Financial Services Authority v Sinaloa Gold Plc & Ors [2011] EWHC 144 (Ch) (25 January 2011)

Financial Services Authority v Sinaloa Gold Plc & Ors [2011] EWHC 144 (Ch) (25 January 2011)

The FSA properly advanced its case for interim relief without needing to plead fraud as a cause of action, as the statutory breaches sufficed. There is a serious issue to be tried regarding contraventions of the FSMA and Regulated Activities Order by all defendants, and the evidence supports a real risk of dissipation of assets. The amount of the freezing order should reflect the total sums received from investors. The court applies the dispensation principle and does not require the FSA to give a cross-undertaking in damages to the respondents, but maintains the standard cross-undertaking in damages in favour of third parties such as Barclays.

Citation
[2011] EWHC 144 (Ch)
Parties
Claimant: Financial Services Authority; First Defendant: Sinaloa Gold PLC; Third Defendant: Mr Glen Lawrence Hoover; Intervener: Barclays Bank PLC
Jurisdiction
England and Wales
Judgment Date
25 January 2011
Procedural Posture
Interim Injunction Application (freezing Order) / Adjourned Hearing of Application to Continue Interim Injunctive Relief
Outcome
Application granted in substantial part
Legal Topics
Freezing Injunctions, Cross Undertakings in Damages, Boiler Room Fraud, Share Sale Scam, Financial Services and Markets Act 2000, Regulated Activities Order, Restitution, Risk of Dissipation, Third Party Rights
Financial Regulation Civil Procedure Injunctions Freezing Injunctions Cross Undertakings in Damages Boiler Room Fraud Share Sale Scam Financial Services and Markets Act 2000 +4 more

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Parties

Financial Services Authority

Claimant

Sinaloa Gold PLC

First Defendant

Mr Glen Lawrence Hoover

Third Defendant

Barclays Bank PLC

Intervener

Procedural Posture

Interim Injunction Application (freezing Order) / Adjourned Hearing of Application to Continue Interim Injunctive Relief

Legal Issues

  1. 1 Whether the FSA properly pleaded and substantiated allegations of fraud against the defendants
  2. 2 Whether there is a serious issue to be tried regarding contraventions of the FSMA and Regulated Activities Order
  3. 3 Whether there is a real risk of dissipation of assets by the defendants

Ratio Decidendi

The FSA properly advanced its case for interim relief without needing to plead fraud as a cause of action, as the statutory breaches sufficed. There is a serious issue to be tried regarding contraventions of the FSMA and Regulated Activities Order by all defendants, and the evidence supports a real risk of dissipation of assets. The amount of the freezing order should reflect the total sums received from investors. The court applies the dispensation principle and does not require the FSA to give a cross-undertaking in damages to the respondents, but maintains the standard cross-undertaking in damages in favour of third parties such as Barclays.

Court Disposition

Application granted in substantial part

Orders

  • Continuation of the freezing injunction against all defendants up to £858,266.97, subject to minor adjustments for sums returned to investors and original subscriber share.
  • No cross-undertaking in damages required from the FSA in favour of the respondents.