Asset Land Investment PLC v Financial Conduct Authority (2016)


Certain "land banking" schemes, under which a company marketed plots of land on sites to investors by undertaking to progress planning procedures at the sites, procure the sites' sale and pay the investors a share of the consideration, were unauthorised collective investment schemes within the Financial Services and Markets Act 2000 s.235.


A company appealed against a decision ([2014] EWCA Civ 435, [2015] 1 All E.R. 1) that "land banking" schemes it had operated were unauthorised collective investment schemes within the Financial Services and Markets Act 2000 s.235.

The company had acquired land and divided it into plots, which it sold to investors. The company was not an authorised person under the Act. The Financial Conduct Authority alleged that the schemes were collective investment schemes. The judge accepted investors' evidence that they were told that the company would have the sites re-zoned for residential building or secure planning approval, and that they would receive a share of the proceeds of sale once developers bought the sites. He held that there had been "arrangements" within s.235(1) as the investors had described; that the "property" for the purposes of s.235(1) was each site as a whole; on that basis, that no investor had had control over the site as a whole within s.235(2); and that the property had been managed by an operator, namely the company, within s.235(3)(b).

The company argued that

(1) the judge had erred in his identification of the component parts of the arrangements, and that the focus should have been on the arrangements as made by the operator, including the documents prepared for that purpose, rather than as the investors had perceived them;

(2) the relevant "property" for the purposes of s.235(1) was the aggregate of the interests owned by the individual investors, not the site as a whole, and it was they who had ultimate control over the management of the property, in the same way as did the individual tenants in a block of flats, where there was no collective investment scheme.


(1) The content of the arrangements had been a matter of fact for the judge. The distinction between the arrangements as made by the operator and others' perception of the arrangements was artificial and unrealistic. The judge had been entitled to find that the understandings of the investors had conformed to what was intended by the operator. He had not been required to give special weight to documents without regard to their context. The judge had concluded that arrangements within s.235 had been made when plots were marketed and investors paid their deposits, the object of the arrangements being that the company should achieve a sale of the site after seeking to enhance its value by improving the prospects for housing development, the price to be shared between the owners. That conclusion was amply supported by the evidence and disclosed no error of law (see paras 54-55, 92 of judgment).

(2) The "property" for the purposes of s.235(1) was each of the company's sites taken as a whole, not the individual plots. The distinction between the "property" being the site and it being the aggregate of the plots was not one of substance. The property for the purposes of s.235(1) was the whole site. That definition remained the same in principle throughout the section. However, management control under s.235(2) and s.235(3) could be achieved in different ways. It was necessary to consider the mechanisms by which the participants on the one hand or the operator on the other managed, or had management control of, the property. "Control" within s.235(2) was not confined to legal control; it had to refer to the reality of how the arrangements were to be operated, which could or could not involve rights or powers enforceable in law, Sky Land Consultants Plc, Re [2010] EWHC 399 (Ch) applied. The judge had found that the facts of the instant case meant that in substance each investor got rights under a scheme that provided for someone else to manage the property. He had clearly been entitled to do so. The management of the property had comprised the steps necessary to obtain planning permission and secure a sale. The investors had no part in or control over those activities. Even if attention was directed to the rights attached to individual units, there was no parallel with individual lessees in a block of flats. They had control over the management of both their own flats and the common parts. The investors' ownership of the individual units was not linked to any exercise of management control. Control of the management activities for the property as a whole had been with the company. Although its control had not been underpinned by legal rights over the units, that did not affect the substance of the arrangements (paras 56-63, 93, 96-102). The judge had considered that s.235(2) required that investors had not actually exercised control. "Control" of property meant the ability to decide what was to happen to it. Either the arrangements conferred control on the investors or they did not. That was necessarily to be viewed from the time the arrangements were made. The test could not depend on what happened afterwards. The question was in whom control would be vested were control to be required, Brown v InnovatorOne Plc [2012] EWHC 1321 (Comm)doubted (para.94).