The Business Secretary announced that:
- He will meet a representative group of Farepak's creditors and MPs to discuss the case
- He has written to HBOS plc to ask for their views on the critical comments made about the bank by Justice Peter Smith, the judge in the case, and to clarify what actions the bank intends to take as a result of the comments. This includes consideration of a further contribution by the bank to the Farepak contribution fund
- He has written to the Financial Services Authority (FSA) seeking their views on the comments made by the judge on the conduct of HBOS plc in the period leading up to Farepak’s collapse.
While the discontinuation of the legal proceedings is disappointing the Business Secretary believes that the Government acted appropriately and in the public interest in taking action to disqualify the former directors of Farepak. The Insolvency Service will consider the implications of this case for future proceedings.
Business Secretary Vince Cable said:
“This is a regrettable incident that has blighted so many people’s lives. I wish once again to express my regret and sympathy for the victims who have had this hanging over them for many years now. More than 100,000 people had their Christmas ruined when Farepak collapsed and some families have been seriously affected by the loss of their savings.
“This case was launched in July 2009, which was based on good legal advice and the Insolvency Service has had a very high success rate with disqualification actions. I want to stress that although disqualification proceedings have been dropped, the Government is considering the wider implications of the judge’s statement and the way forward.
“I will therefore be meeting representatives of the creditors and a selection of MPs in the coming days to discuss the case.
“Furthermore, I have written to the bank involved - HBOS - to seek their views on the statement of the judge in the case and to understand what the next steps might be, especially when it comes to the matter of increasing the compensation fund.
"I have also written to the FSA to seek their views on the comments made by the judge in respect of the bank."
The Farepak case seeking to disqualify seven directors was discontinued on 20 June 2012 when the Insolvency Service, on behalf of the Business Secretary, took legal advice and decided to discontinue the legal proceedings in the public interest.
Notes to editors:
1. Farepak Food & Gifts Ltd and European Home Retail plc went into administration on 13 October 2006. EHR went into liquidation on 21 February 2007 and Farepak went into liquidation on 4 October 2007. Following an investigation, disqualification proceedings commenced on 26 January 2011 against nine directors. Two directors offered undertakings later that year. The disqualification hearing started at the High Court on 24 May 2012 and the Secretary of State discontinued proceedings on 20 June 2012.
2. HBOS plc, which provided banking services to European Home Retail plc, holding group of Farepak, before it went into administration and liquidation, is a banking and insurance company in the United Kingdom, a wholly owned subsidiary of the Lloyds Banking Group since January 2009.
3. The Government has worked closely with the remaining Christmas savings clubs, and has put in place effective protection specifically for customers’ prepayments. Independently controlled, ring-fenced trust accounts have been introduced by the companies for customers’ payments, and these new arrangements are overseen by a new body, the Christmas Prepayments Association.
4. Since 2007, the Insolvency Service has disqualified over 6,400 directors as shown below (this includes the success rate of disqualifications):
2007-08 1173 (95%)
2008-09 1281 (96%)
2009-10 1388 (96%)
2010-11 1437 (93%)
2011-12 1151 (91%)
5. In the last year, the Insolvency Service lost cases in Court against three defendants.
6. The Government's economic policy objective is to achieve 'strong, sustainable and balanced growth that is more evenly shared across the country and between industries.' It set four ambitions in the ‘Plan for Growth’ (PDF 1.7MB), published at Budget 2011:
· To create the most competitive tax system in the G20;
· To make the UK the best place in Europe to start, finance and grow a business;
· To encourage investment and exports as a route to a more balanced economy;
· To create a more educated workforce that is the most flexible in Europe.
Work is underway across Government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the Government wants the economy to travel.
7. BIS's online newsroom contains the latest press notices and speeches, as well as video and images for download. It also features an up to date list of BIS press office contacts. See http://www.bis.gov.uk/newsroom for more information.