Court outlaws 'evil' pyramid selling scheme

Members to lose investment as 'lottery' banned

A "pyramid-style" selling scheme, which involves no product, was yesterday ruled illegal by the Court of Appeal. But lawyers for the Titan Business Club, which has thousands of members, including showbusiness celebrities, said they would take their fight to the House of Lords and ultimately to the European Court.

Lord Woolf, Master of the Rolls, said all such operations broke the law when "they involve those who set up, promote, purvey and administer the scheme in criminal offences". Describing the scheme as "pernicious" and "evil", he added: "I hope this will deter those who may be tempted to create clones of Titan."

The court heard how new club members, having paid pounds 3,000 to become "junior partners" in the scheme, would make pounds 450 from each of the first two members they introduced, pounds 1,220 from each subsequent introduction and further amounts of pounds 770, depending on the success of members of their particular "family tree" in introducing new members.

In theory, considerable sums could be generated as the membership grew, but there was "only a chance" of this, and the scheme was essentially a lottery, said the judge.

Yesterday's ruling will come as a blow to thousands of members, who, having paid to join, are now unable to recruit others, recoup their investment and begin to make a profit.

One member at court said: "Obviously we are extremely disappointed." He and others are pinning hopes on a scheme launched to replace Titan, which they hope will not be affected by yesterday's ruling.

The scheme is being restructured by Patrick Minford, one of the Treasury's "six wise men", who said after a hearing in June that he thought the "snowball plan" run by Titan could be run on a sustainable basis.

Charles Buckley, a lawyer for SHV Senator of Hamburg, which runs Titan, said: "My reaction to this ruling is one of anger and disappointment at the unwarranted interference by the judiciary and the Government into the way in which citizens spend their money in what is a form of mutual society.

"This ruling is contrary to Article 59 of the European Convention, which supports the freedom of movement of services and capital and is also contrary to the ruling of the highest court in Germany, the Bavarian Supreme Court, which has held that this scheme is not a lottery."

The ruling was a victory for Ian Lang, the President of the Board of Trade, who said the scheme was an unlawful lottery which was bound to fail. A Department of Trade and Industry (DTI) official said it was "chuffed to bits" by the decision.

Titan had appealed against the ruling in June by the Vice-Chancellor, Sir Richard Scott, who ordered that no more "revivalist-style" recruitment meetings should be held to promote the club, which has 10,000 members, pending a DTI application for it to be wound up and finally put out of business.