City Link owner slams MPs for accusing him of deception

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City Link owner slams MPs for accusing him of 'deliberate deception'

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Jon Moulton says Business Innovation and Skills and Scottish Affairs committees have acted 'outside the normal rules of natural justice'

Jon Moulton has hit back at MPs who accused his company of "deliberate deception" over the collapse of parcel delivery firm City Link.

The chairman of Better Capital, which bought City Link for £1 in 2013, claimed that the Business Innovation and Skills and Scottish Affairs committees failed to let him respond to "hurtful and unjust labelling" in its report into City Link's failure on Christmas Eve.

MPs last week said that putting City Link into administration on December 24 rather than December 22, when the company's financial troubles became clear, was done for the “financial benefit” of the group and Better Capital. About 1,700 staff and 1,000 subcontracted drivers who lost their jobs had been kept in the dark “as to the true intentions of the company”, the MPs added.

However, Mr Moulton slammed the report on Monday, saying that the committees had acted "outside the normal rules of natural justice" by not informing him of the accusations that they would make and giving him an opportunity to respond.

"The right to a fair hearing generally requires that persons should not be penalised by decisions affecting their rights, reputation or legitimate expectations unless they have been given prior notice of the case, a fair opportunity to answer it, and the opportunity to present their own case," Mr Moulton wrote in a letter to the committees.

"You did not do this. You have published verdicts on matters we did not know you were accusing Better Capital of."

Mr Moulton questioned the MPs' assertion that delaying the announcement of putting City Link in administration benefitted the delivery firm, saying that the move actually could have harmed Better Capital.

"In the case of City Link we are bemused as to what benefit it could possibly have received. This benefit point was not put to Better Capital and we do not believe you received any evidence to support your statement – indeed we would have argued that its converse is true. Better Capital actually risked a reduction in the value of the security for its debt from supporting a continuation of trade to December 24."

Mr Moulton states that far from being guilty of “deliberate deceit by omission” by failing to tell staff of the collapse earlier, it was not Better Capital's job to do so. As a "shareholder and secured creditor of City Link ... there is no legal requirement for such to make announcements", and such a burden would fall on the directors of City Link.

"Indeed if secured creditors were to be making comments about the solvency of borrowers very great mischief could be done," he wrote. "The decision to trade on was for the directors of the company to make and Better Capital agreed to facilitate that timetable."

Mr Moulton also lists the pros and cons of ceasing trading on December 22 versus December 24. He claimed that by closing the business two days earlier, most employees would not get paid after that date and hundreds of thousands of parcels waiting for delivery in time for Christmas "do not get delivered, many stolen". This would mean people whose Christmas presents are not delivered would suddenly become creditors to City Link to the tune of at least £10m.

Waiting until December 24 gave Better Capital the "opportunity" to try to rescue City Link, employees would get paid to December 31, and creditor claims were "much reduced" as the "vast majority" of parcels were delivered, Mr Moulton wrote.

He ends his letter by stating: "We would welcome an opportunity to make our case that these serious assertions as to our behaviour are unfounded and unfair."

City Link’s creditors are likely to see less than 2p in the pound on any money they are owed following the delivery company’s collapse, its administrators have confirmed.

The parcel firm does not have enough assets to repay the full £52.7m owed to priority lenders – and unsecured creditors will be left with nothing until City Link’s property assets are sold.

Administrator EY said that a “small dividend” could then be paid, but that it was likely to amount to less than 2p in the pound.

Those out of pocket include City Link’s trade creditors, who are owed £30.7m, while the taxman is owed £5m and customers are left waiting for £400,000.
EY said in its latest report that most employee claims for unpaid wages and holiday pay have now been settled. Up to £28.4m will be available to repay secured creditors.

Better Capital will get back some of its £40m initial loan, while former owner Rentokil is set to collect £5m.