A law firm which presided over the disappearance of €9.8m (£8.4m) from a Global property fund sold through IFAs has been told it must pay back the missing money, a judge ruled today.
In a case bought by Guernsey-based Stirling Mortimer Global Property fund at the High Court in London, Judge Mrs Justice Gloster found against international law firm ELS and its former partner, Joe Ezaz.
Ezaz, who was not present in court, is accused of "misappropriating" the money by moving it from the client account of the law firm and using it for purposes unrelated to the fund.
Stirling Mortimer is locked in a different legal dispute with Ezaz for fraud, as well as with separate firm European Legal Solutions S.L.
ELS was in charge of holding the €9.8m in an Escrow account. It was supposed to return the cash as a rebate when the fund's property manager failed to hit certain sales targets on 31 January 2010.
The Stirling Mortimer board received regular updates and confirmations from ELS up to and including 15 January 2010 that the cash amount was held in an Escrow and would be paid to the fund.
ELS initially claimed the delay was due to "administrative formalities" arising from anti-money laundering procedures by the bank in Spain holding the Escrow Cash Amount.
But in a fund update in August, Stirling Mortimer revealed it was informed on 29 January by ELS that Ezaz had allegedly "misappropriated" the money.
The board decided not to suspend the shares listed on the CISX, based on a view taken in February that as the funds are now closed to new investment "it would not be advantageous to the fund or to the shareholders to seek a suspension of the fund's shares at this time".
It says it will keep the decision under regular review.
The Stirling Mortimer Property fund bought various "right to purchase" (RTP) contracts in Spain, Morocco and Cape Verde off the west African coast, for resale as "fractional ownership" rights, similar to property time-shares.
Law firm Regulatory Legal, which is acting on behalf of about 70 investors in the fund, says: "This ruling clarifies the position for investors who will be pleased to see the £10m is payable by ELS and Mr Ezaz.
"The main problem is going to be recovery of funds. Our concern is for our investor clients who entered these property funds particularly when they were promoted as low risk investments"
Cautious, Balanced & Dynamic Growth
Cowardly, boring or sensible
Latest news and analysis
‘Most significant’ upgrade since launch
Changes happening over coming months