The court case brought by Business Secretary Greg Clark against unregulated storage pod investment scheme Store First kicked off in Manchester’s Business and Property Court on Monday.
Representing the Secretary of State, Paul Chaisty QC alleged that Store First raised £206 million from investors on the basis of “misleading information and testimonials”. The Government believes that Store First and related companies should be wound up to protect investors.
Store First insists that the scheme is viable and that winding the business up would cause investors to lose their money.
Mr Chaisty said the company would claim that pods had not been sold since 2016 and Store First outfits were financially sound now.
“We say and will seek to demonstrate that the proposition that these companies are financially sound is absurd. It is a house of cards,” he added.
Mr Chaisty alleged any positive balance sheet figures for various Store First companies had been generated by internal loans between different arms of the business.
He also told the court that any suggestion investors would “face chaos” if their winding-up orders succeeded was hard to accept, as another company Paystore, run by Mr Whittaker’s wife, managed many of the storage pods.
Leading the counter-attack for Store First was Nicholas Peacock QC.
Nicholas Peacock QC, for Store First, said the Secretary of State had sought two major undertakings, from his clients.
One was for a compensation scheme to be established, he told the court, which would result in a payout of £34million, which was not financially viable.
The Business Secretary had also sought to have Mr Whittaker barred from being a company director, said Mr Peacock, which was also unacceptable.
Mr Peacock said 14 other undertakings had been proposed by Store First, including no further pod sales, a “profits top-up” scheme and an offer to manage any of their units in private investor hands.
An annual audited report would also be produced, detailing the company’s performance and leases for any unwanted pods could be surrendered, he said, with the ground rent waived, where applicable.
Exactly what Store First’s proposed “profits top-up” scheme consisted of is not specified, but it is likely to be less generous than the original proposition, under which investors were “guaranteed” a return of 8% for the first two years, and offered “projected” returns of 10% in year 3 and 4 and 12% in year 5 and 6.
It will also be less generous than the £34 million compensation scheme that the Secretary of State demanded, given that Store First says it can’t afford that.
Nicholas Peacock QC has experience in this field, having previously represented the Financial Conduct Authority against Asset Land Investment plc. Asset Land was an illegal “landbanking” unauthorised collective scheme that was shut down by the FCA in 2013. The case went all the way to the Supreme Court, which affirmed that Asset Land was an illegal collective scheme.
Having helped the FCA shut down Asset Land three years ago, Peacock will now be doing his best to ensure the Business Secretary doesn’t do the same to Store First in the next few weeks.
Unlike Asset Land or Store First’s sister scheme Park First, which was coincidentally found to be an illegal unauthorised collective scheme by the FCA in November 2017 and subsequently restructured, Store First has not been deemed an unauthorised collective scheme by any court or regulator. Individual property investments are not subject to UK investment regulation.