, and £60,838.84 for the year ending 30 April 2013, amounting to 33% of the turnover disclosed by its accounts. Mr Elster’s claim, therefore, that the Cheshunt sales proceeds represented a very small part of JDG’s business, is not entirely accurate. Overall the companies’ case lacks reality … Moreover, even if Mr Elster did believe that there was an outside chance of planning approval many years hence, the reality is that in the meantime he was through JDG and Tithebarn playing a part in a dishonest scheme which made a short term gain for him and his companies at the expense of the public. In my judgment, on the evidence before me, the Secretary of State has made out its case against each of these two companies. This was a mis-selling scheme structured so as to separate the ownership of the land from the sales entity and, by the use of Tithebarn, to create the impression that there was real interest in developing the land to encourage sales. Members of the public were not told that JDG and Tithebarn were owned by the same person. The fact that Tithebarn made no direct contact with investors prior to sale of a given plot is no answer to Tithebarn’s role in the scheme. It is clear that sales agents were mentioning Tithebarn to investors pre-sale as a source of encouragement, and from the email correspondence in evidence it is clear that Mr Elster was aware of that fact … The relative passivity of the role played by JDG in the scheme is no answer to the petition brought against it. Mr Elster, as the controlling mind of both JDG and Tithebarn, entered this scheme with his eyes wide open. He knew full well that the scheme lacked probity when he entered into it … I accept that Mr Elster has a long track record as a property developer with a history of getting planning permission for various projects. I also accept that JDG has been in existence for upwards of 12 years and that prior to the Cheshunt land scheme was involved in a number of property development projects which were wholly unconnected with any land banking activities. Regrettably, however, Mr Elster has now crossed a line in getting both JDG and Tithebarn involved in the Cheshunt land banking scheme. On the evidence before me the Secretary of State has made out its case against each of these companies. For the reasons given, I am satisfied that it is in the public interest that JDG Properties Limited and Tithebarn Trading Ltd be wound up. I therefore propose to make a winding up order against each of these two companies.
Mr Carl Anthony Ballard was disqualified from acting as a director for a period of 14 years commencing on 10 July 2014 as a result of his undertaking to the Secretary of State in respect of his conduct as a director.
Aughton Land Ltd (07317468) was incorporated on 16 July 2010. The registered office of the company from incorporation to 7 April 2015 was 33-35 Cheapside, Liverpool, L2 2DY and from 7 April 2015 to present date c/o Greenfield Recovery Limited, One Victoria Square, Birmingham, B1 1BD. The sole recorded director throughout has been Jon Farley Elster. No secretary is shown to have been appointed.
The company’s share capital is shown to be 4 £1 ordinary shares held by Alan Stockton (2 shares), Giulio Canetti (1 share) and Mr Elster (1 share).
The company’s most recently filed accounts for the year ended 31 July 2013 reported assets of £61,386, creditors of £20,744 and shareholder’s funds of £40,642.
On 10 December 2014 a petition to wind up the company was presented in the High Court by the Commissioners for HM Revenue and Customs.
On 20 March 2015 the company resolved to be wound up voluntarily with reported assets of £34,301 comprising stocks (freehold land) of £37,000 and inter-company indebtedness of 324,301 and liabilities of £41,129 comprising £10,000 owed to Mr Stockton, £6,800 owed to Mr Elster and £24,329 owed to HMRC for corporation tax.
The Insolvency Service administers the insolvency regime, investigating all compulsory liquidations and individual insolvencies (bankruptcies) through the Official Receiver to establish why they became insolvent. It may also use powers under the Companies Act 1985 to conduct confidential fact-finding investigations into the activities of live limited companies in the UK. In addition, the agency authorises and regulates the insolvency profession, deals with disqualification of directors in corporate failures, assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees, provides banking and investment services for bankruptcy and liquidation estate funds and advises ministers and other government departments on insolvency law and practice.
Further information about the work of the Insolvency Service, and how to complain about financial misconduct, is available .
By virtue of the winding up orders all public enquiries concerning the affairs of the companies should be made to: The Official Receiver, Public Interest Unit , 4 Abbey Orchard Street, London, SW1P 2HT. Telephone: 0207 637 1110 Email: firstname.lastname@example.org.
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Published: 5 August 2015
From: The Insolvency Service