A property dealer who was involved in dealings with a controversial property investment company, Home Reit, has been ordered by a court to pay £700,000 to an intermediary.
The case was marked by a tumultuous court hearing where the judge criticised the credibility of several witnesses.
Home Reit is a company aimed at providing sheltered housing for homeless individuals. It has faced significant scrutiny and controversy and was in the process of being wound down.
Christopher Downing, who claimed to have conducted £92 million worth of business with Home Reit, has been severely criticised by Judge Claire Jackson for his approach during the trial.
The judge noted that his evidence was filled with deflections, that he avoided accountability by focusing on perceived issues with the claimant's case, and that he failed to produce expected documents, including his bank statements.
Downing was excoriated by the Judge for his evidence that was “replete with whataboutism”, and for “avoiding answering for his decisions or actions by turning to what he thought were issues with the claimant’s case” and for failing “to produce documents which would be expected from him, especially his bank statements”.
Judge Jackson also pointed out that Downing’s understanding of the Decent Home Standards was objectively incorrect. She further criticised his behaviour during the trial, describing it as "controlling" and reproached him for referring to a company vice-president, Jessica Few, as a "23-year-old girl." The judge emphasised that "Ms. Few is not a girl, she is a woman."
Home REIT, an investment trust, was marketed as the “dream scheme to house 10,000 homeless and needy tenants,” and a sure-fire investment alternative in property. It was a scheme that “took-in” many unsuspecting investors. It is now folding with extensive debts and legal claims.
One alternative to investing directly in property is to put your money into a fund where investors buy and manage properties for you. In theory it takes all the hassle out of managing your own properties, and what could be nicer than investing in a company that is helping the homeless?
Well, what sounded like a safe investment with a headwind behind it – renting funded by the government - was the theory behind investing in Home REIT. The tax efficient property investment model that was to invest in social housing, HMOs specifically aimed at housing homeless people, and funded by the eminently safe Government housing benefit payments sounded like an ideal combination.
It would seem at first sight in the archetypal property guru parlance, “a no brainer” and that’s how most of its investors saw it when they forked out their hard-earned cash at the time the company had its initial public offering (IPO) in October 2020.
Home REIT was launched on the London Stock Exchange in October 2020 and tapped investors for £850 million to build its portfolio of HMO properties with some 12,000 beds.
At that time, during the Covid episode, it turned out to be the largest London IPO offering of any investment trust that year. The company used the capital raised to invest in something like 500 HMO properties, all destined to be let for homeless people around the United Kingdom.
Held in the commercial court of the High Court in Leeds (pictured), this battle was initiated by property intermediary Tim Holmes. He accused Downing and the estate of his late business partner, Meyrick Cox, of failing to pay him £900,000 in fees for services rendered in acquiring properties in northeast England in 2020.
Cox was a former City banker and an old Etonian who once played in the school’s wall game team with Boris Johnson, the former prime minister and was allegedly involved in the deal.
According to the Daily Telegraph, the disputed fees of £700,000 pertained to a transaction involving 161 properties purchased by Downing and Cox for £8.25 million. These properties were later sold to the Home Long Income Fund, the precursor to Home Reit.
The properties were then leased to the Liverpool-based Big Help Project, a charity that was one of Home Reit's significant tenants, but this charity is now under investigation by the Charity Commission. Home Reit and the Home Long Income Fund, which were established by investment manager Alvarium, are both currently under investigation by the Financial Conduct Authority.
Concluding the five-day trial in Leeds, Judge Jackson said that the case was characterised by intense disputes but provided little clarity: “…this is a claim where there has been much heat, but little light, brought to the case by the parties’ conduct”, but she upheld Holmes’ claim of over £700,000 in fees, while throwing out a £200,000 claim relating to a block of flats in Newcastle.
In reaching her verdict she said she had relied on “contemporaneous documents”, including an email headed “Tim — fees” sent in March 2020 by Few to Emma Lloyd, Downing’s lawyer, who then worked at DLA Piper, and copied to both Downing and Holmes.
As reported by the Daily Telegraph, the judge said she had little time for the key witnesses’ evidence. Of Holmes' evidence, she said: “By the end of the first hour of his evidence, it was clear to me that the claimant could talk, and distract, for England.” She thought he was “prone to exaggeration” and a “consummate salesman who is likely extremely effective”, but “when his answers are forensically analysed, they are not always accurate”.
Few, she said, had been “in thrall” to Downing, with her evidence “frequently confusing and confused” and showing “a lack of understanding of employment, agency relations and more generally business and property transactions”.
The judge was also scathing of Peter Mitchell, the Big Help boss, stating that “in the witness box [he] said what he wanted, not caring whether it was accurate or not” and that he would “speak effusively for his friends even if that requires the telling of untruths, until they are his enemies, when he will turn on them with whole-hearted venom”.
She said that she had also considered Downing’s remark during cross-examination that “oh, by the way, I also said that I had autism”.
So, despite the chaotic nature of the proceedings, Judge Jackson upheld Holmes’ claim for £700,000 in fees but dismissed his further claim of £200,000 which related to the block of flats in Newcastle.
The latest from Home Reit, as reported by City A.M. (23 August 2024), is that it has set-out a plan to apply to the Financial Conduct Authority to restore the trading of its shares amidst what its embattled chair admitted is facing “very significant challenges”.
Home REIT said its delayed 2022 audited results are now expected to be published by mid-September. The failure to submit had led to trading being suspended for the investment trust in January 2023.
“Upon publication of the results for all [the delayed periods] these periods, application will be made to the FCA for the restoration of trading of the ordinary shares,” Mr Michael O’Donnell, chair of Home REIT had said.
The trust which was formerly quoted as a FTSE 250 firm has appointed JLL and Allsop as agents to manage its £341m property sell-off.
Mr O’Donnell has admitted that Home REIT has faced “very significant challenges as a result of the failing of its former advisers” Alvarium, for example, the poor condition of its properties. Many of the houses rented privately as opposed to social housing, had tenants not paying any rent or going bankrupt. There had been, he said, “significant mismanagement of properties by non-performing tenants”.
He added that another key challenge had been “connections between tenants (and connections between tenants and vendors) that were not disclosed to the board”, he told City A.M.
Home REIT has faced serious accusations and revelations over conflicts of interest with both the FCA and the Serious Fraud Office conducting ongoing investigations into the company. The SFO had said it cannot confirm or deny investigations.
Last month the firm, which is facing significant debts, had announced that it had no choice but to pursue a managed wind-down, selling off properties to pay back investors and debts.
It seems that these sell offs are enabling Home Reit to settle a significant portion of its outstanding debts, hence its bid to continue trading.
But shareholders are to vote on the proposals to “wind down” and continue property sales at a general meeting on 16 September.
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