RSS

BANKRUPTCY PROBE: Creditors & law firms in judicial conflict case linked to top judge – were excluded from sequestration by Trustee handed role by law firm linked to bust £400M Heather Capital Hedge Fund, & Court of Session illegal fee deal judgement

01 Oct

QC branded Levy & Mcrae ‘untrustworthy’ in £6m case. A LAW FIRM branded “untrustworthy” by a senior QC, and which once stood accused of transferring millions linked to the collapsed £400m Heather Capital Hedge Fund – is now at the centre of a case linked to judicial conflicts of interest, and the resolution of two remaining issues in a controversial sequestration linked to Scotland’s top judge.

Levy & Mcrae – the Glasgow based law firm who were recently found to have constructed an illegal fee agreement along with Advocate Jonathan Brown – in a case involving A&E Investments & businessman Robert Kidd – are now accused of appointing a trustee – Kenneth Pattullo of insolvancy practitioners Begbies Traynor – who hindered and excluded creditors attempts to secure consideration of legitimate debts including legal fees & legal funding of Mr Nolan’s case.

Files now handed to the ongoing media investigation – reveal that two remaining issues of the long running Nolan v Advance case – relate to the deliberate exclusion of creditors in the sequestrations of Mr Nolan and his partner – after their £6m action against Advance Construction – heard by Lord Woolman in the Court of Session – scored a victory on principle – but lost out on legal expenses.

The documents – released by the Accountant in Bankruptcy – reveal creditors – including solicitors who provided legal services, and the providers of significant legal funding which enabled Mr Nolan to go into the Court of Session and secure the win against Advance Construction – still await a consideration of sums due to them from the sequestrations.

However, further enquiries and responses from the Accountant in Bankruptcy now indicate the Trustee Kenneth Pattullo – who was directly appointed by Levy and Mcrae at Hamilton Sheriff Court in the sequestrations of both Mr Nolan and his partner – did not take account of either of the significant debts – which comprise most of Mr Nolan’s legal fees and legal expenses.

Instead – records show that Mr Pattullo and others at Begbies Traynor – did not reply to enquiries from legitimate creditors and solicitors – and focused on selling off a portfolio of properties including substantial plots of land in Wishaw, and a valuable farm – to pay Mr Pattullo’s own fees, and an offshore vulture fund known as Promontoria – which bought additional debt incurred by Mr Nolan and his partner from the secured lender – The Clydesdale Bank.

In a response to a request for review – Alex Reid of the AIB commented “Representation has been received highlighting that neither Mr Nolan nor his solicitor [redacted] received notification of any meeting of creditors. In accordance with Section 21A of the Act the trustee must give notice to every creditor known to him, at the time, whether or not they intend to hold a creditor meeting…”

However, it can be revealed the AIB have previously been presented with copies of confidential emails from law firms to Mr Pattullo’s office – showing multiple requests by lawyers to contact Begbies Traynor to establish communication and a consideration of positions regarding legal fees, and legal funding provided to Mr Nolan for his court case.

The new evidence raises questions of why Begbies Traynor did not acknowledge creditors attempts to communicate with the Trustee while there are multiple references within the released files to legal fees geneerated by Levy & Mcrae for their client – Advance Construction (Scotland) Ltd.

The files also slow some Edinburgh based law firms who did act on behalf of Mr Nolan were included in the sequestration – while other law firms, creditors and providers of legal funding do not appear.

With over 1000 documents released by the AIB currently being studied – it can now be reported that the two remaining creditors have now secured significant backing to present their case for consideration of debts and repayment to the Accountant in Bankruptcy – who are expected to remain involved in this process for some time.

Within the sequestration files released by the Accountant in Bankruptcy, legal fees for Advance Construction appear to amount to around £212K – which is in the form of legal fees the company are alleged to have paid Levy & Mcrae, and Gavin Walker & Roddy Dunlop QC.

However – legal sources close to the case have raised questions over the ‘small’ sum of £212K – given the length of the case and lawyers who represented Advance – such as Peter Watson, Jamie Robb and Ewen Campbell, with the addition of Gavin Walker QC and Roddy Dunlop – the current Dean of the Faculty of Advocates.

To compare – the legal fees of around £212K used by Advance Construction to sequestrate both Mr Nolan and his partner are much less than Mr Nolan’s legal costs – which are estimated at up to £500,000.

Mr Nolan’s legal fees including include hiring of construction site plant & equipment, use of multiple law firms including Biggart Baillie, Tods Murray, and John Campbell QC, advocate Craig Murray, solicitor Gavin McPhail and additional inspection and survey reports on contaminated material which culminated in Advance Construction being forced to admit in court they had dumped the contaminated material  illegally on Mr Nolan’s land.

And, while it is a matter of record the pursuer – Mr Nolan – won his action against Advance Construction in the Court of Session – his own QC – John Campbell – inexplicably withdrew his own client’s claim for legal expenses – which would have seen most or all of the legal fees and legal funding paid by the defenders had Mr Campbell returned to court for the expenses hearing.

A law accountant who has studied the case is of the view that had Mr Nolan’s counsel – John Campbell QC made the usual court claim for legal expenses against Advance Construction – Lord Woolman or any judge hearing the exepnses claim would have granted much of Mr Nolan’s legal expenses along with his victory in the case against the defenders – Advance Construction.

However, Mr Campbell did not follow through with instructions to appear at an expenses hearing and lodge a full claim for Mr Nolan’s legal expenses.

Mr Campbell has not offered any explanation for his refusal to lodge an expenses claim for his client’s winning case, and instead was found to have withdrew much of the claim without any instruction to do so.

A full report on how John Campbell QC reduced his own client’s financial claim almost to zero and without any instruction or consultation – can be found here: CASHBACK QC: Legal regulator’s files reveal senior QC reduced claim without instructions, withheld key evidence & witnesses including Cabinet Secretary from Court of Session case

A further investigation of John Campbell’s involvement in the case revealed the senior QC signed a no-win-no-fee agreement with his client Mr Nolan – then went back on it’s terms after Campbell refused to appear for the expenses hearing and the case had concluded.

A full investigation of Campbell’s fee scam and the Faculty of Advocates role in concealing undeclared cash payments to Campbell is reported in further detail here: CASH ADVOCATE: £9K consultations & £75K meetings – Edinburgh Quaich Project Charity QC Boss scammed clients on no-win-no-fee deal – Faculty of Advocates files reveal extent of Advocates cash-for-fees HMRC tax dodge scam

Ironically, during discussions with his clients – John Campbell himself described Levy and Mcrae as “untrustworthy” and

An earlier investigation revealed Trustee Kenneth Pattullo of Begbies Traynor was directly appointed by Levy and Mcrae at Hamilton Sheriff Court in the sequestrations of both Mr Nolan and his partner.

Documents previously published revealed Levy & Mcrae altered the appointment of the AIB in the sequestration of Mr Nolan’s partner to that of their own preferred choice – Mr Pattullo.

Now – fresh questions over the conduct of the Accountant in Bankruptcy have now been raised after documents revealed Levy & Mcrae requested the AIB become Trustee in the sequestration of Mr Nolan – in Jamuary 2015.

The letter and petition, published here:  Petition to appoint AIB January 2015 Jamie Robb Levy Mcrae reveals Jamie Robb of Levy & Mcrae asked the AIB to assume the position of Trustee in their sequestration of Mr Nolan in January 2015.

Records then show Levy & Mcrae went on to appoint Mr Pattullo in the same unusual manner in Mr Nolan’s sequestration – and the AIB did nothing in either case – despite having the power to intervene and call a meeting of all interested parties including debtors & creditors alike to find a way forward after the court’s alteration of an appointment where the court did not appear have the power to act.

A previous report published material which questioned the court’s improper use of powers to switch out Trustees in the sequestration of Mr Nolan and his partner from the Accoutant in Bankrutpcy to Mr Pattullo, here: FIRE SALE: AIB face sequestration probe as files reveal Trustee was paid £20K by vulture fund to sell home & firebombed farm five days after targeted attack on couple at centre of land case linked to top Scots judges, an ex-Sheriff, an asbestos dumping building company & law firm Levy and Mcrae

And, an earlier investigation revealed Scotland’s top judge – Lord Carloway (Colin Sutherland) – deliberately concealed his own links to this case while he faced questions in the Scottish Parliament from MSP Alex Neil and members of the Public Petitions Committee, here: JUDGE OF CONFLICT: Top judge who attacked MSPs over judicial interests probe – failed to declare relative’s role at law firm targeting MSP’s constituents’ home & farm in £6M court case linked to Lord Malcolm conflict of interest scandal

Nolan v Advance Construction Scotland Ltd [2014] CSOH 4 CA132/11 is the same case which exposed serious conflicts of interest in Scotland’s judiciary – notably where Lord Malcolm (Colin Campbell QC) failed to disclose on multiple occasions – the fact Lord Malcolm’s son – Ewen Campell – represented the defenders in the same court.

The investigation into the Lord Malcolm case of serious failures to declare conflicts of interest, is reported in further detail here: CONFLICT OF INTEREST: Papers lodged at Holyrood judicial interests register probe reveal Court of Session judge heard case eight times – where his son acted as solicitor for the defenders.

LAW FIRM AT CENTRE OF ILLEGAL FEES & CONFLICT OF INTEREST CASE:

Earlier this year, Levy & Mcrae – the same law firm who masterminded the Advance Construction case in the Court of Session, and the resulting sequestrations of the pursuers in a case now linked to Scotland’s top judge Lord Carloway – were found by Lord Doherty to have constructed an illegal fee agreement after a ruling by Lord Doherty.

Levy & McRae had billed their former client – businessman Robert Kidd the seven-figure sum after representing him in a successful damages claim against another firm of solicitors.

The £19 million settlement figure was paid to Levy & Mcrae – after the firm deducted it’s legal fees which included £3million of “success fees” for winning the case.

Mr Kidd then launched a legal action against Levy & McRae, claiming it should not have charged him the success fees on top of its legal fees.

The case was heard by Lord Doherty – who later ruled the fees were “illegal and unenforceable”,

The judge said the fees breached a legal principle designed to prevent conflict of interest when a lawyer has a financial stake in the amount a client gets in compensation.

The £6million sum included a basic fee to Levy & McRae of £2.1million plus a success fee of £1.89million while advocate Jonathan Brown was paid £1.1million plus a success fee of £990,000.

Lord Doherty said: “The substance of what was agreed was that the defenders’ (Levy & McRae and Jonathan Brown) remuneration would increase in proportion to the sum recovered.

“That gave them a clear ­pecuniary interest – a stake – in the amount recovered.

“In my view, that pecuniary interest created a conflict of interest which gave rise to an unacceptable risk that the proper administration of justice might be obstructed.”

Levy and Mcrae have lodged an appeal against the decision by Lord Doherty.

The full judgment from Lord Donerty is here: A&E Investments Robert Kidd v Levy & Mcrae and Jonathan Brown – Lord Doherty 2020csoh14

And more a recent report in the Sunday Post Top advocate found guilty of “unsatisfactory professional conduct” after charging client extra fee of almost £1 million reports the Advocate Jonathan Brown was found guilty of “unsatisfactory professional conduct” after charging his client – Robert Kidd an extra fee of almost £1 million for representing him in a successful £20m damages action against another firm of solicitors.

The case arose after Mr Kidd hired lawyers, including Mr Brown, to sue his former solicitors over the sale of his oil firm ITS. Mr Kidd said Mr Brown had failed to tell their QC Andrew Smith details of the arrangement which brought his total bill to £2m.

The Sunday Post further reported that the Faculty of Advocates Disciplinary Committee has since made a finding of unsatisfactory professional conduct against Mr Brown, ruling that he should have informed Andrew Smith QC that he had an arrangement with Mr Kidd by which his fee increased according to the amount recovered from the opponent, and how the amount on which the success fee was measured should be calculated.

Mr Kidd’s spokesman Jim Diamond told the Sunday Post: “We’re very happy with the decision of unsatisfactory professional misconduct. We want the success fee repaid in full plus interest at 8%. We will also be seeking repayment of our legal fees in this matter which could amount to more than £100,000.”

Levy & Mcrae – Court papers reveal their part in Heather Capital hedge fund writ

Detailed documents submitted to the Court of Session as part of a now abandoned writ against Levy & Mcrae and their former partner Peter Watson – revealed the following acts attributed to Levy & Mcrae and Heather Capital:

[21]      In the Levy Mcrae case:

  • On 4 January 2007, Heather Capital transferred £19 million to its client account with Levy & Mcrae (Lord Doherty paragraph [5]).

  • On 24 January 2007, Heather Capital transferred £9.412 million to its client account with Levy & Mcrae (Lord Doherty paragraph [5]).

  • The money was intended to be loaned to a first level SPV Westernbrook Properties Ltd (WBP) for onward lending to second level SPVs (Lord Doherty paragraph [5]).

  • On 9 January 2007, Levy & Mcrae transferred £19 million to a Panamanian company (Niblick) owned and controlled by Mr Levene:the money was not therefore transferred to WBP.The transfer was undocumented and without security (Lord Doherty paragraph [5], and Condescendence 6 and 17, pages 20 and 44 of LM reclaiming print).

  • By a memorandum dated 17 March 2007, Heather Capital’s auditors KPMG “identified a number of concerns relating to the documentation provided in respect of these loans”.Further work and information was required (Condescendence 5, page 13 of Levy & Mcrae reclaiming print).

  • On 29 March 2007, Levy & Mcrae transferred £9.142 million to Hassans, solicitors, Gibraltar, under the reference “Rosecliff Limited” (a company controlled by Mr King):the money was not therefore transferred to WBP.The transfer was undocumented and without security (Lord Doherty paragraph [5], and Condescendence 6 and 17, pages 20 and 44 of LM reclaiming print).

  • In April to June 2007, amounts equivalent to the loans thought to have been made to WBP (including accrued interest) were “repaid” to HC via Cannons, solicitors, Glasgow.The directors were unable to ascertain the source of these repayments (Lord Doherty paragraph [7]).

  • Approaches made by Heather Capital to Mr Volpe and Triay & Triay, a firm of solicitors in Gibraltar, were met with a total lack of co-operation (Lord Doherty paragraph [8]).

  • At a board meeting on 6 September 2007, “KPMG could not approve HC’s accounts … Santo Volpe had executed certain loans to SPV companies where non‑standard procedures had been followed which meant that inadequate security had been given for some loans … Gregory King stated that the loans to the SPVs had been repaid in full in May 2007” (Condescendence 5, page 13 of Levy & Mcrae reclaiming print).

  • By email to a non‑executive director of HC (Mr Bourbon) dated 7 September 2007, Mr McGarry of KPMG referred to the previous day’s board meeting, and expressed concerns about the situation.He asked for further information, namely “all possible evidence regarding the movement of monies out of Heather Capital into these SPVs and onwards to whatever purpose the funds were applied – ie, sight of bank statements, payment/remittance instructions, certified extracts from solicitors clients’ money accounts etc”.(It should be noted that, contrary to HC’s averment in Condescendence 5 at page 13C‑D of Levy & Mcrae reclaiming print, the email did not restrict the inquiries requested to “explaining what information was required from Santo Volpe”:the request was much broader.)

  • In October 2007 the non‑executive directors of HC met with the Isle of Man Financial Services Commission (FSC) to discuss “the issues” (Lord Doherty paragraph [8]).A director also disclosed the suspicious activity and Mr Volpe’s obstruction to the Isle of Man Financial Crime Unit (FCU), who said they would investigate (Condescendence 5 page 14 of LM reclaiming print).The auditors KPMG carried out an additional full scope audit.

  • By letter dated 18 October 2007, FSC wrote to the directors of HC setting out further information which they required.

  • By letter dated 26 November 2007 Mr King advised the HC board that “some sort of fraud had been deliberately introduced with invalid land registry details on a number of the loans”.He stated that he had applied pressure to Mr Volpe and Mr Cannon, whereupon there had been “full repayment of the loans with relevant interest” which meant that “investors were secure”.

  • On 17 December 2007, KPMG signed the accounts and added a completion note using language such as “The risk of fraud increased to high as a result of the documentation issues surrounding the SPVs, where some form of fraud appeared to have been attempted”.In their audit report opinion, they stated “We have been unable to verify where funds advanced to the SPVs were invested.In addition, we were supplied with false documentation in relation to the SPVs which appears to have been a deliberate attempt to mislead us.Given these loans were repaid in the period, we consider that the effect of this is not so material and pervasive that we are unable to form an opinion on the financial statements [opting instead for express qualifications that loan and security documentation could not be validated] … There is uncertainty as to where the monies lent to the [SPVs] were then subsequently invested … Investigations continue to determine what party (or parties) were involved in and were accountable for these events, and whether any action should be taken against them …” (Lord Doherty paragraph [9]).

  • By letter to HC dated 4 January 2008, KPMG gave serious warnings about their inability to validate loan and security documentation, and lack of evidence as to the purpose for which the money advanced to SPVs was applied.In their words:

“ … Our report is designed to … avoid weaknesses that could lead to material loss or misstatement.  However, it is your obligation to take the actions needed to remedy those weaknesses and should you fail to do so we shall not be held responsible if loss or misstatement occurs as a result … [Having explained the disappearance of the funds and the apparent repayments, on which legal advice had been received, KPMG warned] … these matters are extremely serious … an attempted fraud appears to have been perpetrated … We would recommend that the Board continue their investigation into this matter and formally document their decision as to whether or not to inform the criminal justice authorities …”

A full copy of a court opinion detailing these and other claims with regards to a further case against Burness Paull LLB  – which coincidently also collapsed earlier last year – can be viewed here: Court of Session allows proof against Levy & Mcrae and Burness Paull LLP in Heather Capital case as liquidators attempt to recover cash from collapsed £280m hedge fund.

 
Leave a comment

Posted by on October 1, 2020 in Blogroll

 

Tags: , , , , , , , , , , , , , , , , ,

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

 
%d bloggers like this: