Land banking boss banned from being director

Simon Donohue

The boss of a land banking business which misled people into believing planning permission could be obtained for the plots it sold has been disqualified from being a director for eight years.

John Mahon was the director of CLS & Partners, Webster Court, Westbrook Crescent, Gemini Business Park, Warrington, which, with a connected company, was wound up in the public interest in 2012.

He has been disqualified from being a director for eight years for failing to make himself aware of the company's business or keep proper books and records.

Mahon's disqualification follows an investigation by the Insolvency Service.

Mahon, 35, has given an undertaking to the Secretary of State for Business Innovation and Skills agreeing not to manage or in any way control a company or act as a director from 11 July 2013 for the duration of the disqualification.

The investigation found that CLS operated a land banking business selling small plots of land for investment.

The company was wound up on grounds of public interest on 9 May 2012 following an investigation by the Insolvency Service authorised by the Secretary of State for Business Innovation and Skills.

Evidence provided by the Insolvency Service showed the company had sold agricultural land to would-be investors on the pretext that it was suitable for development.

The company also implied that the land had potential for development and that the company or another party would apply for planning permission.

The reality was that permission would never have been given for these purposes.

In giving the undertaking for his role in the company, Mahon did not dispute that he allowed CLS to trade in a manner lacking commercial probity, failed to inform himself of the trade of CLS and failed to maintain or preserve proper accounting records.

The investigation showed that:

  • CLS sold plots of land at sites in Wakefield and Studley and between 29 March 2010 and 15 May 2011 – sales agents acting on behalf of the company sold 78 plots for a total of £952,209
  • Mahon failed to monitor or take an interest in the information provided to prospective investors and as a result misleading and unfounded statements were made
  • Investors who purchased plots at the Wakefield site were made to understand that CLS or another party acting on its behalf would apply for planning permission. No applications were made and it is unlikely that a change of use would be allowed given that the site was greenbelt land.
  • Investors who purchased plots at the Studley site were provided with information which implied that the land had potential for planning permission to be obtained for a housing development. The local council has stated that the likelihood of planning permission being granted was remote given that the land is in the greenbelt.
  • The Official Receiver is unable to verify the purpose of payments totalling £541,281 and the liquidator has been unable to trace motor vehicles purchased for £113,689.

Commenting on the disqualification, Ken Beasley, Official Receiver at the Insolvency Service's Public Interest Unit, said: "Mr Mahon allowed the company to mislead members of the public into purchasing plots of land for significant amounts of money based on the unfounded assertion that the plots had potential for planning permission.

"In failing to monitor or take an interest in the information provided to investors, Mr Mahon failed to discharge his responsibilities as a director of the company.

"The Insolvency Service will take tough action to put a stop to companies trading against the public interest and we will seek to remove culpable directors from the business environment."

CLS & Partners Limited was incorporated on 18 February 2010.

Disqualification undertakings have the same effect as disqualification orders made by a court, and are therefore legally binding.

Without obtaining permission from a court, a disqualified person may not: act as a director of a company; take part, directly or indirectly, in the promotion, formation or management of a company; be a liquidator or administrator of a company; or be a receiver or manager of a company's property.

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