Supreme Court

Financial Conduct Authority v Asset Land Investment plc and another

[2016] UKSC 17; [2016] WLR (D) 206

2016 Jan 13, 14; April 20

Lord Mance, Lord Clarke of Stone-cum-Ebony, Lord Sumption, Lord Carnwath, Lord Hodge JJSC

Financial services — Regulated activities — Collective investment schemes — Related companies not authorised to carry on regulated activities buying agricultural land and offering individual plots for sale to investors on expectation of rise in value should land be reclassified for housing use — Evidence of companies representing they would facilitate change of use and procure purchase of each whole site by developer allowing investors share in profit — Investors signing contacts of sale disclaiming any intent by companies to procure change of use and retaining investors’ freedom to sell or retain own plots as they wished — Financial Conduct Authority alleging company in each case carrying on “arrangements in respect to property” amounting to collective investment scheme in breach of general prohibition — Judge finding intent of parties being that companies negotiate with planning authorities and coordinate sale of each whole site with agreement of all investors — Whether “arrangements in respect to property” in relation to whole site — Whether participants in scheme lacking day-to-day control over management of property — Whether property managed as whole by or on behalf of relevant company — Whether companies operating collective investment scheme — Financial Services and Markets Act 2000 (c 8), ss 19, 235


The first and third defendant companies acquired agricultural land at various sites, which they sub-divided into small plots and which individual investors then purchased in the hope that the land in question would be re-classified for residential use, allowing the land to then be resold at a profit. The contract between the companies and each investor disclaimed any intent by the companies to offer investment advice and declared that the company would not itself be applying for planning permission or providing any other services amounting to “regulated activities” under the Financial Services and Markets Act 2000, which it was not authorised to conduct. The Financial Services Authority however brought a claim seeking, inter alia, a declaration that the scheme was a regulated activity under the 2000 Act, namely a collective investment scheme by reason of being “arrangements with respect to property” where the investors did not have “day-to-day control over the management of the property” and which was “managed as a whole by or on behalf of the operator of the scheme”, within the meaning of section 235(1)(2)(3)(b) of the Act. The judge granted the declaration notwithstanding that each investor retained the right to retain or sell the land as he or she wished, having found as a fact that investors’ understanding was that the companies would work with the planning authorities to enhance the prospects of housing development and that each whole site would then be sold as one unit with investors receiving a share of the total consideration paid by the purchaser, and that consistently with such understanding they would not in practice exercise their right to keep their individual plot or dispose of it in some other way. On appeal by the third defendant and its director, the fifth defendant, the Court of Appeal upheld the judge’s declaration.

On appeal by the third and fifth defendants—


Held, appeal dismissed. Where a company owing a site sold individual plots to investors on the basis that it would thereafter achieve a sale of the site after seeking to enhance its value by improving the prospects for housing development, with the price to be shared between the owners, the relevant “property” for the purposes of section 235(1) was the company’s site taken as a whole, not the individual plots, since that was the property the sale of which was to lead to the profits which were the object of the exercise, and which brought the scheme within the scope of the section. The term “have … control over the management of the property” in section 235(2) was not a technical term but, in context, was to be taken to refer to the reality of how the arrangements were to be operated, which might or might not involve rights or powers enforceable in law. On the judge’s findings, the reality was that the relevant management of the property as a whole comprised the steps necessary to obtain planning permission and to secure a sale to a developer and it was no part of the arrangements that the investors should have any part in, or control over, those management activities. The investors’ ability as individual owners to determine ultimately whether or not to participate in a sale could not be equated with control of its management in the meantime. Similarly, for the purposes of section 235(3)(b), control of the management activities for the property as a whole lay with the company, which was acting as the operator of the scheme, not as mere managing agent for the individual owners. The fact that its control was not underpinned by any legal rights over the units making up the property did not affect the substance of the arrangements. Accordingly, the schemes in question had been collective investment schemes (post, paras 56–62, 92–93, 95, 99–102).

Cases Considered

In re Sky Land Consultants plc [2010] EWHC 399 (Ch); Brown v InnovatorOne plc [2012] EWHC 1321 (Comm) and Financial Conduct Authority v Capital Alternatives Ltd [2015] Bus LR 767, CA considered.


Michael Blair QC and Robert Purves (neither of whom appeared below) (instructed by Morrisons Solicitors LLP (who were not instructed below) for the third and fifth defendants.

Nicholas Peacock QC (who did not appear below), Tim Penny QC and Philip Hinks (instructed by Director of Enforcement and Market Oversight, Financial Conduct Authority) for the authority.

Reported by: Colin Beresford, Barrister

© 2016. The Incorporated Council of Law Reporting for England and Wales.