Skip to main content

Your browser is out of date, and unable to use many of the features of this website

Please upgrade your browser.


This website requires cookies. Your browser currently has cookies disabled.

Mr Patrick McLarry and Mr Roy Grimwood - Determination notice

Standard Procedure - Determination notice under s.3 of the Pensions Act 1995 (PA 1995) and s.96(2)(d) of the Pensions Act 2004 (PA 2004)

The Pensions Regulator case ref: C23099076


  1. The Determinations Panel (the Panel), on behalf of the Pensions Regulator (the Regulator), held an oral hearing on 18 October 2017 (the Hearing) to hear representations on whether to exercise a reserved regulatory function in relation to the issues in a Warning Notice dated 21 July 2017.

Matters to be determined

  1.  In the Warning Notice the Panel was asked to determine whether to make an order under s.3(1) of PA 1995 to prohibit:

    (i) Mr Patrick McLarry; and/or

    (ii) Mr Roy Grimwood (together, the Respondents).

  1. The power to prohibit a trustee under s.3(1) PA 1995 is a reserved function under paragraph 4 of Schedule 2 to PA 2004 and can therefore only be exercised by the Panel.

  2. The Panel considers that the Respondents are the only parties who are directly affected by this determination.


  1. The Panel determined that each of the Respondents should be prohibited from being a trustee of trust schemes in general, as the Panel is satisfied that each of them is not a fit and proper person to be a trustee of trust schemes. The Panel reached a separate determination in respect of each of the Respondents albeit its decision has, for convenience, been set out in this single Determination Notice.

  2. The reasons for the Panel’s decision are set out below. Where the Panel reaches findings of fact, it is doing so on the balance of probabilities.


  1. The Regulator’s case against the Respondents relates to their involvement with the Yateley Industries for the Disabled Limited Pension and Assurance Scheme (the Scheme). The Scheme is a defined benefit occupational pension scheme. It has no active members. At all material times, the Scheme has had fewer than 100 members.

  2. The sponsoring employer for the Scheme is the charity Yateley Industries for the Disabled Limited (Yateley). Mr McLarry is the CEO and company secretary. Mr Grimwood was the Chairman of Trustees for the charity.

  3. Mr McLarry and Mr Grimwood were also the sole directors and shareholders of VerdePlanet Limited (VerdePlanet). VerdePlanet was incorporated on 15 July 2009 and, according to the Respondents, was formed as a ‘not for profit organisation’ for the three key purposes: (1) to train disabled and vulnerable people; (2) to mediate, deal with and relieve disabled and vulnerable peoples’ debt problems; and (3) to assist Yateley and others in the production of bio fuels.

  4. On 1 April 2011, Yateley replaced the incumbent trustee of the Scheme, AWD Chase De Vere (AWD) with VerdePlanet. Upon this appointment, VerdePlanet ceased all of its previous business activities.

  5. VerdePlanet has not acted as a trustee of any other pension scheme, nor have the Respondents otherwise (whether before or after their involvement with the Scheme) acted as trustees of pension schemes or directors of corporate trustees of pension schemes. The Respondents were frank in pointing to their lack of experience in running a pension scheme during the Hearing.

  6. As a result of special procedure proceedings issued by the Regulator on 28 August 2013 under s.7 of PA 1995 (the s.7 Proceedings), on 29 August 2013 the Panel ordered that Dalriada Trustees Limited (Dalriada) be appointed as trustee of the scheme with exclusive powers. That determination (the reasons for which were set out in a Determination Notice issued on 6 September 2013) was confirmed in a Final Notice issued on 8 November 2013 (the Final Notice).

  7. References made by Yateley and VerdePlanet to the Upper Tribunal on 28 November 2013 were struck out following a hearing on 18 March 2014, albeit permission was given to reinstate the reference on the issue of whether an alternative independent trustee to Dalriada should be appointed. That reference was subsequently withdrawn, and VerdePlanet resigned as a trustee of the Scheme. VerdePlanet was dissolved on 14 June 2016.

Material considered

  1. The Panel has considered the written material with which it has been provided (as described below), and the oral submissions it received at the Hearing.

  2. The Regulator’s case was set out in its Warning Notice dated 21 July 2017 together with exhibits. Further:

    (i) In advance of the Hearing, a short “Position Statement” was provided by Mr Bobby Friedman, counsel for the Regulator.

    (ii) Mr Friedman also made oral submissions at the Hearing on behalf of the Regulator.

  3. The Respondents filed (under cover of a letter dated 2 October 2017) a joint statement (the Respondents’ Statement) which they had prepared themselves. In addition:

    (i) During the Hearing, Mr McLarry and Mr Grimwood appeared in person, and both made oral submissions.

    (ii) Before making his submissions, Mr Grimwood indicated that certain medical complaints were impacting his memory and, on occasion, causing him not to express himself as he intended – for example, using the wrong word. To address those concerns, the Panel gave Mr Grimwood permission to correct or amend any of his statements on the transcript after the Hearing. Written comments were subsequently provided on the transcript. The Panel has considered these comments, and concluded that they do not have any material effect on its decision.

    (iii) The Respondents have also submitted, and the Panel has considered, a document entitled “Response to Regulator’s Position Statement” which they provided at the Hearing.

  4. The Regulator has, within the Warning Notice, referred to findings made by the Panel in the s.7 Proceedings and has included the Determination Notice and Final Notice within the supporting documents relied upon. Whilst the contents of the Determination Notice and Final Notice have been noted by way of background to the present regulatory action, the Panel has considered the question of whether each of the Respondents is “fit and proper” on the basis of the current state of the material before it, the legal tests set out below, and the submissions made by the Regulator and the Respondents.

Prohibition orders

  1. The Panel is being asked to make an order under s.3(1)(c) PA 1995 against each of the Respondents.

  2. S.3 provides (so far as relevant):

    Prohibition orders
    (1) The Authority may by order prohibit a person from being a trustee of-
    (a) a particular trust scheme,
    (b) a particular description of trust schemes, or
    (c) trust schemes in general,

    if they are satisfied that he is not a fit and proper person to be a trustee of the scheme or schemes to which the order relates.

    (2) Where a prohibition order is made under subsection (1) against a person in respect of one or more schemes of which he is a trustee, the order has the effect of removing him.
    (6) The Authority must prepare and publish a statement of the policies they intend to adopt in relation to the exercise of their powers under this section.”

  3. When the Panel refers to the question of whether the Respondents are “fit and proper persons” below, that is by way of shorthand for, and reference to, that s.3(1) test.

  4. The most recent statement published by the Regulator in accordance with s.3(6) was published in July 2016 (the Policy Statement). The Policy Statement contains the following guidance on the criteria for a ‘fit and proper person”:

    “When considering whether a person ought to be prohibited, we will investigate whether a trustee is a ‘fit and proper person’ to be a trustee of a trust scheme by looking at all the relevant information.

    In particular we will consider any information which concerns the trustee’s:
    (i) honesty
    (ii) integrity
    (iii) competence and capability
    (iv) financial soundness

    When considering the above criteria, we may take account (where relevant) of:
    (i) any attempt to deceive
    (ii) any misuse of trust funds
    (iii) any breaches of trust or pensions law, particularly if these are significant, persistent, deliberate or contrary to legal advice received
    (iv) whether a trustee’s professional charges constitute a breach of trust or demonstrate a lack of internal controls
    (v) criminal convictions, not limited to those involving dishonesty or deception, so including (for example) money laundering, violence or substance abuse

    This is not a comprehensive list of the factors we will look at when considering whether to prohibit, but it is indicative of what may be relevant. One of our statutory
    objectives under the Pensions Act 2004 (…) is to protect the benefits of members of occupational pension schemes, and we will take such actions as are necessary and proportionate to meet that objective.”

Summary of Grounds

  1. The Regulator contended in its Warning Notice that neither of the Respondents is a fit and proper person to be a trustee of trust schemes in general because of concerns about each of their honesty, integrity, competence and capability.

  2. In support of those concerns, the Regulator relied upon a number of grounds which may be summarised as follows:

    (i) Investing Scheme money without the benefit of proper investment advice and imprudently. These matters are said to show a lack of integrity, competence and capability by both Respondents.

    (ii) Acting improperly in positions of conflict between interests and/or duties (in the case of Mr McLarry) and mishandling those conflicts (in the case of Mr Grimwood). Those matters are said to show a lack of integrity, competence and capability by both Respondents, and also dishonesty on the part of Mr McLarry.

    (iii) Breaches of employer surplus restrictions. These breaches are said to show a lack of integrity, competence and capability by both Respondents.

    (iv) Attempts to supress information and mislead the Regulator in relation to fees paid to VerdePlanet and into the Respondents’ own accounts, and in respect of investment of Scheme money in certain French property. These breaches are said to show dishonesty and a lack of integrity, competence and capability by both Respondents.

    (v) Mr McLarry’s failure to comply with a request under s.72 of PA 2004, and his conviction under s.77 of PA 2004, is said to show dishonesty and a lack of integrity, competence and capability on his part.

  3. Several of the matters set out in the Warning Notice (with the statements of legal principles in support) were stated in terms of the Respondents themselves having breached various common law and statutory duties imposed upon trustees. Technically, it was VerdePlanet that owed the duties imposed upon the trustee of the Scheme. The Respondents, as the sole directors of VerdePlanet, were able to direct compliance with those duties.

  4. For the avoidance of doubt, the Panel is entirely satisfied that if the directors of a corporate trustee cause the corporate trustee to act in breach of relevant duties then
    that is to be taken into account in assessing whether those directors are fit and proper persons for the purposes of s.3 PA 1995.

Approach to investment

  1. Whilst the Warning Notice groups allegations by reference to particular categories of breaches, the Panel has found it helpful to address its decision by reference to the key factual aspects of the Warning Notice. The first of these concerns the investment in Phoenix Helicopter Academy Limited (PHAL), and the second is the investment in Plane Sailing Sales Limited (PSSL). Before considering those facts, the Panel addresses VerdePlanet’s obligations and the Respondents’ general approach to investment of Scheme funds.

Investment obligations

Common Law

  1. Pension trustees are under duties to conduct the business of the trust in the same manner that an ordinary prudent man of business would conduct his own business, on behalf of those for whom he felt morally bound to provide (and not merely as if he were acting for himself): Re Whiteley (1886) LR 33 ChD at 355 per Lindley J.

  2. This means, amongst other things, that pension trustees should not invest scheme assets in a manner which exposes the scheme to excessive risk. Excessive risk may exist where investments are not appropriately diversified between different asset classes, or where too great a proportion of a scheme’s assets is invested in inherently risky asset classes. The duties imposed upon trustees under ss.1 and 4 of the Trustee Act 2000 are to similar effect.

The Pensions Act 1995

  1. S.36 PA 1995 imposes particular statutory obligations on pension scheme trustees relating to investment. In particular:

    (i) By s.36(4), trustees retaining investments must determine how frequently they should obtain advice as to whether the investment is satisfactory having regard to regulations (as to which see below), and obtain and consider such advice accordingly.

    (ii) By s.36(3) (and subject to exceptions not relevant to this matter) trustees should, before investing in any manner, obtain and consider proper advice on the question of whether the investment is satisfactory having regard to the requirement of regulations and the principles set out in the statement of investment principles to be produced under s.35 PA 1995.

    (iii) “Proper advice” means advice taken from an appropriately authorised (or exempt) adviser if the giving of advice constitutes the carrying on, in the United Kingdom, of a regulated activity for the purposes of the Financial Services and Markets Act 2000, or otherwise from someone reasonably believed by the trustees to be suitably qualified, i.e. by reason of ability in and practical experience of financial matters and to have the appropriate knowledge and experience of the management of the investment of trust schemes (s.36(6)).

    (iv) Trustees shall not be treated as having complied with those statutory obligations unless the advice is given or confirmed in writing (s.36(7)).

Investment Regulations

  1. As the scheme has fewer than 100 members, the detailed requirements of regulation 4 of the Occupational Pension Schemes (Investment) Regulations 2005 do not apply.

  2. Instead, the trustees of such a scheme, by regulation 7, “must have regard to the need for diversification of investments, in so far as appropriate to the circumstances of the scheme.”

Initial steps upon appointment

  1. As at 31 March 2011 (immediately prior to VerdePlanet’s appointment as a trustee), the Scheme’s investments had been delegated to Legal and General Investment Management (Legal and General), and that portfolio was valued in the Scheme’s accounts for 31 March 2011 at c.£1.57m (c.97.4% of Scheme assets).

  2. The Respondents explained that they did not take over the roles of trustee (via VerdePlanet) willingly; but because, the Respondents perceived, no-one else would be willing to take over the role from AWD. The Respondents have also complained about AWD’s previous oversight of the Scheme, and contend that the Scheme may have been mis-sold in that it was not properly designed for the Yateley employees, many of whom were disabled. Mr McLarry correctly accepted, however, that those matters were irrelevant for the purposes of the proceedings against the Respondents. The Panel is prepared to accept in the Respondents’ favour, however, that upon VerdePlanet’s appointment as trustee, the Respondents found themselves in an unfamiliar and challenging role which may well not have been assisted (without making any findings at all as regards AWD’s conduct) by incomplete records and paperwork upon VerdePlanet’s appointment.

  3. It is right also to note that the Respondents did obtain some investment advice upon their appointment as trustee. For example (as was consistent with Mr McLarry’s oral explanation during the Hearing), the Respondents said in their Respondents’ Statement that:

    “[VerdePlanet] did not seek specific advice on the investments but spoke to three different companies on investment advice in general. A further company, St James’s Place Wealth Management, was spoken to but all three said that under the current economic climate they could not advise on what would happen tomorrow let alone in years to come. At the time the Scheme’s actuary (inherited from AWD) was Andrew Little of Little and Co. He was also giving investment and financial advice to us as Trustees. He in fact warned us that we should refrain from seeking advice from adhoc street investment managers as they would not be competent (as by implication he was) to advise investments in pensions schemes. So, in the main, we followed Mr Little’s ‘expert advice’.”

  4. The Panel also accepts that the IFAs the Respondents saw were expressing the view that the then economic conditions were challenging and that devising and implementing a successful investment strategy was difficult.

  5. In the Panel’s view, however, the extent of the advice that was taken fell short of that which the Respondents ought properly to have taken. Whilst the economic conditions were no doubt challenging, and returns were not guaranteed, those were circumstances which made obtaining and following professional investment advice all the more important. Whilst it may well have been frustrating to be told that relatively expensive professional advice could not guarantee reasonable returns, that was not a reason not to obtain proper advice before investing Scheme assets in investments that the Respondents had identified themselves.

  6. In the year that followed VerdePlanet’s appointment, it sold £1,003,642 of the Legal & General investment portfolio. The proceeds were paid into a business account of VerdePlanet. In their 16 September 2013 representation letter in the s.7 Proceedings the Respondents explained that, “this move [was] driven by heavy and fast losses incurred by the L&G investments in gilts, equities and bonds.”

  7. The Panel finds that this decision to liquidate such a significant part of the Legal and General portfolio was taken without proper investment advice, and was (at least) as a result of the Respondents being too quick to dismiss the importance of taking investment advice – even where returns could not be ‘guaranteed’.

The investment in PHAL

  1. PHAL was incorporated on 14 April 2010 as a helicopter flying school and charter academy. The abbreviated accounts for the year ending 30 June 2011 showed net assets of just £3,753. It was, at the date of the Scheme’s investment, a start-up with no proven track record.

  2. It was a business which Mr McLarry had come across: he had learnt to fly helicopters with the company, and came to be impressed by the company and the people behind it. Mr McLarry explained at the Hearing that he had a background in the aviation industry, and he therefore knew more than an “average FA [Financial Advisor]” would know about that industry. Mr McLarry was keen to emphasise, and the Panel accepts, that Mr McLarry did not personally gain financially from the Scheme’s investment in PHAL.

First PHAL Deed

  1. On 9 December 2011, the Respondents entered into a deed with the directors of PHAL, by which they agreed to cause VerdePlanet to invest £50,000 in PHAL for an initial three year period. In exchange, VerdePlanet would receive a one-third shareholding and an annual dividend equal to 5% of the investment. Mr McLarry was to be appointed as a non-executive director for the duration of that investment. At that time, there were two existing shareholders and directors.

Second and Third PHAL Deeds

  1. On or around 6 September 2012, VerdePlanet agreed to advance a further £28,000 to PHAL. Whilst an annual dividend of 5% was also agreed on this additional investment, no additional equity or security was provided. The Respondents explained that this additional £28,000 investment was required for the purchase of office premises.

  2. A third deed was entered into on 8 May 2013. This third deed recorded a total investment by VerdePlanet of £278,000 for three years from the date of that deed.

  3.  An annual dividend of 5% of this investment was to be paid for three years (subject to the potential unanimously to agree an extension). There was no obligation on the part of PHAL to repay the initial investment sum. Instead, to redeem the investment the one-third shareholding in PHAL would be sold at market value, with the directors having a first option to purchase. In addition to the one-third shareholding, VerdePlanet was – on the face of the deed - to be granted a fixed and floating charge over PHAL’s assets. The form of the deed, which Mr McLarry explained at the Hearing was created without professional assistance so as to save money, led to subsequent uncertainty.

  4.  In particular, there was a concern as to whether the investment was by way of debt or equity. It was subsequently agreed between Dalriada and PHAL that the investment was for equity, and advice taken by Dalriada was that the charge could only attach to unpaid dividends. The Panel need not determine whether that is correct; but does find that the Respondents’ failure to take proper advice when entering into these investments and documenting them has led to subsequent problems.

Suitability of the Investment

  1. The Panel finds that this investment in PHAL (even at its initial level) amounted to a breach of the Respondents’ investment duties. Even had it been appropriate to invest some modest amount of Scheme assets in PHAL, to invest sums in the order of £278,000 was manifestly inappropriate. It was a clearly imprudent investment for Scheme assets.

  2. The Panel is also concerned about the Respondents’ lack of appreciation of the unusual and risky nature of the later investments in PHAL. For example:

    (i) Mr McLarry asserted during the Hearing that, “We never had shares; we owned under that deed, lodged against a legal charge that can’t be changed, we owned one-third of that business.”

    (ii) The inherent contradiction in that statement demonstrates a lack of understanding of how the investment was to work or be structured. There is a fundamental lack of understanding as to whether the sums were loans to PHAL, or an equity investment.

    (iii) The original investment was in exchange for a one-third equity stake. The remaining ‘investments’ were almost entirely, and unusually, one-sided. No additional equity was obtained, the other shareholders did not inject capital at the same level and there was no express obligation for the additional sums to be repaid. The only up-side to the additional investment was an increase in the dividend payments envisaged for the next three years; and the opportunity to benefit from one third of any increase in the value of the company attributable to the increased investment.

    (iv) The Panel concludes that the confusion surrounding, and one-sided nature of, the subsequent investments arose from the failure to take adequate legal or investment advice, and is indicative of the Respondents’ lack of competence and capability.

  3. The Respondents provided a letter from Mike Sinfield, a chartered accountant, dated 13 March 2014 in which Mr Sinfield provides his view as to the value of PHAL. Whilst Mr Sinfield expresses some optimism about the future value of the business, he also notes that “this sort of investment is of course somewhat unusual for a Pension Scheme”. In relation to the value of the business in 2013 (when the additional £200,000 was invested), Mr Sinfield says that, on an earnings basis, “…with a profit in only 1 of the 3 years trading so far and losses in the last 2 years it is clear that the company had limited value on this basis at 30 June 2013….”

  4. Even according to the Respondents’ expert, therefore, the investment was an “unusual one for a Pension Scheme” and was, when made, in a company with “limited value”. The Panel concludes that this was a risky and speculative investment which was unsuitable for the Scheme. Some risky investments pay off; but that does not mean that it was appropriate to have made them.

  5. There is something of a conflict of evidence as to the later performance of PHAL, what the investment is now worth and whether later poor performance was due to failures on the part of Dalriada. The Panel has concluded that it is not necessary or appropriate for it to consider or make findings on those matters. Whatever the reasons for the subsequent performance of PHAL, it would not serve to excuse the earlier failures on the part of the Respondents.

Failure to take investment advice

  1. Although, as noted above, the Respondents had consulted, in general terms, with a number of IFAs, the Respondents took no advice on the suitability of the PHAL investment. Whilst the Respondents state that there was “some investigation”, and Mr McLarry may have sought to draw on his own aviation background, no advice from third parties, let alone suitably qualified third parties, was taken on this investment.

  2. The Panel has not found it necessary to speculate on what a suitably qualified advisor might have said in relation to the initial £50,000 investment in PHAL. However, the Panel is satisfied that no properly qualified adviser would have recommended the ultimate extent of the PHAL investments (£278,000) on behalf of the Scheme if asked, or the way that the investment was structured. The Panel also considers that it should have been obvious to reasonably competent directors of a corporate trustee that the PHAL investment was, at the very least, risky and should not have been proceeded with without professional advice as to its suitability.

  3. The fact that the Respondents caused VerdePlanet to make the investment in PHAL, and failed to take any proper advice on the issue, causes the Panel to conclude that both Respondents have – in this instance – demonstrated a serious failure of competence and capability.

  4. The Panel accepts, however, that the Respondents, in investing in PHAL, genuinely believed that the investment was one that was in the interests of the Scheme as presenting a good opportunity for a return.

  5. The Respondents’ Statement contends that the Respondents were acting by making this investment, “in accordance with TPR’s advice that a minor part of Scheme’s money was to be invested in more unusual and high risk investments to counteract the extremely low rate of returns that was being gained by the more traditional investments.” The Panel accepts that the Respondents did hold this view at the time. That is a further reason for finding a serious lack of competence and capability on their part. The Panel accepts that it may be appropriate in some cases for pension schemes to properly invest in some more risky investments as a part of a diversified portfolio. An investment of c.20% of the Scheme’s assets in PHAL was, however, a long way removed from what might sensibly have been considered as appropriate diversification into riskier asset classes.

  6. The Panel also considers that Mr McLarry’s judgment may have been clouded on the issue of whether PHAL was a suitable investment by his enthusiasm for PHAL’s business and prospects as a result of his previous involvement with the business. The Panel does not know why Mr Grimwood was prepared to be swept along with this investment decision; it may have been due to a failure to exercise sufficient independent judgment on his own part.

  7. Thus, whilst these factors further demonstrate a want of capability and competence, they do not in the Panel’s view amount to, or demonstrate, a lack of integrity.

Conflicts of Interest

  1. The Panel notes the Regulator’s contention that the acceptance by Mr McLarry of a non-executive directorship with PHAL placed him in a position of a conflict of interest between the interests of PHAL and the interests of the Scheme, which led him to invest Scheme funds for the benefit of PHAL; that being an improper purpose and hence in breach of trust.

  2. The Panel does not find that the acceptance of a non-executive directorship of PHAL by Mr McLarry, whilst remaining a director of a pension trustee, necessarily gave rise to a conflict of interests (or, perhaps more accurately, duties) which would, without more, tend to suggest that he was not a “fit and proper person”.

  3. The Panel has some doubts as to whether Mr McLarry’s acceptance of a non-executive directorship had any material bearing on his approach to VerdePlanet’s investment in PHAL. Instead, the Panel’s view is that Mr McLarry was sufficiently enthused by PHAL that, on balance, he would have caused VerdePlanet to make and continue making investments in PHAL irrespective of any formal role he had within PHAL.

  4. As the Panel has already found that that Mr McLarry demonstrated a serious lack of competence and capability in causing the Scheme to invest in PHAL, it does not consider that a conflict of this type would have a material additional bearing on its assessment of whether he is a “fit and proper person”.

  5. Similarly, in the Panel’s view, the complaint that Mr Grimwood failed properly to manage Mr McLarry’s alleged conflict of interest would add little to the “fit and proper” assessment – the Panel is more concerned that he allowed the investment in PHAL to go ahead in the first place.

  6. The fact that it was Mr McLarry who signed the third deed on behalf of PHAL (with Mr Grimwood signing on behalf of VerdePlanet) is, however, more significant. At the very least (and the Panel makes findings to this effect only), it shows a lack of appropriate appreciation of proper governance processes on behalf of both Respondents. These failures appear to have contributed to a subsequent dispute with the other directors of PHAL as to whether the third deed had been validly entered into.

  7. The issue of conflicts as it relates to PHAL therefore demonstrates further failings of competence and capability on the part of both Respondents, but the Panel does not find it demonstrates a lack of integrity or dishonesty.

The investment in Plane Sailing Sales Limited (PSSL)


  1. PSSL, was a company apparently to be engaged in the antiques dealing business. It was incorporated on 22 March 2010. Mr McLarry was a director of PSSL between 6 April 2010 and 19 November 2012. PSSL filed dormant accounts, signed by Mr McLarry, for the financial years to 31 March 2011 and 31 March 2012. PSSL had the same registered address as Yateley and VerdePlanet.

  2. PSSL’s sole shareholder was Mr McLarry’s wife; who is described both as Ms Sandra Dudley (her maiden name) and Mrs Sandra McLarry. Mrs McLarry replaced Mr McLarry as a director of PSSL on 19 November 2012 and remained director and shareholder until PSSL’s dissolution on 17 November 2015.

  3. At least £214,000 was paid to PSSL from Scheme funds between May 2012, (the first substantial tranche of £177,500), and February 2013, (the second tranche of £36,500). Dalriada has suggested that at least another £32,500 was paid out of Scheme funds. Mr McLarry denies that. The Panel has not found it necessary to make any findings in respect of that difference.

  4. The investment in PSSL is, in the Panel’s view, a more serious matter than the investment in PHAL. In order to explain its findings, the Panel has set out the factual narrative – and its conclusions on key factual elements – in some detail. Those are set out below.

  5. An overview of the conclusions that the Panel has reached as a result of its findings is:

    (i) The decision by the Respondents to invest sums at the level they did in a company with no trading record, owned by Mr McLarry’s wife and controlled by Mr and Mrs McLarry, without the benefit of any independent financial advice as to its suitability, or legal advice as to how, if at all, the serious conflict could ever be managed, was one that no trustee, taking account of its duties, should ever have contemplated, never mind carried through.

    (ii) But, far worse than that, the sums advanced were then mixed up in the overseas bank accounts of Mr and Mrs McLarry and used, in substantial part, for the acquisition of a property in France, ultimately retained by the McLarrys as a private property.

    (iii) A minor part of the scheme funds was then used for the acquisition of a second property in France, the true value of which was grossly inflated and untruly stated in the Scheme’s accounts.

    (iv) There was a series of statements made by the Respondents to Dalriada and the Regulator in which various attempts were made to justify the value to the Scheme of the second property at £118,000. Those statements were contradictory and unreliable, and simply wrong. They also included an untrue statement that Scheme funds had never been used for the acquisition of the first property.

    (v) It was only in April 2017, following a request under s.72 of PA 2004 for the statements for Mr and Mrs McLarry’s overseas account, held in France with the bank of Credit Agricole, and Mr McLarry’s prosecution and conviction under s.77 in 2017 (five years after the Scheme funds had been paid to the McLarrys) that the statements for that account were provided. They show the reality of the dealings with those French properties, which radically differs from the misleading version of events Mr McLarry had previously given to Dalriada and the Regulator.

    (vi) The series of events reflects badly both on Mr McLarry and Mr Grimwood, the self-described non-conflicted trustee, and fully justifies the perseverance of Dalriada, backed by the Regulator, to track the funds to their destination.

  6. With that overview in mind, the Panel next turns to the detail of the investment; with a focus on the dealings with the French properties in particular.

Investment of Scheme Monies

  1. On 23 March 2012, £250,000 was paid from Legal and General into the VerdePlanet bank account with Reliance Bank. Those sums arose from the liquidation of Scheme holdings with Legal and General. There was only c.£2,400 in the VerdePlanet bank account at the time.

  2. Five days later, on 28 March 2012, £177,500 was paid by VerdePlanet to the client account of a firm of solicitors: Saulet Ashworth LLP (Saulet). Saulet subsequently confirmed that the funds had been received for the purchase of a freehold shop in East Looe, Cornwall, but that Mr McLarry had given instructions on 24 April 2012 not to complete the transaction, after which the sums were returned to VerdePlanet on 1 May 2012.

  3. The following week (9 May 2012), £177,500 was paid by VerdePlanet into the account of PSSL (which had a balance of only £2,500 at the time). In the next week PSSL paid
    £4,000 to what looks to be an English account of Mr & Mrs McLarry and spent £3,000 on foreign currency at a Tesco Store.

  4. On 29 May 2012 a payment of £170,000 was made by PSSL to the bank account “M OU MME PATRICK MCLARRY”, being a personal joint account held by Mr and Mrs McLarry in France with Credit Agricole (the Credit Agricole Personal Account). On the same day the Credit Agricole Personal Account, which previously had a nil balance, shows the receipt of €210,083.92 – being the £170,000 transferred from the PSSL account in Euros.

  5. It was not until April 2017 that the account statements for the Credit Agricole Personal Account were disclosed by Mr McLarry to the Regulator following Mr McLarry’s criminal conviction under s.77 of PA 2004 for his previous failure to provide them. That is an issue the Panel returns to below.

The purchase of La Force

  1. On 4 July 2012 a payment of €60,000 was made from the Credit Agricole Personal Account to a bank account in the names of Mr Tony French and his partner Ms Diana Murray. As explained by Mr McLarry at the Hearing, Mr French was a former business associate of his from when they ran a pub in Portsmouth.

  2. Mr McLarry explained that this €60,000 payment was a deposit for the purchase of a property in France called “La Force”. The evidence shows that Ms Murray was the sole owner of La Force.

  3. On 27 August 2012, there was a payment out of the Credit Agricole Personal Account of €146,000 described as“VIR A SCP LAMARQUE ET THORENT”. That payment was to a notary firm for completion of the La Force property. It would appear from official records from France that completion of the sale of La Force to Mr and Mrs McLarry took place on or around 20 September 2012. The Panel notes that the price recorded on that document is €150,000 – whereas the Respondents’ clearly stated position is that the full €206,000 was spent on acquiring the La Force property. The evidence from the statements shows that the Scheme principally paid for the investment. (Other payments into the Credit Agricole Personal Account before the purchase of La Force were too small to have funded it.)

  4. The original structure of the investment, according to Mr McLarry at the Hearing, was that the Scheme would invest in PSSL, and PSSL would use the funds to purchase property in France. In the event, what happened, as the bank statements show, was that a very large part of the £170,000 paid into the McLarrys’ Credit Agricole Personal Account account was used for the purchase of La Force and, whatever the intended use and ownership (whether that of the Scheme or PSSL or the McLarrys, in beneficial ownership or in trust for PSSL), La Force remains in the ownership of the McLarrys. It was only at the Hearing that Mr McLarry finally acknowledged that he had used Scheme funds for the purchase of La Force.

Purchase of La Cave

  1. Mr McLarry also stated during the Hearing that, although the La Force property was intended as being a commercial building for use by PSSL, it was not (it quickly transpired) suitable for that role because delivery vehicles blocked the road. La Force was not, however, sold. It was retained by Mr and Mrs McLarry for their personal use. It was never, therefore, ultimately a PSSL investment or asset, because it could not be used for the PSSL business.

  2. Instead, Mr McLarry stated, PSSL decided to purchase a wine storage barn in a nearby village. This property is known as “La Cave”. In order to effect that purchase, on 15 November 2012 (less than two months after the purchase of La Force), a payment of €28,000 was made from the Credit Agricole Personal Account to the “SCP LAMARQUE ET THORENT” account (being the same French notary who dealt with the La Force property). That sum was, the Panel finds, the sum in fact paid for the purchase of La Cave, as confirmed in notarised French sale paperwork.

  3. By November 2012, therefore, sums largely deriving from the Scheme had been used to purchase two French Properties– La Cave and La Force – for a total of €234,000, from the Credit Agricole Personal Account.

  4. At the Hearing Mr McLarry asserted that the La Force property, in particular, was not bought using “…all scheme money it was probably about, about 50% I would think, maybe two-thirds”. The Panel prefers the evidence from the bank statements that the Scheme funds transfer of the original £177,500 to PSSL was the main source of the funding of La Force and formed a substantial part of the €234,000 expenditure on both properties. Following the purchase of La Cave and La Force, less than €13,000 remained in the Credit Agricole Personal Account.

Retention of La Force by Mr and Mrs McLarry

  1. La Force was, according to Mr McLarry and as stated above, intended to be an asset of PSSL. At the Hearing, Mr McLarry explained in response to questions from the Panel seeking to understand why La Force had been bought through a substantial injection of Scheme funds:

    “I bought it for PSSL originally. That’s who I bought it for. It was only when we got the second building that we were told, no, put that in the name by way of the trustee in the Scheme.”

  2. In fact all of the Scheme’s interest in property rested on the “second building” (La Cave) bought at a fraction of the cost of La Force. As La Force was (it is said) not suitable for use by PSSL, PSSL had no use for La Force (and, in any case, PSSL has since been wound up). The net result is that Mr and Mrs McLarry have continued to retain La Force notwithstanding – as explained above – that it was substantially purchased with Scheme funds.

La Cave Documentation

  1. Shortly after the completion of the purchase of La Cave, A “Heads of Terms of Business Lease” dated 19 November 2012 indicated that La Cave was to be let by the Scheme (though “held in trust for the Scheme by Mr Pat McLarry, Trustee”) to PSSL. The proposed rental figure was £500 per month. The existence of that document is consistent with La Cave being treated as an asset of the Scheme. It is signed by Ms Dudley (McLarry) and Mr Grimwood.

  2. By a “trust deed” dated 18 December 2012, Mr McLarry purported to “certify” that he, in his capacity as trustee of the Scheme, held La Cave in trust for the Scheme. The ‘deed’ also records that the property is “identified in the 2012/13 audited accounts for the Scheme at a value of £118,000.”

  3. On 4 March 2013, over three months after the purchase, a “Third Amendment to Deed” was signed by the Respondents, Mrs McLarry and a Mrs Higginbotham (being the Finance Manager and Deputy CEO at Yateley). The Panel has not seen any first or second version of the deed. The deed was said to replace earlier agreements.

  4. That document records an intention for the Scheme to loan £118,000 to PSSL, for a period of 14 years. The loan was to be secured by way of fixed and floating charges over PSSL’s assets. The document was duly registered at Companies House.

  5. A schedule attached to the deed records that the monthly payments included £500 “rent” plus capital and interest repayments. Capital and interest were to be repaid in full in 14 years. PSSL would, therefore, pay to the Scheme monthly sums of £1,420.

  6. The position as recorded in this deed is confused. The Respondents’ inability properly to explain, by reference to proper records, precisely how much had been lent, what the money was used for and how it was to be repaid demonstrates a serious failure of competence and capability. Leaving aside the issue of Mr McLarry’s involvement, Mr Grimwood (as the designated unconflicted trustee responsible for the relationship) should have had records that clarified these matters.

  7. So far as the Panel can ascertain, the position that had been reached by the end of 2012 is that £170,000, out of the original £177,500, of Scheme money had been paid over from the PSSL account to the Credit Agricole Personal Account. An additional
    £36,500 was advanced (in February 2013) when that account was running short of funds. There is no documentation relevant to that later payment, of a kind that might suggest any return to the Scheme.

  8. In the event, there were some monthly payments from PSSL to VerdePlanet, paid by standing order from a bank account in PSSL’s name, in approximately that sum (originally in the sum of £1,308.78, before increasing to £1,426 in September 2012).

  9. The source of those sums is unclear: PSSL maintained a very low balance in the English account in its name (into which the original £177,500 was paid, before being paid out again – as explained above at paragraph 73). Thereafter, the only sums that were paid in each month were sums paid in from another account in Mr McLarry’s name. A few days after PSSL paid £1,426 to VerdePlanet, Mr McLarry would repay £1,420 to PSSL.

  10. There is no visibility of whether or how the sums Mr McLarry paid in to PSSL’s account were generated from PSSL trading activities. Indeed, the Panel has seen little to suggest any revenue generating activities on the part of PSSL at all. Whilst the Panel makes no findings on this, it notes that this flow of funds is unusual, unexplained and serves to reinforce: (i) the unsatisfactory opacity caused by the mixing of Mr McLarry’s funds with Scheme funds; and (ii) the lack of proper accounting records justifying what had happened to the Scheme funds. Nevertheless, according to the bank statements of PSSL, and included in the documents attached to the Warning Notice, the monthly payments continued to be made until at least the end of December 2013.

The Explanations of £118,000 for La Cave

  1. The 2011/12 accounts (which, given the timing of the 18 December 2012 trust deed, must have been those Mr McLarry meant to refer to) do refer to an investment in PSSL as a post-balance sheet event (the financial year end being 31 March 2012). The accounts are signed by Mr Grimwood. The note reads:

    “Of the amount of £177,500 held by the solicitor at the balance sheet date, £118,000 was utilised to purchase an investment property held in the name of P J McLarry in trust for the scheme. The property is leased to Plane Sailing Sales Limited under a 12 year lease agreement at a rental of £6,000 per annum. The wife of P J McLarry is the sole director and shareholder of the tenant company. In the opinion of the trustee company, the lease is on an arms length commercial basis. The balance of the funds of £59,500 was used as a loan. Interest is charged on this loan at 3% per annum.”

  2. The Respondents, (who the Panel concludes are responsible for the making of the statements), seek to establish an audit trail between the £177,500 and the Scheme investments. Of course, unknown to anyone but Mr McLarry and possibly Mr Grimwood, most if not all of that £177,500 had been spent on a property, La Force, that did not belong to the Scheme and in which the Scheme had no financial interest or security. It is thus untrue that “£118,000 was utilised to purchase an investment property…held in trust for the scheme.”

  3. The property being referred to (as the lease referred to confirms) is La Cave. £118,000 of Scheme money was not used to purchase that: €28,000 was.

  4. The Panel notes that the Scheme accounts do not actually value La Cave at £118,000 (c.f. Mr McLarry’s statement in the 18 December 2012 trust deed), but say that that was the sum utilised to purchase it.

  5. By letter of 16 June 2014 to Dalriada, VerdePlanet stated that:

    “£100k was the base purchase price of the building by agreement with the previous owner. However, in France there are the Notaries costs added to this base price (circa 12%) and there were also local builders’ costs for the rendering of the building to secure the 500 year old fabric and the initial urgent repairs to the roof. There was also a bill for monies paid to the architects’ plans for the renovation of the building.”

  6. That was untrue; the “base purchase price” of the building was €28,000. The Panel also notes that, contrary to the suggestion in that letter that the Scheme spent sums, Mr McLarry said during the Hearing that, “at one time Plane Sailing spent nearly €12,000 out of our own money doing a ... repair to the roof” (emphasis added).

  7. Dalriada then obtained independent evidence of the €28,000 purchase price. It also obtained an independent valuation of the property in 2014, which showed a value of €29,000. In response to enquiries as to why a £100,000 purchase price had been alleged, Mr McLarry responded (email of 14 August 2014, copied to Mr Grimwood):
    “PSSL (in my name) purchased the property [La Cave] from an old friend Anthony French who owed money to me which was set against PSSL as a debenture on a previous business venture which was a previous partnership involvement. It was agreed that the ‘headline’ price with PSSL through the Notary was to be circa 28,000 euros with the rest of the money owed circa 85,000 euros settled on the purchase price. What should be noted here is that the property stood in at £118,000 total value to PSSL.”

  8. The Panel notes, first, that the sums do not tally: €28,000 plus €85,000 does not equal £118,000. This was not the only confusion demonstrated by Mr McLarry as to what the off-set sum was; at the Hearing he said that it could have been “65”, “85” or “93” (presumably Sterling, but unclear). The assertion that the property “stood at £118,000 total value to PSSL” again reveals the complete confusion as to who benefitted from the value - the Scheme or PSSL, the valuation being again no more than the value put on it by Mr McLarry.

  9. The reference to the “set[ting] against PSSL as a debenture” would appear to communicate the idea of PSSL standing indebted to Mr McLarry in the amount equal to the personal debt previously owed to him by Mr French that he had written off in return for a debenture from PSSL. Such an explanation also contradicts the statements made in the Scheme accounts referred to above.

  10. On 21 August 2014, Mr McLarry responded to Dalriada further to reiterate that the value of La Cave lay in the fact that it may be redeveloped, and Mr French – owing to his good relationship with the local mayor – had a good chance of securing the necessary planning permissions. “This fact, and after the sale verified by valuation of 28,000 euros, made the building, when developed, worth this much money (£118,000) to PSSL”. A value of £118,000 after development is, the Panel notes, not the same as the property having that value at the point of purchase.

  11. Later in that same email, and at a time when the Credit Agricole Personal Account statements had not been disclosed – such that the connection between Scheme funds and La Force was unknown, Mr McLarry stated:

    “You are clearly trying to imply that in some way I have used the scheme funds to purchase my private house in France. All the trustees here are aware of this property, and the manner in which it was purchased and indeed, 3 of the Trustees have spent time at this property on holiday. The details of the purchase of this property has absolutely nothing to do with you whatsoever. However, for the sake of transparency, let me state that this property was purchased by Sandra and I under a private arrangement from the previous owner who is a close friend of ours. It was paid for by means of 4 lump sum payments that I received from 4 private pension schemes, assisted by way of a bank loan from my bank (Santander), and from money that I received from the sale of a flat in Portsmouth.”

  12. That statement also was untrue.

  13. Those explanations prompted a request from the Regulator to Mr McLarry under s.72 of PA 2004 dated 22 August 2014 for a full explanation of VerdePlanet’s dealings with the French property (ie La Cave), a time when the only reasonable assumption was the interest in a single French property. The response, in the view of the Panel, is wholly unsatisfactory:

    (i) In answer to the questions as to the purchase price for the French property, Mr McLarry stated, first, that the purchase price was €28,000, plus costs, for the ‘shell property’.

    (ii) Next, it was explained that Mr French would be able to obtain planning permission from the Mayor, which would increase the value of the building.

    (iii) It was then said that:

    “[S]ometime after the purchase of the property, when it became evident that the planning process was to be agreed, the deal with Mr French was concluded by way of a settlement of an outstanding debt owed by Mr French to Mr McLarry of £93k which was added to the assets of PSSL by means of a Directors debenture. Therefore, although only circa 30k (with costs) of the Schemes investment monies was used to purchase this property, with the resultant planning permission, the value of the property was estimated to rise to 118k – 120k.”

  14. The letter enclosed a “Deed of Sale” ostensibly dated 30 November 2012, and recording a date of completion of 15 December 2012. The agreement was between Mr French and Mr McLarry. The document records that “£93,000 (…) of the total purchase price is to comprise of the repayment of an outstanding debt owed by the vendor to the purchaser due to the borrowings that arose from the purchase of a share in the ‘Mary Rose Public House’, Portsmouth, Hampshire, UK in November 2005.”

  15. That document was not contemporaneous with the purchase of La Cave. The Respondents admitted in a 28 October 2014 email to Dalriada that it was “reconstituted” at Mr McLarry’s request and based on Mr French’s recollection substantially after the event, and only days before Mr French’s death (which the Panel understands to have been at the end of 2013).

  16. The Panel therefore finds that the document was created to give credence to the idea of a £118,000 “purchase price” or agreed valuation of La Cave after the event, but that in fact it was not agreed that the property was worth that at the time of the sale. In fact, La Cave was worth only about what was paid for it: €28,000.

Other PSSL investment money issues

  1. There were three other PSSL investment money issues cited in the Warning Notice. In view of its findings in relation to La Force and La Cave, the Panel does not need to, and does not, reach a conclusion on the items in dispute. These are:-

    (i) £12,500 paid to the account of PJ & S McLarry on 11 June 2012;

    (ii) £20,000 paid to the account of M ou Mme Patrick McLarry on 16 July 2012;

    (iii) £36,500 paid to Saulet Solicitors on 27 February 2013.

  2. In relation to the £12,500 and £20,000 there was a dispute as to whether these sums were Scheme monies or monies to which Mr and Mrs McLarry had already become entitled. In relation to the £36,500 it was accepted by the Respondents that this was a Scheme investment (bringing the PSSL investment, with the £177,500, to a total of £214,000). The dispute about this sum was what happened to it after being mixed with Mr and Mrs McLarry’s personal accounts.

The Criminal Conviction of Mr McLarry

  1. It is the statements from the Credit Agricole Personal Account which demonstrate that Scheme funds were the principal source of the purchase monies for La Force.

  2. The Regulator sought copies of the account statements for the Credit Agricole Personal Account from Mr McLarry pursuant to s.72 PA 2004. By response dated 4 May 2015, Mr McLarry explained various practical and potential legal impediments or defences which might prevent the provision of those statements. Mr McLarry explained, however, that the Credit Agricole Personal Account was used “as a vehicle to allow PSSL to trade in Euros”.

  3. The Regulator sent a further notice under s.72 PA 2004 formally requesting copies of bank statements for the Credit Agricole Personal Account for the period from 28 May 2012 to 1 May 2015.

  4. In the absence of compliance by Mr McLarry, he was prosecuted under s.77 PA 2004 (“the s.77 Proceedings”). Mr McLarry, in his evidence in defence, continued to assert that there were impediments on the provision of the bank statements of the Credit Agricole Personal Account as a matter of French privacy law. In particular, Mr McLarry relied upon a letter signed by a number of persons who claimed to have been engaged in trading with PSSL, and who refused to permit bank statements to be disclosed under confidentiality laws. Mr McLarry’s position was that the only way for the Regulator to obtain the bank statements was to apply directly to the French courts to have them released.

  5. In April 2017 Mr McLarry was found guilty under s.77 PA 2004, his defence having failed.

  6. In the Panel’s view, a criminal conviction for failure to comply with a notice under s.72 PA 2004 (which followed a not guilty plea) is a serious matter to which significant weight should properly be given in assessing whether someone is a fit and proper person for the purposes of s.3 PA 1995.

  7. On 12 April 2017, following that conviction, Mr McLarry provided the bank statements sought. The Regulator has asserted that the Credit Agricole Personal Account bank
    statements do not contain details of identifiable third parties with whom PSSL has traded; contrary to the position adopted by Mr McLarry in the s.77 proceedings.

  8. Without having before it the full material before the court for the purposes of the s.77 Proceedings, the Panel does not consider that it would be appropriate for it to make any finding about whether Mr McLarry provided false or misleading evidence to the Court in the s.77 Proceedings.

  9. The Panel does, however, consider that irrespective of the French legal arguments Mr McLarry thought he could raise to prevent provision of the Credit Agricole Personal Account, there was nothing preventing him from explaining what had become of the sums paid into the account from the Scheme. The reason he would not do so, the Panel finds, is because by this stage he recognised that the truth of those matters reflected badly upon him.


  1. On 3 August 2012, almost three months after the Scheme had invested £177,500 in PSSL, Mr Grimwood made a statement on Yateley headed notepaper about a “Stock Check of Items held by Plane Sailing”. He recorded that he had been requested to undertake a stock check of various items held by Plane Sailing prior to the company commencing trading; and that “this not only gives a starting point for stock levels and values but is also an additional security measure for the investment loan which the company has from [the Scheme]”. At the Hearing Mr Grimwood described his role as checking items against a description. Stock was divided into three categories: Transport, “one item with a value of £3,900”; Antiques and Collectables, “134 items with a value of £41,780”; and Art-Paintings and Antiques, “39 items with a value of £48,770”. The total was £94,450.

  2. On 12 August 2013 Mr Grimwood made a similar kind of statement, with the same heading and also broken down by category of stock. On that occasion, he verified the physical existence of stock “with a total value of £127,775” which he compared with “the value outstanding on the investment [at] £65,890 at 7 August 2013”, thus providing an “excess of £61,885 or 93.92%”. In PSSL’s Accounts for the year ended 31 March 2013 (and approved by the Board on 12 December 2013) stock was shown as an asset with a value of £40,648.00. The Panel does not know how the figure of £65,890, stated to be the “value outstanding on the investment” was calculated. The Panel is prepared to accept that PSSL acquired stock for the purpose of trading and that some of the funding probably came from the Credit Agricole Personal Account, into which £214,000 of Scheme funds had been paid. On this aspect of the Scheme’s investment in PSSL and having already found that money invested in PSSL was used to purchase La  Force, the Panel makes no findings as to whether the evidence suggests some breach of duty by the Respondents, in respect of either the acquisition or valuing of stock.

  3. However, it does not appear to the Panel that Mr Grimwood took any steps in August 2013 to verify that PSSL in fact owned the stock that he was confirming the existence of. So, whilst he might have seen year-on-year that PSSL had access to a lot of stock (with little evidence of stock being traded), he did not know that it was PSSL’s own stock.

  4. In summary, the Panel considers that Mr Grimwood’s stock taking exercise provided no assurance of value or security to the Scheme. The exercise serves further to underline the, at best, confusion as to the nature and extent of the Scheme’s ‘investment’ in PSSL.

Summary of findings in relation to the investment in PSSL

Competence and Capability

  1. The Panel considers that a substantial investment in PSSL was not an appropriate one for the Scheme. Even had PSSL been an independent company, and the investment properly documented, it would have been an imprudent investment for Scheme assets. No investment advice was taken, and the Panel doubts that any investment advisor would have recommended the investment.

  2. The Panel also considers that there was an acute and obvious conflict between Mr McLarry’s duties to the Scheme, and his and his wife’s financial interests in relation to PSSL.

  3. The Panel doubts that that conflict would ever have been capable of appropriate management; and the Panel has seen nothing from the Respondents to indicate that anything approaching appropriate steps were taken by Mr Grimwood to assess and monitor the investment as the “unconflicted trustee”. Again, the stock-taking exercise, for example, was inadequate and misguided.

  4. At the very least, the investment in PSSL and the dealings with the French properties show a serious lack of competence and capability on the part of both Respondents.

Honesty and Integrity

  1. The Regulator has alleged dishonesty and a lack of integrity in addition, and set out detailed submissions on what those terms have been defined as meaning in different regulatory and non-regulatory legal contexts.

  2. In the Panel’s view, there is no need to seek a precise definition of dishonesty or integrity in this context. If the Panel finds that there has been behaviour of the sort that would be described as dishonest or lacking in integrity by ordinary people, that will be a matter to take into account in determining whether that person is a fit and proper person to be a pension trustee. A finding of “dishonesty” or “lack of integrity” is not a threshold requirement for finding that someone is not “fit and proper”.

  3. The Panel treats integrity as a separate concept to dishonesty. If a person is acting dishonestly they will almost invariably be acting without integrity. On the other hand, a person may lack integrity without being dishonest.

  4. Integrity connotes moral soundness, rectitude and steady adherence to an ethical code (Hoodless and Blackwell v FSA (2003) at [19]). A person will lack integrity if they are unable to appreciate the distinction between what is honest or dishonest by ordinary standards; i.e. if they lack what would be described as an ethical compass (First Financial Advisors Limited v FSA [2012] UKUT B16 (TCC); quoted with approval in Batra v The Financial Conduct Authority [2014] UKUT 0214 (TCC)). A lack of integrity “is capable of being identified as present or not by an informed tribunal by reference to the facts of a particular case”: SRA v Chan [2015] EWHC 2569.

  5. The Panel has limited its consideration of allegations of “dishonesty” in the remainder of this decision to the question of whether the relevant conduct is conduct that ordinary people would consider to be dishonest, and not whether the Respondents would subjectively have recognised it to be dishonest.

  6. In relation to the purchase of the French properties, the Panel further concludes as follows in relation to Mr McLarry:

    (i) The Panel has not found it necessary to decide either way as to whether the purchase of La Force was ever predominantly intended to be a business asset for PSSL (or a Scheme asset) as opposed to a holiday home (as it was, in fact, subsequently used). It does not therefore find that the initial purchase of La Force was an attempt by Mr McLarry to misappropriate scheme assets for his and his wife’s personal benefit. It is, instead, content to proceed on the basis (though without finding it) that Mr McLarry may genuinely have believed that investment of substantial Scheme assets in PSSL and that property was a good and suitable investment for the Scheme.

    (ii) When La Force, apparently, proved to be unsuitable, only €28,000 of Scheme money was used to purchase La Cave; which was its fair value.

    (iii) La Cave was not then worth, and was never worth, £118,000. The note in the 2011/12 accounts to the effect that £118,000 of Scheme funds had been utilised to purchase it was untrue. It was attributed that inflated value in order to go some way to justify where the £177,500 received back from Saulet had been transferred in circumstances where Mr McLarry and his wife were keeping La Force.

    (iv) The variable explanations that have been given in relation to the relationship between £118,000, the €28,000 purchase price, the £93,000 loan write off/debenture, the future development potential of La Cave and/or the other ‘investments’ that he or PSSL had put in to that property by way of temporary repair are confusing and inconsistent. If they have been given honestly, they show a gross lack of competence and capability on the part of Mr McLarry.

    (v) The Panel does not discount the possibility that it may, objectively viewed, have been possible honestly to reach the view that La Cave was worth £118,000. It therefore does not find that Mr McLarry was dishonest in attributing an inflated value of £118,000 to La Cave.

    (vi) The Panel is, however, satisfied and so concludes that Mr McLarry lacked integrity in his initial dealings with monies derived from the Scheme. No-one with integrity could have found themselves in a position where they and their wife remained owning La Force, which was originally intended as a direct or indirect Scheme investment and paid for with Scheme monies, whilst instead attributing to the Scheme more in value for the replacement property than was in fact paid for it.

    (vii) Further, the Panel is satisfied that – whether or not Mr McLarry originally acted honestly in the acquisition of the French properties – he has subsequently lied about how the arrangements transpired. In particular, the explanation in the 21 August 2014 email to Dalriada as to how La Force was purchased was untrue and dishonest. That dishonesty was particularly significant in the context of the “fit and proper person” test, in circumstances where the statement was made to a successor trustee investigating his conduct and seeking to understand the destination of Scheme funds.

    (viii) The Panel notes Mr McLarry’s assertion that he and his wife have ultimately lost out as a result of these matters, and that he has paid back money from which he might otherwise have benefitted. The Panel makes no finding as to the extent of Mr McLarry’s ultimate benefit or loss, as those matters do not have a material bearing on the Panel’s conclusions as to Mr McLarry’s previous conduct, nor on whether he is a “fit and proper person”.

  7. In relation to Mr Grimwood and the French properties:

    (i) The Panel concludes that Mr Grimwood’s role in relation to the purchase of the French properties was rather more limited. It does not find that Mr Grimwood in fact knew that Scheme funds were, initially, used to purchase La Force prior to the subsequent purchase of La Cave. Although Mr McLarry suggested to Mr Grimwood at the Hearing that Mr Grimwood knew this at the time, Mr Grimwood’s response was not an unequivocal yes.

    (ii) The Panel does find, however, that Mr Grimwood knew of La Cave before it was bought; and that this (if not La Force) was the “suitable building” Mr Grimwood says (in the Respondents’ Notice) that he reviewed the suitability of in his capacity as the “un-conflicted Trustee”.

    (iii) It was Mr Grimwood who signed the 2011/12 Scheme accounts which recorded that £118,000 of Scheme funds had been “utilised” to purchase the La Cave property. The Panel does not find he knew that was false. It is clear, however, that he did not take adequate steps to satisfy himself that it was true.

    (iv) Further, whilst he appears not to have been the author of many of the later emails and letters with the Regulator and Dalriada concerning the €28,000 purchase price, he was copied to many of them and did not distance himself from those explanations.

    (v) Indeed, in giving evidence in support of Mr McLarry in the context of the s.77 proceedings he stated, “I am aware of the problems that Mr McLarry has had with the French property and TPR over the French property. I am also aware of the discussions he held with his French Avocat. I have no reason whatsoever to dispute what Mr McLarry told me and have seen various documents and plans relating to this property. Had the building been allowed to develop, as was envisaged, the Scheme would have benefitted greatly by holding a property which would probably have doubled in value when it was completed plus interest on the development and also a rental fee.”

    (vi) Mr Grimwood’s dealings in relation to PSSL showed an acute lack of competence and capability. Ultimately, however, the Panel has not found it necessary to conclude whether or not Mr Grimwood lacked integrity (or acted dishonestly) in his dealings with PSSL and the French properties or subsequently.

Investment in B&K Cleaning and Maintenance

  1. The Panel notes that the Respondents also caused the Scheme to loan £18,000 to a cleaning company called B&K Cleaning and Maintenance Limited (B&K). On the basis of the financial information provided by the Regulator in relation to that company, the Panel doubts that this was an appropriate investment for a pension scheme. The company soon became insolvent and the investment was lost. However, in light of the comparatively small figure of the investment and the conclusions reached as regards PHAL and PSSL, the Panel has not found it necessary to make any findings in relation to this loan in order to reach its ultimate determination.

Alleged breach of employer surplus restrictions

  1. The Regulator submits that the Respondents have also caused VerdePlanet to breach statutory obligations contained in regulations concerning the repayment of scheme surpluses to sponsoring employers (Regulation 5 of the Occupational Pension Schemes (Payments to Employer) Regulations 2006 and s.37 of PA 1995.

  2. That allegation arises against the following factual background.

    (i) A triennial valuation of the Scheme as at 1 April 2009 showed a deficit of £520,000. The Recovery Plan provided for annual deficit repair contributions of £3,114.27 per annum from Yateley.

    (ii) Shortly after its appointment, VerdePlanet chose to obtain an early valuation with an effective date of 31 March 2010. On the “Part 3 basis”, the valuation showed a £3,000 surplus. Retrospective valuations show a deficit on the s.75 basis, however.

    (iii) The Scheme accounts for the financial year ending 31 March 2012, signed by the Respondents, show a “refund of contributions” to Yateley in the sum of £97,499. The notes record that, “There was a refund of £97,499 for contributions in respect of the reversal of the previous deficit shown in the actuarial valuation.”

    (iv) The Employer’s accounts for the year to 31 March 2012 show receipt of a ‘refund’ of £42,620 from the Scheme. Mr Grimwood’s foreword to those accounts states:

    “The accounts show a surplus of £52,280. The turn round was entirely due to the efforts of all staff, plus a refund from, the pension fund, and for that they should be congratulated…. We [meaning Mr Grimwood and Mr McLarry] realised that from 1 April 2010, as the scheme was then in surplus, all monies paid to AWD during the period 1 April 2010 to 31 March 2011 should be classed as an overpayment. We therefore contacted AWD and, eventually, in June of 2011, received almost £43,000 back into the Trustee account. This money has been given to Yateley….”

  3. During the Hearing, Mr Grimwood explained that:

    “Regarding the repayment of any surplus money, that was not our decision. That was a decision made by our accountant. She was looking at the scheme then being £3,000 in surplus and her words were, ‘As you’re in surplus, you can have the money back’. Now, whether she was right or wrong, at this stage, it’s immaterial. That is the advice that we took from our experts.”

  4. In light of the findings the Panel has made above in relation to PHAL and PSSL, and the explanation provided during the Hearing that the Respondents were following professional advice (or what they understood the advice to be), the Panel has not found it necessary to reach any conclusions on this return of surplus issue.

Payments to VerdePlanet / the Respondents

  1. The Regulator also submits in the Warning Notice that the Respondents or VerdePlanet have received substantial fees from the Scheme and then have provided misleading information about that remuneration.

  2. This is a complex and contested area, extending well beyond the period of the trusteeship of the Respondents. This was also not an area of the Regulator’s case which featured in its Position Statement or which was focussed upon in the Regulator’s submissions at the Hearing. Again, therefore, and in light of its earlier findings, the Panel has not found it necessary to reach additional conclusions on this area.

Conclusions on the Regulator’s alleged grounds

  1. As regards the grounds identified, the Regulator contends that the Respondents each demonstrated a lack of honesty and/or integrity and/or competence and capability such that each of the Respondents should be prohibited from acting as a trustee of trust schemes in general. The Panel concludes, by reference to the summary of “Grounds for Prohibition” set out in the Warning Notice that:

Investment Advice and Acting Prudently

(i) The investment in PHAL involved VerdePlanet acting in breach of investment obligations (including the requirement to take proper advice), was an imprudent investment and showed a significant lack of competence and capability on the part of both Respondents. The investment in PSSL also demonstrated the same breaches. The Panel does not find a lack of integrity in relation to the decisions to make these investments as such, subject to its separate findings below in relation to PSSL. The Panel makes no findings in relation to B&K.


(ii) Save for the circumstances surrounding the entry into the third deed with PHAL, which demonstrated a further failure of competence and capability on the part of both Respondents, the Panel makes no findings in relation to the Respondents acting improperly in a position of conflict in relation to PHAL.

(iii) In relation to PSSL, the Panel concludes that there was an acute conflict between Mr McLarry’s interests and duties, and that he lacked integrity in allowing himself to end up in a position where he and/or his wife retained a property paid for with Scheme funds, whilst also attributing to the ‘replacement’ property an artificially high value. The Panel does not find it necessary to reach a conclusion on whether Mr McLarry was also dishonest under this head. Mr Grimwood’s attempts to recognise and manage this obvious conflict were inept and demonstrated acute failures of competence and capability. The Panel does not, however, find it necessary to conclude whether Mr Grimwood lacked integrity.

Breach of Employer Surplus Restrictions

(iv) The Panel has not found it necessary to reach any conclusions under this ground.

Payments to Respondents & VerdePlanet

(v) The Panel has not found it necessary to reach any conclusions under this ground.

Providing false and misleading information – the French property

(vi) The Panel finds that Mr McLarry was dishonest in relation to his subsequent explanations, to Dalriada in particular, in relation to the purchase of La Force. Further explanations were not straightforward and therefore lacked integrity. The Panel does not reach any conclusions in relation to Mr Grimwood in relation to these subsequent explanations about the purchase of La Force, given a lack of clarity as to what Mr Grimwood in fact knew to be the case.

Misuse and misappropriation of Scheme assets

(vii) In relation to PSSL, the Panel concludes that Mr McLarry has improperly come to hold Scheme assets personally, and demonstrated, at least, a lack of integrity in reaching that situation. Mr Grimwood has shown, at least, a gross lack of competence and capability in allowing that to happen.

Failure to comply with a s.72 Notice

(viii) The Panel notes that Mr McLarry has been found guilty of an offence under s.77 of PA 2004. In the Panel’s view, that is a free-standing matter that can be taken into account in deciding whether someone is a fit and proper person.

Giving false evidence in s.77 proceedings

(ix) The Panel declines to reach a decision on this point, especially in the absence of a full transcript. The Panel has, however, found that Mr McLarry could have given a fuller explanation of the circumstances surrounding the purchase of La Force and La Cave, without providing the Credit Agricole Personal Account statements, had he wished to.

Determination and order

  1. In making its decision the Panel has had regard to the objectives of the Regulator as set out in s.5 of PA 2004 and to the matters listed in s.100 of PA 2004 together with the Regulator’s published Prohibition Policy Statement.

  2. The Panel has further had regard to the fact that Mr McLarry has stated (in his evidence in the s.77 proceedings) that neither he nor Mr Grimwood intend to act as pension scheme trustees. In the Panel’s view, this does not impact the question of whether they should be prohibited under s.3 PA 1995.

  3. The Panel concludes that the failings of competence and capability set out above are sufficiently serious and wide-ranging as to compel a conclusion that neither of the Respondents is a fit and proper person to be a trustee of trust schemes in general for the purposes of s.3 PA 1995. For that reason, the Panel has largely found it unnecessary to consider whether the Respondents lacked integrity or behaved dishonestly in all of the ways that the Regulator has alleged. It has, nevertheless, concluded that it is appropriate to find that Mr McLarry lacked integrity in his dealings with PSSL and has subsequently been dishonest in his explanations.

  4. The Panel therefore determines that an order be made under s.3 PA 1995 prohibiting each of the Respondents from acting as trustees of trust schemes in general in the following terms:-

    “Order under section 3 of the Pensions Act 1995 The Pensions Regulator hereby orders as follows:-

    The following individuals are prohibited from acting as a trustee of trust schemes in general:-

    (i) Mr Patrick McLarry
    (ii) Mr Roy Grimwood

    This order has the effect of removing the above-named individuals from all or any schemes of which they are a trustee.

    By section 6 of the Pensions Act 1995, any person who purports to act as a trustee of a trust scheme whilst prohibited under section 3 is guilty of an offence and liable

    (a) on summary conviction to a fine not exceeding the statutory maximum, and
    (b) on conviction on indictment to a fine or imprisonment or both.”

  5. Appendix 1 to this Determination Notice contains important information about the Directly Affected Parties’ rights to refer this decision to the Upper Tribunal.

  6. Although the Panel has, for convenience, issued one Determination Notice in respect of both Respondents, the Panel has reached a separate determination in respect of each of the Respondents.


Dated: 8 December 2017

Appendix 1

Referral to the Tax and Chancery Chamber of the Upper Tribunal

You have the right to refer the matter to which this Determination Notice relates to the Tax and Chancery Chamber of the Upper Tribunal (the Tribunal). You have 28 days from the date this Determination Notice is sent to you to refer the matter to the Tribunal or such other period as specified in the Tribunal rules or as the Tribunal may allow. A reference to the Tribunal is made by way of a written notice signed by you and filed with a copy of this Determination Notice.

The Tribunal’s address is:

Upper Tribunal
(Tax and Chancery Chamber) 
Fifth Floor
Rolls Building 
Fetter Lane 
London EC4A 1NL

Tel: 020 7612 9700

The detailed procedures for making a reference to the Tribunal are contained in s.103 of PA 2004 and the Tribunal Rules.

You should note that the Tribunal rules provide that at the same time as filing a reference notice with the Tribunal, you must send a copy of the reference notice to the Pensions Regulator. Any copy reference notice should be sent to:

Determinations Panel Support 
The Pensions Regulator 
Napier House
Trafalgar Place 

Tel: 01273 811852

A copy of the form for making a reference, FTC3 ‘Reference Notice (Financial Services)’, can be found on the GOV.UK website.