Court Details 19 June 2012 – FAREPAK DIRECTORS DUE TO START GIVING EVIDENCE

Cause list Tuesday, 19 June 2012

Updated: 18 June 2012 13.07 (refresh your browser for the latest version)

The following list is subject to change until 4.30pm. Any alterations after this time will be telephoned or emailed direct to the parties or their legal representatives.

IN THE HIGH COURT OF JUSTICE

 

CHANCERY DIVISION

 

 

COURT 26

Before MR JUSTICE PETER SMITH

Tuesday, 19 June 2012

At half past 10

GENERAL LIST

Part Heard

584 of 2011 In the matter of European Home Retail plc and in the matter of Farepak Food & Gifts Ltd

Skeleton Argument for Sir Clive Thompson & Non Executive Directors EHR/Farepak

Skeleton Argument Sir Clive Thompson & Non Executive Directors

 

 

This opening skeleton argument is filed on behalf of the 2nd, 5th, 6th and 9th Defendants (referred to collectively below as “the EHR Non-Executives”), being Mr Neil Gillis (“Mr Gillis”), Mr Michael Johns (“Mr Johns”), Mr Paul Munn (“Mr Munn”) and Sir Clive Thompson (“Sir Clive”). The Secretary of State (“SoS”) seeks Disqualification Orders against each of them under section 8 of the Company Directors’ Disqualification Act 1986 (“CDDA 1986”) on the grounds that the conduct of each of them as a director of European Home Retail PLC (“EHR”) was such as to make them unfit to be concerned in the management of a company.

William Rollason & Stevan Fowler’s Skeleton Argument

William Rollason & Stevan Fowler’s Skeleton Argument

 

This skeleton argument is filed on behalf of the First Defendant (“Mr Fowler”) and the Eighth Defendant (“Mr Rollason”), both of whom were directors of both EHR AND FFG.  Mr Rollason was the Chief Executive of EHR; Mr Fowler was appointed as Group Finance Director on 1 January 2006 and he actually started work on 9 January 2006 (which was after the start of the material period for the allegations). 

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.

Collapse of Choice & Consequences of same to Farepak

UNFAIRPAK MUST POINT OUT THAT ALL DEFENDANTS MENTIONED ARE INNOCENT UNLESS PROVEN OTHERWISE.

Taken from Skeleton Argument – THE SECRETARY OF STATE FOR BUSINESS INNOVATION AND SKILLS

 

Collapse of Choice and the consequences thereof

 

176. On 30 January 2006 it became clear that the £12.1m payment due to be made to Choice that day could not be honoured,  and the CHAPS payment order was cancelled.

 On 31 January 2006 FFG paid Choice only some £6.5m of its £12.1m liability.  Choice went into administration the same day, “as a direct result of two major customers failing to pay their January accounts“, according to the joint administrators.


177. The fact that Choice had not been paid in full by FFG was known to Mr Rollason and Mr Fowler contemporaneously, and each of them was involved in discussions with Choice on 31 January.

177.1. Mr Gilodi-Johnson was told by Mr Hicks on Monday 30 January that the £12.1m payment had not been made, and went on to discuss the matter with both Mr Fowler and Mr Rollason shortly afterwards.

177.2. Mr Johns was informed of the administration of Choice by Mr Gilodi-Johnson on 1 February.113

177.3. Sir Clive Thompson learned of the collapse of Choice in a conversation with Mr Rollason on 1 February.114

177.4. Mr Munn’s evidence is that he first learned of the collapse of Choice upon reading an EHR board memorandum of 2 February from Mr Rollason, dealt with further below (the “2 February Memo”).

177.5. The evidence does not suggest that Mr Gillis knew of the collapse of Choice before receiving the 2 February Memo, which he discussed at the time with Mr Munn.116

178. Once the payment to Choice was missed and Choice collapsed, the Defendants knew or should have known that this was because of a lack of funding at the time. They should also have known that there was (at the least) a very high risk that payment terms would change in relation to any substitute supplier of vouchers and they should have been demanding a clear report as to what the effect of the collapse of Choice would mean. The directors should have monitored the position, including requiring appropriate financial modelling. Had they done so, the funding gap identified in forecasts by April 2006 would have come to light significantly earlier. An informed process leading to a decision as to whether to continue trading, and if so on the basis of what plans, could accordingly have been explored a lot sooner.

 

Court Details Farepak directors Trial – Day 8, 1 June 2012`

 

IN THE HIGH COURT OF JUSTICE

 

CHANCERY DIVISION

 

 

COURT 26

Before MR JUSTICE PETER SMITH

Friday, 1 June 2012

At half past 10

GENERAL LIST

Part Heard

584 of 2011 In the matter of European Home Retail plc and in the matter of Farepak Food & Gifts Ltd

 

 

Farepak Food & Gifts Limited – European Home Retail Limited Directors Responsibilities

Please see, set out below, the respective responsibilities of the defendants currently involved in the case in High Court, Chancery Division, 584 of 2011 In the matter of European Home Retail plc and in the matter of Farepak Food & Gifts Ltd.

For the avoidance of doubt, Mr Hicks and Mrs Ponting have had proceedings against them discontinued.

EHR APPT EHR ROLE FFG APPT FFG ROLE 
Mr Fowler 01/01/2006 Group Financial Director 01/01/2006 Director
Mr Gillis 15/08/2003 Non-executive N/A N/A
Mr Gilodi-Johnson 25/09/2001 Director 23/02/2005 Managing Director
Mr Hicks N/A N/A 16/10/2003 Finance Director
Mr Johns 28/09/2005 Non-executive N/A N/A
Mr Munn 20/11/2002 Non-executive N/A N/A
Mrs Ponting N/A N/A 01/05/2004 Responsible for customer service and IT
Mr Rollason 08/01/2003 Chief Executive Officer 23/05/2003 Chairman of the Board
Sir Clive Thompson 05/10/1988 Non-executive Chairman (from August 2001) N/A N/A

FAREPAK DIRECTORS TRIAL DAY 7 – 31 MAY 2012

Unfortunately not much to report today.  Mrs Burns, on behalf of the Secretary of State [Vince Cable] has finished giving evidence.

Court is still running behind so the schedule is a bit messed up and as we reported yesterday, witnesses were being shifted to some time “in the future…..”!

Court shall sit tomorrow, 1 June 2012 and then shall not re-sit until Tuesday, 12 June 2012.

Unfairpak feel this is significant time to appoint a journalist to the case and we are hopeful that someone will pick it up.

We shall be blogging over the next couple of days as we have various pieces of information regarding Farepak Food & Gifts Limited that we wish to share with you.

As always, if you require any help whatsoever, please do not hesitate to contact us.

 

FAREPAK DIRECTORS TRIAL DAY 6 – 30 MAY 2012

Mrs Burns, for the Secretary of State, Insolvency Service finished giving evidence on behalf of said Secretary of State today and cross examination began by all defence counsels.  Mrs Burns had been giving evidence for 2 days on behalf of the Secretary of State and cross examination will continue again tomorrow, 31 May 2012.

Unfairpak would like to thank Simon Neville from the Guardian who took the time to go down to court today and see if he could report on same.  Unfortunately, due to the fact that Mrs Burns was beginning to be cross examined, Simon was not in possession of the evidence that had been heard over the last couple of days.  However, he did let us know that the defence were stating that the Insolvency Service were not offering any suggestions for what the directors should have done sooner.  Unfortunately, Mr Justice Peter Smith seemed to concur, stating “The Secretary of State [Vince Cable] wants me to disqualify these directors for doing too little too late……”.  “….. But you’ve given me nothing to suggest what they should have done differently”.  We at Unfairpak feel it is a little too early into the trial for the judge to be making such a statement but we have to concede that we have not heard whether Mrs Burns did offer up any suggestions as to what the directors should have done differently.  Judging on what Mr Justice Peter Smith has said, it appears she [Mrs Burns] offered nothing.

As we have already reported, the schedule is running behind.  We can confirm that witnesses that were supposed to give evidence today were told to come tomorrow and have now been told it will be changed to “sometime in the future”.

Unfairpak have always stated that this is a complex case and perhaps now people may begin to understand why it has taken so long to get to the stage it is currently at.  The trial is set down for 6 to 8 weeks but it may run longer.  We shall just have to wait and see.

There are two more days this week for evidence to be heard and then court will be closed for the holiday on Monday and Tuesday, 4th and 5th June respectively.

We shall, of course, keep you up to date with any further information we receive.

TRIAL OF FAREPAK DIRECTORS – DAY 4 29 MAY 2012

Today brought a mixture of emotions to Unfairpak.  We have been frantically trying to find out why no one is reporting on this case and we have actually had responses from newspapers stating “I was not aware……………”!  Hopefully now they are aware they will realise the importance of this case and start reporting on same.

The trial is running behind by approximately one day which has shifted the schedule a little and the schedule may shift again.  Unfairpak have ascertained and can confirm that the Directors will each give evidence for approximately 3 days each and there are 7 Directors to hear from.  Accordingly, the Directors’ evidence alone will amount to 21 days.  This highlights the scale of this actual case.  The Insolvency Service will be giving evidence into the latter part of June and Stevan Fowler will be the first Director to take the stand once the Insolvency Service rest their case.

Unfairpak have further ascertained that to obtain the transcripts of this trial would be extremely cumbersome and extremely costly.  Accordingly, we need reporters in court tweeting the evidence out to the general public.  There was a court reporter in court today but we are unsure as to whether there were any journalists or not.

The Directors do not need to be in court until they give evidence but they have been coming and going from court. 

Could anyone who suffered loss as a result of Farepak and would be willing to talk to the media, please email our National Campaign Co-ordinator, suzy@unfairpak.co.uk

We hope that we will be in a position to report a little more tomorrow.