High Court Ruling Unlocks Sale of Qualia Group Care Homes
A High Court ruling into the unwinding of a care home group which was funded through a collective investment scheme, could see investors recovering some of their monies.
Earlier this month the High Court ruled that the former investors into St Mary’s Nursing Home in Moston, Manchester, a Qualia Care home, with 77 residents and 85 members of staff, could surrender their leases which were purchased under “fractional ownership” in order for the property to be sold – enabling care for elderly and vulnerable residents to continue. Stephen Hunt of Griffins, the appointed administrator of the Qualia Group, and solicitors, Gateley Legal, made an application to the High Court under the Financial Services and Markets Act 2000 (FSMA) in relation to the home which is being marketed by Colliers’ Healthcare team.
Qualia Care Properties Ltd and Qualia Care Developments Ltd, was funded by a Ponzi scheme which took £57million from individual investors between February 2016 and September 2020. Individuals invested between £50-70,000 on purchasing a long-term lease on a room in a care home and sub-let the room back to the other Qualia companies.
In a previous case bought by the Financial Conduct Authority last year, the High Court ruled that the former director of the company Robin Forster had made false and misleading statements, promising investors returns of between eight to 10 per cent of the purchase price, which were never likely to be achievable.
Qualia Care Properties Ltd and Qualia Care Developments Ltd were both liquidated in the summer of 2022, while Qualia Care Ltd went into administration in October of that year. Some of the group’s 14 care homes have since closed, however nine are still in operation providing approximately 476 care home places to residents. The portfolio is estimated to have a value in excess of £20million, and could achieve greater uplift following asset management.
This latest High Court ruling unlocks the way for the Qualia Care assets to be sold to new owners and operators, and could see former investors receive around a third of their investment recovered through the sales process.
Administrator Stephen Hunt said: “It is rare for an insolvency practitioner to obtain a happy outcome for all concerned. This case marks the culmination of two years of hard work by a number of professionals and stakeholders to obtain a remarkable outcome for investors, staff, and vulnerable residents.
“I was appointed to a loss-making care home group formed by a Ponzi scheme, soon after the end of COVID and during the energy crisis caused by the Ukraine war. Qualia had no access to funding as it had no free assets to borrow against. From this unpromising start we have turned round the business and implemented a novel legal solution to unlock returns to investors and creditors of up to £20 million. Everyone involved should be very proud of that.”
Nick Hammond, Head of Colliers’ Advisory & Restructuring team, said: “There are so many vulnerable parties who have been caught up in this whole scheme from the investors, to the residents and the staff at these care homes. This court ruling unlocks the opportunity to safeguard the operational homes by allowing them to be marketed to a new owner and operator.
Ali Willoughby, from Colliers’ Healthcare team said: “We received lots of interest in St Mary’s and following the due legal process will be able to complete its sale next month. We anticipate continued interest in the majority of the remaining Qualia Care assets which will provide certainty to both the staff and residents, as well as the potential to recover some of the funds for the individual investors, many of whom ploughed their life savings into this scheme.”
The Court hearing was led by barristers Eleanor Temple KC (Kings Chambers) and FSMA specialist Ruth Bala (4 Pump Court).
