Vince Cable’s Statement Lloyds £8 million to Farepak

The Business Secretary Vince Cable has today responded to the Lloyds Banking Group statement on their decision to make an ex-gratia payment of £8 million for Farepak’s former customers. Dr Cable wrote to Lloyds on 28 June asking for their views on the comments made about the bank by Justice Peter Smith. Lloyds Banking Group has today responded.

Business Secretary Vince Cable said:


“The result of the legal proceedings case against the former directors was disappointing but this increased compensation will go some way in helping those who were left considerably out of pocket by Farepak’s collapse. My department and Lloyds will work to make sure this money gets to the victims as quickly as possible. I will be meeting a group of Farepak’s creditors and MPs next week to discuss the case.”

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.

Directors’ Duties in the matter of Uno plc and World of Leather plc [2004]

Unfairpak can confirm that this case has been referred to in the Defendant’s Skeleton Arguments.


Directors’ Duties In the matter of Uno plc and World of Leather plc [2004].


In this directors’ disqualification case it was accepted by the defendant directors that they were aware that the Group of Companies was in financial difficulties; that they continued to take deposits from cash paying customers; that they failed to segregate those deposits and that they knew that there was a risk that if the Group went into formal insolvency before customers received delivery then the customers would be unsecured creditors and would not receive the goods ordered or the refund of their deposits.


The Court agreed, however, with the submission made on behalf of the defendant director that their conduct did not amount to unfit conduct warranting a Disqualification Order. The reason for that was that the Secretary of State had overlooked the all important concession that, at all material times, the defendant directors had reasonable grounds for believing that insolvent liquidation could be avoided.


The Judge found that the defendant directors could not be criticised for their conduct. His detailed summary of the directors’ actions in the case showed that:-


1. They constantly reviewed the Company’s options.


2. They regularly received and considered updated financial infor mation.


3. They regularly took professional advice from solicitors and accountancy experts.


4. They kept their major creditors and suppliers fully informed of the actions they were taking.


5. They had gone out of their way to try and secure a solution which had reasonable prospects of succeeding and which, if achieved, would have satisfied all of the Group’s creditors not least its cash paying customers; and


6. They minuted key decisions taken and the reasons for them.

Collapse of Choice & Consequences of same to Farepak




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.