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.

 

 

FAREPAK DIRECTORS’ TRIAL DAY 1 – 24 MAY 2012

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.

 

 

 

TWITTER

For some unknown reason our @unfairpak account has been suspended.  We have contacted Twitter but reading Google regarding suspended accounts suggests we may have to wait a while until the matter is resolved.

Until we can get @unfairpak back up and running, you can follow our National Campaign Co-ordinator, Suzy Hall @scotsgirlie as she is following all the up to date news regarding the trial of the Directors of Farepak and providing information regarding the liquidation of Farepak Food & Gifts Limited.

Unfairpak would like to apologise to our followers and we hope that Twitter can resolve the issue as soon as possible.  We shall inform you as soon as we are up and running again.

COMPANY SECRETARY

In response to the various emails enquiring whether directors of companies can become company secretaries if they are disqualified, the facts are as follows.

From 6 April 2008 private limited companies have the right to choose whether or not they wish to have a company secretary.  If they already have a company secretary and wish to dispense with same, they need to inform Companies House.  Any company setting up business after 6 April 2008 can decide whether or not they wish a company secretary.

For the avoidance of doubt, a Public Limited Company MUST have a company secretary.

If a company chooses to have a secretary, the secretary basically deals with administrative procedures leaving the directors to run the company business.  Under the Companies Act 2006 there are no specific duties set down for company secretaries as these will usually be contained in a employment contract.  However, a company secretary, if appointed, will usually undertake the following duties; (1) maintaining the statutory registers which are; (i) the register of members; (ii) the register of directors and secretaries; (iii) the register of directors’ interests; (iv) the register of charges; and (v) for public companies only, the register of interests in shares.  The company secretary again, if appointed, will also be responsible for ensuring statutory forms are filed properly, providing member and auditors with notice of meetings, sending Companies House copies of resolutions and agreements, keeping minutes of directors meetings and general meetings and ensuring that people who are entitled to do so, can inspect company records.

If there is not a company secretary appointed, the aforementioned duties must still be carried out by either a director or someone authorised by a director to do same.

As you can see from the above, a company secretary albeit an important job, is an administrative role.  A disqualified director may become a company secretary but if he/she were found to be acting in anyway in the management of the company, he/she would then be committing a criminal offence and could face a jail period of up to 2 years as well as a fine and further disqualification period.

If anyone requires any further information, please do not hesitate to add your comments below.

 

The story from the start

Farepak Hampers began trading in 1969 from Westmead Drive, Westlea, Swindon. By 2004, Farepak employed 130 core staff ­– and during hamper production employed an additional 150 temporary packers. By 2006, the number of employees had dropped to 20, with 75 additional temporary packers to be taken on during the Christmas period.

Farepak Hampers’ origins can be traced back as far as 1935. Bob Johnson was appointed Managing Director with 500 Agents of this small Christmas savings club in 1969 which operated out of a butchers shop in Peckham.

Alongside this, Kleeneze Homecare had been operating since 1923 (now Kleeneze UK) and was acquired by Farepak in 1995. Farepak changed its name to Kleeneze plc and at this time extracted the central part of their business to its subsidiary Farepak Food & Gifts Limited. Kleeneze plc changed names again in 2006, this time to European Home Retail plc (EHR).

On 30 June 2006 an announcement was posted on EHR’s website advising that their existing funding would not last past autumn and they would accordingly be seeking extra funding. The Hamper Industry Trade Association (HITA) – of which Farepak Food & Gifts Limited was a member – immediately contacted the EHR Directors and were given assurances that the required extra funding would be forthcoming.

EHR’s shares were suspended from trading on the Stock Exchange on 23 August 2006. Again, HITA contacted the EHR Directors and asked if Farepak customers’ payments would be ring-fenced, only to be advised that this was not necessary. Thereafter, on Friday 13 October 2006, Farepak Food & Gifts Limited, a subsidiary of European Home Retail Limited had an Administrator appointed following a rejection of a final proposal from their Bank, HBOS (Halifax Bank of Scotland). This led to the whole of European Home Retail being forced into Administration.

Farepak and other companies like it are a convenient way to save for Christmas by ordering your goods in the preceding January and making weekly payments thereafter – in this case, for 45 weeks. Customers could either deal direct with Farepak or become an Agent and secure their own client base (normally family, friends and work colleagues). In becoming an Agent they would receive a % commission on their sales, which could either be taken off their bill at the end of September, or taken in goods, or they could have a cheque sent to them. Farepak was developed originally as a traditional Christmas Hamper company and grew to be one of the largest Christmas saving schemes in the UK. Thousands of customers used Farepak for their range of hampers, gifts and shopping vouchers.

As Farepak stated themselves “We use the experience and knowledge of our friendly staff to ensure that our Agents receive hampers that contain the best branded products and the freshest meats, at great value prices”.

Farepak further went on to state “As one of the founding members of the Hamper Industry Trade Association, we adhere to the HITA Code of Practice to ensure the security of your savings and the safe delivery of your hampers and gifts”.

As all Agents and customers of Farepak will now know, the above statement was a false promise – Friday the 13th 2006 will almost certainly be remembered by thousands of people in the UK who had Christmas 2006 literally taken out of their hands…

The Enterprise Act 2002

Prior to 15 September 2003 far too much protection was given to secured creditors, in that a Receiver could be appointed who would look out for the interests of the secured creditor only. With this in mind, the UK Government passed the Enterprise Act 2002 which took effect on 15 September 2003. This Act was designed to give companies some breathing space and to delay or prevent liquidation (the death of the company). Accordingly, since the Enterprise Act 2002, Administrators are appointed to companies in trouble, and their duty is to look at the company as a whole, which is good news for unsecured creditors. Furthermore, the Government withdrew themselves as a preferential creditor after the passing of the Enterprise Act 2002. However – it has emerged that payments to customers from the Administrators will amount to around 4p for every £1 that was put in.

An Administrator is, as the word suggests, there to administer the affairs of the company. BDO Stoy Hayward have been appointed Administrators of Farepak Food & Gifts Limited. An Administrator must be a qualified or authorised insolvency practitioner. The powers of the Administrator are vast. They have the power to do whatever is necessary for the management of the company’s affairs, business or property. The can take possession and dispose of the company’s property. They can remove and appoint directors, and furthermore they can investigate the company’s affairs. The Administrator must give some indication as to how the company arrived at the position it now finds itself in.

If you have been wronged…

Shortly after the Farepak administration order was made public, many people began to scour the internet for further information on what had happened and what could be done. To this end, a forum was set up at http://www.unfairpak.co.uk/forum/ – there is a wealth of information to be found there, along with a helpful and supportive community, and practical advice on what to do.

First and foremost it is imperative that you register your claim with BDO Stoy Hayward. This can be done via any of the following routes:

through the company’s website www.farepak.co.uk

by phone – Claim Registration Line: 0870 066 9826 Open from 8am – 8pm, 7 days a week

by fax – 01793 606057

by post to:

Kings Wharf,

20-30 Kings Road,

Reading, Berkshire.

RG1 3EX.

If you are sending your claim by post we would suggest that you send photocopies and keep your original documents in a safe place. Furthermore, it would be sensible to send your documents ‘First Class Recorded Delivery’ and to keep the recorded delivery receipt with your original documents.

Within our forum we have Regional sections to enable you to get together with others affected in your area and begin campaigning.

There are various people that you can contact and complain to. The more that like-minded people like us keep Farepak in the media spotlight, the more likely it is that something will be done. Sadly, this is all ‘good news’ for media ratings, but as it will help maintain public interest in this story, it is in our interest to keep the media informed and to encourage responsible and representative journalism. A big thanks goes out to those journalists who have already done so.

Contact HITA (Hamper Industry Trade Association) and complain

Contact your MP – directly or through Writetothem

If you reside in Scotland contact your local MSP

Contact BBC Watchdog

Contact GMTV and other news channels (see forum for more details)

Contact BBC’s ‘Working Lunch

The Right Honourable Sir Ian McCartney MP is doing fantastic work, as is the Labour Party campaign led by Jeff Cuthbert, Welsh Assembly Member for Caerphilly – register your support here

Contact HBOS (Halifax Bank of Scotland) and ask if they can shed any light on what happened (any HBOS shareholders out there?) corporateresponsibility@hbosplc.com

Much headway has already been made, and we suggest that you get involved by supporting local and national campaigns. You can help a lot – even from your armchair.

Possibly the only hope for victims’ cash is either in ‘chargeback’ if payments were made via Credit or Debit cards and some help will come from the Farepak Response Fund which was set up to collect donations and has so far raised over £4million.

This page will be updated again very shortly – as we endeavour to extract all useful info from the forum and from other sources.

We would also like to welcome viewers of BBC’s Working Lunch, who are doing an excellent job supporting the national campaign on behalf of the victims of Farepak. The little fish bites back!