As advised by Unfairpak, the trial is set down for 6 to 8 weeks.
It got off to a slow start today, 24 May 2012, with the Secretary of State giving opening submissions before Mr Justice Peter Smith and advising him that he had the power to disqualify them from being directors from between 2 to 15 years.
In written submissions, Malcolm Davis-White QC, acting on behalf of the Insolvency Service stated “The proceedings, seeking disqualification orders, are brought against directors of the holding company European Home Retail and its subsidiary Farepak Food & Gifts. They concern approximately the last year or so of trading of Farepak and the group.” Mr Justice Peter Smith was also told that the directors had traded at an “unreasonable risk” and that the collapse of Farepak Food & Gifts Limited had not came “out of the blue”.
Accordingly, the Insolvency Service are making “allegations of unfit conduct” and are arguing that the directors of European Home Retail (hereainafter referred to as “EHR”) or Farepak Food & Gifts Limited allowed or caused said companies to “trade at the unreasonable risk of its creditors”.
As Unfairpak exclusively revealed to the Sunday Herald on 12 February 2012, two former directors of Farepak Food & Gifts Limited have already taken voluntary disqualification. Joanne Ponting and Stephen Hicks both took voluntary disqualification in 2011.
Michael Johns who was a non executive director at the time of the collapse is a senior partner with the London firm K&L Gates and is being represented by said company. Neil Gillis and Paul Munn, Farepak directors and Sir Clive Thompson, former chairman are also being represented by said firm with Paul Girolami QC of Maitland Chambers instructed as counsel.
Richard Highley dispute resolution partner of DAC Beachcroft is acting for William Rollason and Steven Fowler with Michael Green QC of Fountain Court alongside.
The commercial dispute resolution partner of Nabarro has instructed Philip Jones QC of Serle Chambers to act for Nicholas Gilodi-Johnson, Farepak Food & Gifts Limited’s former managing director.
Lawyers for the Insolvency Service also pointed out that prior to the collapse on Friday 13 October 2006, “about £1 million a week” was coming in from Farepak savers who had “no inkling” of “any serious risk”.
Mr Davis-White also pointed out that company financial forecasts in November 2005 “identified a risk” that Farepak Food & Gifts Limited would not have enough monies to pay Choice Gift Vouchers, their main supplier. Choice Gift Vouchers Limited entered administration on Tuesday 31 January 2006 having being paid approximately half of the £12.1 million owed to them by Farepak Food & Gifts Limited.
“With alarming cashflow projections available from early April 2006 warning of a lack of sufficient cash in the group from October 2006 onwards, various unsuccessful attempts were made by the group to find a solution to the funding crisis,” Mr Davis-White added.
“Throughout this period, savers’ weekly payments (amounting by October to some £2million per week) continued to be collected by Farepak and swept up daily into the group account, unprotected by any trust account or similar arrangement.”
“By the time Farepak ceased to accept savers’ money on October 11 2006, it had ordered no vouchers for Christmas 2006. On October 13 2006 European Home Retail and a number of its subsidiaries including Farepak entered (variously) administration and administrative receivership.”
Mr Davis-White also went on to point out that Farepak’s creditors were also savers. He further went on to state that “we say you have to look at the overall financial position and the risk. We say it is relevant that your creditors are savers. It should help you shape more carefully how you deal with things. It is all very well saying ‘they are creditors like any other’ but, in our respectful submission, they are not simply creditors like any other.”
Counsel will deliver opening submissions on behalf of the defendants tomorrow, 25 May 2012 and the court will begin hearing evidence on Monday, 28 May 2012.