Farepak Directors Trial Day 10 – 12 June 2012

Unfairpak would like to advise that all Defendants are innocent unless proven otherwise.

Mr Justice Peter Smith’s Clerk has confirmed to Unfairpak that Mr Peter Johnson of Park is giving evidence today.  We insert herewith passages from the Skeleton Argument for the Secretary of State in relation to Mr Johnson’s evidence relating to the purchase of multi-retailer vouchers.

261. Moreover, although FFG did at a meeting on 15 June 2006 attempt, unsuccessfully, to negotiate improved terms with Grass Roots, there is no evidence to suggest that as at 5 June there was any suggestion from either side that the requirement for upfront payment (which had been taken as read throughout the pre-contractual negotiations) might be open for renegotiation. Indeed, given that there was a binding contract in place, it is hard to see what FFG could in June 2006 have offered Grass Roots as a quid pro quo for Grass Roots permitting a variation of that contract which would have meant it offering credit to FFG on vouchers supplied, or on what basis FFG might have thought there was any prospect of such a variation.

262. The assertion by Mr Rollason that “as it turned out, the ultimate offer from Park was for deferred payment for its multi-retailer vouchers, i.e. exactly the same terms as Choice had provided221 is no answer to the point; the Park deal proposed much later in the year was part of a wider rescue plan involving (amongst other things) a buyout of the assets of FFG, and not an arm’s length commercial deal for the supply of vouchers.

263. The evidence of Peter Johnson of Park is telling in this regard. Park was FFG’s main competitor and a provider of multi-retailer vouchers in its own right. Mr Johnson, who has been a director of Park for over 40 years, says in his evidence:

“As far as I am aware, at the time there was nobody else in the market who offered the terms which Farepak previously enjoyed with Choice (i.e. payment on redemption of the vouchers) and I believe that the prospects of anyone offering replacement vouchers on the same terms were nil. We certainly would not have done so.”

 

Passages taken from Mr Nicholas Gilodi-Johnson’s Skeleton Argument detailing Park II which was rejected by HBOS on 10 October 2006.

1 September 2006 onwards……

142. The bank was ready to appoint receivers with a pre-pack sale to Findel but Findel lowered its offer price and it fell through.

143. This led to what has been referred to as ‘Park II’. The precise details of ‘Park II’ changed over time, but, in essence, by the end of September 2006 it involved

(1) A £3m loan from the Johnson family trusts, subordinated to HBOS;

(2) £1.875m of IWOOT loan notes and £3.1m of earn-out payments to be converted to a loan of £4.975m;

(3) Park to provide a loan of £3.5m (in the form of deferred payment terms (£3m) and an additional £500,000);

(4) Park to acquire FFG for £6m; and

(5) Kitbag to be sold for £15m.

144. On 7 September 2006 a further request had been made to HBOS by FFG to set up a trust account. This was refused the following day. This again was inevitable.

EHR board meeting on 19 September 2006

145. Mr Rollason reported that HBOS had been pursuing a pre-pack solution with Findel up until late on 1 September 2006 but that at the last minute Findel had reduced their offer. HBOS had then decided that their loss on the Findel deal was too large and as a consequence they had expressed an interest in Park II. He set out the then basis on which Park II was proceeding. This offered a real prospect of a solvent solution.

EHR board meeting on 4 October 2006

146. By now Findel had come back on the scene. The purpose of the meeting was to consider giving HBOS permission to speak to Findel and Deutsche Bank to explore the possibility of a sale of the business. The board agreed on the understanding that HBOS had to have regard in any solution to maximising funds to all creditors, and in particular FFG creditors.

147. On 10 October 2006 HBOS telephoned Mr Rollason to say that they would not support Park II and that they wanted him to work alongside PwC to complete a sale of parts of the business to Findel. The board of EHR met on 12 October 2006 and resolved to request HBOS to apoint administrative receivers to EHR.  Partners in PwC were formally appointed on 13 October 2006.

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