Bill Peters hoped that owning half of an apartment in the Portuguese Algarve would be his route to sun-filled worry-free holidays.
Instead, his purchase has created a labyrinthine quagmire of confusion.
The labyrinth extends far beyond Portugal to England, Guernsey and the British Virgin Islands. Guernsey and the British Virgin Islands (BVI) are both tax havens offering secrecy, and the BVI especially are a popular place for money to be obscured. Details are occasionally leaked, as in the Panama Papers, offering a tantalising glimpse of who keeps assets hidden from tax authorities.
The Panama Papers show that companies involved in Bill Peters’ property purchase are sequestered in the British Virgin Islands, a territory in the Caribbean scoured and scarred by hurricanes Irma and Maria in September 2017.
Bill, who lives on Merseyside, would like to unravel the tortuous web of companies which, he believes, are keeping him in the dark about his property rights, while sending out bills for he knows not what.
In May 2015 he signed a purchase and sale agreement for two quarter shares of Apartment 2A, Block 37, Plot F, Várzea da Luz. The seller was William Hurley of Chillenden, Kent. Bill Peters paid €90,000 and looked forward to holidaying on the Algarve.
What exactly did Bill Peters buy? According to purchase and sale agreement, it was shares 3 and 4 in a company called Isaura Properties Ltd.
Isaura Properties was then registered at 208a Telegraph Road, Heswall, Wirral, but is now at PO Box 5, Willow House, Oldfield Road, Heswall, Wirral. This address, a private house barely visible behind high walls and stout gates in a quiet road, is the home of an accountant called David Leslie Bates. Mr Bates has featured on West Wales News Review before, in an administrative connection with The Corran Resort and Spa, Laugharne: https://westwalesnewsreview.wordpress.com/2017/01/27/sunk-investments-drown-in-carmarthenshire-marsh/. Investors lost £17 million in the venture.
The house in Oldfield Road, Heswall, the unlikely headquarters of a fractional property business empire. Photo: Google
The purchase and sale agreement states that Isaura Properties is the legal owner of Apartment 2A. This company is non-trading and has no assets, according to records at Companies House. The directors are Fractional Secretaries Ltd, David Leslie Bates, Julia Rachel Day, and Lucy Ann Whitfield, all at PO Box 5, Willow House. Previous directors include Nicholas Robert Hannah of La Hougette House, Route des Deslisles, Castel, Guernsey, and three more ‘Fractional’ companies – Fractional Administration Services Ltd, Fractional Administration Solutions Ltd and Fractional Nominees Ltd.
Nicholas Robert Hannah was fined £35,000 by the Guernsey Financial Services Commission in November 2016, and barred from directorships for five years, because he made false statements and was negligent in the management of Guernsey-registered Marlborough Trust Company Ltd. Fellow director Adrian Bradley Howe received the same penalty, and Marlborough Trust Company was fined £100,000. The Marlborough Trust Company is implicated in the 2009 failure of Arch Cru, a group of funds which invested £400 million on behalf of around 20,000 private investors. Marlborough Trust Company was, it appears, ultimately responsible for investment decisions over the assets underlying 23 of the Arch Cru funds held in SPVs – special purpose vehicles – for property, wine, and a company owning other companies which invested in ships.
Carbon credit and wine scams
Marlborough Trust Company appears to operate on the wilder margins of the investment world, and features in a report by the UK Government’s Insolvency Service in November 2015. After investigation by the Insolvency Service, the High Court ordered the liquidation of eight interlinked companies which had been operating scams selling carbon credits called carbon benefit units, and wines. Marlborough Trust Company, and sister company Marlborough Nominees Ltd, were directors of two of the eight companies, Consolidated Carbon Projects Ltd and WK Investments Holdings Ltd, both registered in the British Virgin Islands.
The Insolvency Service reported that “Marlborough Trust Company Ltd based in Guernsey made various representations as to the position of Consolidated Carbon Projects Ltd and WK Investments Holdings Ltd and requested the petitions against these two companies be withdrawn by the Secretary of State“. Who represented Marlborough Trust at the (unsuccessful) petition hearings?
The Insolvency Service said: “David Bates of Marlborough Trust was present at the hearing of the petitions.”
As for Isaura Properties Ltd, this is a company limited by guarantee and has no shareholders. It seems to fit the Oxford Dictionaries’ definition of a shell company, “an inactive company used as a vehicle for various financial manoeuvres or kept dormant for future use in some other capacity”.
So where did Bill Peters’ €90,000 go? William Hurley says he received just over €75,000, but that leaves nearly €15,000 footloose. “William Hurley told me that some went to estate agents in Portugal, Casas do Barlavento at Lagos; some to lawyers; and €2,000 to ‘fractional owner’,” said Bill Peters. Could that have been Fractional Administration Services Ltd, at that time still a director of Isaura Properties? (It is legal for companies to be directors of other companies, but not transparent or, one suspects, conducive to good management.)
Bill Peters made his purchase despite not receiving clear answers from his lawyer in Portugal, Cristina Marcelino, to questions such as “Is there any debt or lien associated with the property?” A lien is a right to keep property belonging to someone else who owes them money, until the debt is paid.
He learnt this year, from Mr David Bates (as a director of Fractional Administration Services Ltd), that there was at least one debt relating to his fractions of the apartment, £945 in administration fees.
Although Bill Peters bought what he thought was a half share in the apartment back in 2015, the details were apparently not transmitted to the Fractional Ownership Consultancy Ltd (FOC), registered on Tortola in the British Virgin Islands. On August 8 2017 FOC sent, from its office in Guernsey, a bill for £1,195 to Mr William Hurley, the previous ‘owner’, as his portion of moneys due to FOC from Isaura Properties Ltd in 2016, 2017 and 2018. Isaura Properties Ltd is the dormant company which is the legal owner of Apartment 2A. The money was to be paid into Barclays Bank in Ellesmere Port, Cheshire.
Why is FOC demanding money for Apartment 2A? The ‘owner’ of another Algarve property received a document from FOC headed Oceanico – Members FAQ, which indicates the answer.
The background of Oceanico Group is that it acquired land in Portugal and other tourist venues to build resorts with a focus on golf. Apartment 2A is part of an Oceanico development. The Portugal-registered group was created in 2006 by Gerry Fagan from Drogheda, Ireland and Simon Burgess from the UK. At the time Simon Burgess, who had been based in Northwich, Cheshire, was serving a five-year disqualification from holding directorships in the UK, running from February 2003 until February 2008, according to the Irish Independent. Oceanico had troubles from the beginning, selling properties and taking in deposits before it had planning permission., 
Oceanico’s irrepressible (some would say irresponsible) optimism was dashed against the rocks of bank failure in 2008. Anglo-Irish Bank, to which Oceanico was heavily indebted, failed and was nationalised by the Irish Government. The Oceanico loans were passed to Ireland’s National Asset Management Agency, which in 2015 instructed prestige estate agents Savills to sell Oceanico’s Portuguese portfolio.
The background of banking collapse makes it more likely that companies with interests in the distressed real estate would seek to recoup losses in any way possible. This brings us back to the FAQ document from the Fractional Ownership Consultancy, which said that it is:
“the owner and operator of the fractional system used by Oceanico. FOC is based in Guernsey, so it has arranged for all the UK work to be carried out by SMD & Co under a contractual arrangement. This is because the UK companies used in the fractional system are required to have a UK registered office, directors and secretaries which SMD provides from its office in Heswall, Wirral.”
The document continued: “SMD & Co is paid for its services by FOC, and FOC recover those costs through the contractual arrangements with Oceanico, and, ultimately, the fractional owners.”
“SMD & Co is owned, controlled and managed by David Bates, a chartered accountant (ICAEW 7600847) and chartered tax adviser (CIOT 135624). David is also a minority shareholder in FOC, having been involved with that business since its commencement.”
So FOC owns the fractional sale system, which employs companies limited by guarantee (without shares or shareholders) as the legal owners of the properties in which fractional interests have been sold. In Bill Peters’ case, this is Isaura Properties Ltd.
For Isaura, the company secretary is Fractional Secretaries Ltd, but SMD Secretaries Ltd is the company secretary for Fractional Secretaries Ltd. These companies are so similar! David Bates is secretary and director of SMD Secretaries Ltd and a director of Fractional Secretaries Ltd. Julia Day and Lucy Whitfield are directors of both.
Several connections between the Fractional Ownership Consultancy and the Marlborough Trust Company (whose motto could well be ‘wing it and pray’) include David Bates – as a shareholder in FOC, and representative of Marlborough Trust petitioning against the compulsory winding up of Consolidated Carbon Projects Ltd and WK Investments Holdings Ltd, for both of which Marlborough Trust Company was a director. Marlborough Trust Company itself, and Nicholas Hannah, are both among former directors of the FOC.
No wonder Bill Peters cannot find out exactly what he owns, who is entitled to charge him, and for what. It appears that he does not have many rights at all. His fractions of Apartment 2A are dispensed by legal owner Isaura Properties Ltd, which wrote for itself Articles and Memorandum of Association greatly in favour of itself, not the fraction holders – who are not directors of the company. The directors on incorporation in 2006 were Fractional Administration Services Ltd and Fractional Nominees Ltd, and the secretary was, as now, Fractional Secretaries Ltd, all at Mr Bates’ Post Office Box address in Heswall.
The directors can suspend or vary the rights of fraction-holding members for multiple reasons including not paying money when it is demanded, and for behaviour which directors think is detrimental to the company or the property. A fraction-holder whose rights are suspended “shall continue to be liable for all the obligations attaching to membership (unless they have been cancelled).”
The company’s ‘founder member’ is important, too. This was Oceanico Stepping Stones Ltd, registered at the Heswall PO Box address. The founder member and all other members have to approve any transfer of ownership, including the price to be paid, and the founder member can veto the sale – so Bill Peters has purchased something he might not be able to resell. And who are the directors of Oceanico Stepping Stones? Fractional Secretaries Ltd, David Bates, Julia Day and Lucy Whitfield.
Beware removal of rights
It is feasible to argue that it is in Oceanico Stepping Stones’ interests, as the powerful founder member, for other members to be confused over the correct procedures for registering their interests, because the founder member can then make a case for removing their rights. William Hurley’s lawyer in Portugal, Justin Ryan, emailed David Bates on August 30 2017 to say “In my opinion, if the buyers [William Peters] want to register their ownership then they need to deal with you.” Mr Bates did not answer this question but wrote: “I don’t want to upset anyone, but it is not our position to agree who pays the fees. If you have agreed the buyers pay, that is fine, but they do need to be paid otherwise they remain the obligation of Mr Hurley.” So what is the procedure for registering a new member of Isaura Properties? If anyone should know, it is surely the directors of Isaura Properties itself, including David Bates.
Buying a fraction of Isaura Properties has not been, for Bill Peters, a passport to trouble-free holidays. He might have expected his purchase to be protected under the European Union Timeshare Directive, introduced across the EU by February 23 2011 as a response to timeshare misselling scandals. (See, for example this article, ‘Timeshare horrors: fresh hope for 100,000 people locked into costly contracts’, by Kate Palmer, in The Telegraph online, May 30 2015.)
The status of fractional ownership remains a grey area, but buying a right to use an apartment or villa for a portion of every year is much more like timeshare than joint ownership of a property. The Resort Development Association advised back in 2010 that members should behave as if the directive definitely applies to fractional sales. The rules are nothing difficult, principally an obligation for full disclosure in marketing and sales, a ‘cooling off’ period of 14 days after a purchase agreement is signed, and a bar on any money changing hands during the cooling off period.
Bill Peters says: “I was not given information about any debts on the property, or any regular payments due, even though I asked specifically.”
We asked David Bates whether, in his opinion, fractional ownership is covered by the EU timeshare directive, including the requirement for full disclosure. We also asked for his take on advantages and drawbacks of fractional investments. As yet, we have not received a reply.
The fractional saga, which cost investors in The Corran, Laugharne, so many £ millions, appears a tale of mystery enveloped in mist – but buyers can start to penetrate the fog:
- by searching out and reading all the small print
- by not signing anything until all their questions have been answered satisfactorily, with documentary proof, and
- by avoiding solicitors recommended by vendors and choosing one with a high reputation to uphold
Bill Peters relied on a lawyer in Portugal recommended by the estate agents selling the fractions of apartment 2A, but feels he was fobbed off with sparse, incomplete answers.
And he still doesn’t know exactly what it is he bought.
 ‘8 companies involved in multi million pound international carbon credit and wine investment scam ordered to close’, press release from the Insolvency Service, November 27 2015.
 ‘Oceanico defends its director barred in UK’ by Charlie Weston, July 7 2006.
 Article by Charlie Weston, as above.
 This happened at The Corran too.
 But registered in the British Virgin Islands.
 Articles and Memorandum or Association section 12.2(e).