City Link directors failed to inform minister of redundancie

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City Link directors failed to inform minister of redundancies, trial hears

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Three former City Link directors failed to inform the business secretary of impending redundancies despite the company being “hopelessly” insolvent, a court has heard. Hundreds of staff only found out about its collapse on Christmas Day last year.

The parcel firm’s managing director, David Smith, its finance director, Robert Peto, and its sole non-executive director, Thomas Wright, are accused of failing to give 45 days’ notice of dismissals, which took place on New Year’s Eve. Smith, 50, of Dickens Heath, near Solihull, Peto, 48, of Priors Marston in Warwickshire, and Wright, 32, from north-west London, deny a single charge brought under the Trade Union and Labour Relations Act.

Opening the case against the three at Coventry magistrates court on Thursday, counsel for the Department for Business, Innovation & Skills (BIS), Paul Ozin, alleged that City Link, which had its head office in the city, was left “dead in the water” after failing to secure a £25m funding increase or find a buyer. He told the court at the start of a two-day trial that City Link operated 53 depots and four hubs in locations across the UK, employing 2,727 people.

Ozin said City Link had only three directors at the relevant time, adding: “We say that the plan formulated by the managers on December 22nd was to carry on trading over the Christmas period – with the purpose of delivering the bulk of the parcels within the City Link network – and then to put the company into administration by, at the latest, Boxing Day.”

The prosecution claim the plan also envisaged that City Link would “minimise” the collection of new parcels on Christmas Eve and cease trading in a controlled fashion.

A two-page form, known as HR1, was sent to the Insolvency Service on Boxing Day, after the appointment of administrators. The form gave notice of potential redundancies – involving City Link’s entire workforce – on dates ranging from 31 December 2014 to 31 March this year. Ozin told the court all three defendants were interviewed about the statutory requirement for employers to inform the government of potential redundancies using the form.

Wright said during an interview that he believed the BIS had been informed of the company’s proposal. “He said specifically that he did not believe redundancies were inevitable on the 22nd of December,” Ozin said.

Peto said City Link had taken advice on trading after 22 December to benefit creditors, and asserted that it was “up to the administrators” to decide what to do with the firm.

Ozin went on: “Mr Smith gave a similar account. He said that the situation had been sprung on them on the 22nd of December. He said that they had a board meeting on that occasion and that they concluded that there were no other external funding options.”

Summarising the prosecution case, Ozin told the district judge hearing the case: “We say that the duty to give notice fell on the company and its directors on the 22nd of December. The failure to give such notice deprived workers of the potentially substantial benefit arising from notice to the secretary of state for the period between December 22 and December 26, when the administrator remedied the deficiency.”

The trial continues.