Analysis
100. Drawing upon the factual evidence contained
in the relevant documentation[96],
my interviews with Mr Robinson and other witnesses, as well as
information from other sources, I have attempted in the following
paragraphs to set out my own understanding of the sequence of
events relating to the alleged payment of £200,000 to Mr
Robinson.
101. In respect of some aspects of the alleged
payment I am in a position to say with reasonable certainty, because
of the strength and reliability of the evidence, what happened
and what part was played by Mr Robinson. In relation to other
issues, however, where the evidence is either not so clear-cut
or lacks the necessary corroboration, I have formed a view on
the balance of probability as to the likely pattern of events.
In other cases, where the evidence is weak or non-existent, I
have offered what seems to me to be the most credible explanation—particularly
where no alternative account has been provided.
Was a payment expected for Mr Robinson's management
services to Lock?
102. There is no doubt that Mr Robinson entered
into discussions about the provision of management services by
Transfer Technology Ltd to Lock on the basis that this was a normal
business transaction for which payment, in some form, would be
made. The exchanges, in the form of meetings and correspondence,
between Mr Robinson, Mr Stoney and Mr Kevin Maxwell went into
considerable detail about the nature of the management services
to be provided, the timescale of the commitment, and the form
the remuneration should take. On the last point, there were lengthy
negotiations about whether a flat rate fee was appropriate or
whether a profit-related element should be included—Mr Robinson's
original preference. The correspondence also shows that Mr Robinson
drove a hard bargain, succeeding in increasing the agreed fee
to £200,000 from the initial offer of £150,000.
103. The extent of Mr Robinson's personal involvement
in the management support package for Lock was demonstrated by
his frequent references to his own proposed role as executive
chairman of the company. In the outline management services agreement
which Mr Robinson drafted and sent to Mr Kevin Maxwell on 3 May
1990, the senior management personnel to be provided to Lock International
from within the resources of Transfer Technology Ltd were spelt
out in detail and there was an explicit reference to Mr Robinson's
commitment (three days a week, falling to two) as chairman and
chief executive.
104. On the instruction of Mr Stoney an entry
was included in the October 1990 management accounts of Hollis
Industries plc (as owners of Lock) making provision for a payment
of £200,000 for chairman's emoluments. During its previous
inquiry the Committee concluded that this entry was probably an
error, since Mr Stoney could not then recall that such a payment
was ever made and there was no other supporting documentary evidence
to verify the accuracy of the relevant item in the Hollis Industries
plc accounts.
105. This is, of course, no longer the case in
view of the new documentation relating to the payment (in the
form of nominal ledgers and cashbook entries) which have come
to light as a result of the activities of the administrators of
Transfer Technology Ltd, Hollis and Pergamon AGB. This additional
documentary evidence was set out earlier in this memorandum[97]
and I return to it in more detail later.[98]
106. The final and most important evidence that
Mr Robinson expected to be paid for his services to Lock was the
invoice he raised for that purpose on 24 October 1990,which was
drawn up on his home writing paper (headed "Orchards")
and which requested that the cheque be made payable to Transfer
Technology Ltd.
How vigorously did Mr Robinson attempt to secure
payment of the fee of £200,000?
107. Mr Robinson accepts that he made a number
of attempts to secure the settlement of the invoice for £200,000
which he had sent to Hollis Industries plc. This is borne out
by Mr Stoney's letter of 26 November to Mr Kevin Maxwell in which
he said, referring to Mr Robinson's invoice:
"I understand from Geoffrey Robinson that
at a recent meeting with him you agreed that Hollis Industries
would pay Geoffrey a fee for management services of £200K.
I enclose herewith a copy of this invoice and would
be grateful if you would approve this.
Geoffrey has chased me a couple of times on this
matter."
108. Mr Robinson's consistent contention has
been that, whatever expectations he may have had of a payment
for the services to Lock International, he never in fact received
it. To the obvious question, namely why he should suddenly
have abandoned his attempts to obtain a payment which was due
to him and which had been agreed by Mr Kevin Maxwell, Mr Robinson's
response is that when it became clear that the proposed company
restructuring was proceeding as planned and that the management
benefits he had brought to Lock would be carried forward into
the enlarged group, there seemed no further point in pursuing
the matter. This explanation is difficult to accept, given the
lengths to which Mr Robinson had gone to negotiate the best possible
terms for the contract with Lock and to demonstrate his own personal
commitment to it, and in view of the efforts he had already made
during the negotiations for the sale of Transfer Technology Ltd
to ensure that the agreed fee was paid.
Was a cheque for £200,000 paid by Pergamon
AGB for management services provided to Hollis Industries plc?
109. There is compelling evidence that a payment
of £200,000 was made by Pergamon AGB in December 1990 and
that its purpose was to settle an invoice for management services
provided to Lock. This evidence is as follows:
— Pergamon AGB's computerised cashbook
for December 1990 recorded an outgoing payment of £200,000
for "Mngmt Chg Hollis Ind"[99]
by cheque no. 001751
— Pergamon AGB's bank statement showed
a debit of £200,000 on 11 December 1990 through cheque no.
001751
— Mr Stoney, Pergamon AGB's director of
finance at the time, had written on Mr Robinson's invoice "Paid—recharge
Hollis"
— Pergamon AGB duly invoiced Hollis for
£200,000 for management services on 31 January 1991.
110. Given the apparent intention, as expressed
in Mr Stoney's note on the invoice, that Hollis Industries plc
should ultimately bear the cost of the £200,000 management
fee, it is at first sight odd that the Hollis bank statements
showed no sign of a debit of that amount during the relevant period.
111. It is possible that Mr Stoney meant simply
that the cost should be treated as an expense of Hollis Industries
(which, of course, it was), rather than of Pergamon AGB. This
explanation is all the more credible in the light of Mr Kevin
Maxwell's remark that the confusion over which of Hollis Industries
or Pergamon AGB would actually pay the fee probably reflected
"the fact that Hollis Industries had no surplus cash or facilities,
whereas Pergamon AGB did." And Mr Maxwell pointed to his
father's habit of using "treasuries like that of Pergamon
AGB to settle group-wide invoices, with internal book-keeping
entries being made to reflect appropriate inter-company credits
and debits." The implication of Mr Maxwell's statement is
that, although Hollis Industries was invoiced by Pergamon AGB
for the £200,000 management fee, the payment may have been
treated as a group-wide transaction, perhaps to be regularised
later by an accounting adjustment between the companies concerned.
What route did cheque No. 001751 follow?
112. It is not possible to establish with precision
the date[100]
on which cheque no. 001751 was drawn on Pergamon AGB's account
since the relevant documentation, in the form of returned cheques
and cheque stubs, is missing. It can be stated with some certainty,
however, that the cheque must have been written between 26 November
1990 (when Mr Stoney sent Mr Kevin Maxwell a memo asking him to
approve the payment) and 7 December 1990, the probable date on
which the cheque was paid in at the Tavistock Square branch of
the National Westminster Bank. (This second date is based on applying
normal processing times for cheques to the date of the corresponding
debit on Pergamon AGB's bank statement, 11 November 1990.)
113. It may be significant in this context that
a board meeting of Central and Sheerwood took place on 7 December
1990. Amongst those present, in addition to Mr Robinson, were
Mr Stoney and Mr Kevin Maxwell, who had joint authority to sign
cheques for £200,000 drawn on Pergamon AGB's account.
114. The National Westminster Bank no longer
holds any documentary records which would enable the payee account
of cheque no. 001751 to be identified. The cheque itself would
almost certainly, in line with standard banking practice, have
been returned to Pergamon AGB, where it cannot now be found.
115. The National Westminster Bank's files do,
however, show that a credit for £200,000 was transferred
from its Tavistock Square branch on the same day—7 December
1990—to its Colmore Row branch in Birmingham.
How likely is it that the two payments of £200,000
were part of the same transaction?
116. The National Westminster Bank has stated
that it could not "unequivocally link" the debit of
£200,000 on Pergamon AGB's bank statement and the credit
for an identical amount which was transferred to the bank's Colmore
Row branch in Birmingham on the same day as cheque no. 001751
was paid in at the Tavistock Square branch.
117. Nevertheless, the evidence that the two
payments were linked is persuasive, namely:
— it is unlikely (though the bank
cannot absolutely exclude the possibility) that two entirely separate
payments for such large sums were made on the same day, one into
and one out of the Tavistock Square branch
— Transfer Technology Ltd and Mr Robinson
held accounts at the Colmore Row branch
— Mr Robinson's notebook shows that on
7 December 1990 he telephoned the Colmore Row branch to ask for
an account number for Transfer Technology Ltd, and that he wrote
underneath "one down, one to go". (Mr Robinson was at
that point still expecting his £150,000 fee from Central
& Sheerwood which was eventually paid on 19 December 1990[101])
— the credit which was transferred to
Colmore Row was handwritten, indicating that the person who paid
in the Pergamon cheque for £200,000 already knew the payee's
account number.[102]
118. Although these various factors could be
coincidental, in my view the combination of circumstances is too
striking for that to be the case. I therefore believe that it
is not unreasonable to assume that the two payments of £200,000
were part of the same transaction.
119. Mr Robinson has pointed out that, according
to the relevant documentation, the receipt of £200,000 was
recorded in Transfer Technology Ltd's books one day before the
debit of the same amount appeared in Pergamon AGB's bank statement.
120. This timing certainly calls for some explanation.
A possible sequence of events is that the person who paid in cheque
no. 001751 at Tavistock Square on 7 December (or someone acting
on his or her behalf) informed Transfer Technology Ltd that a
credit of £200,000 had been transferred to the company's
account. In the expectation that the credit would reach the account
within two or three working days, the sum was entered as a receipt
in Transfer Technology Ltd's books for 10 December. A further
possibility, as the National Westminster Bank has confirmed, is
that the cheque could have been processed more quickly than standard
banking practice would imply, enabling it to have reached Transfer
Technology Ltd's account on 10 rather than 11 December 1990.
121. Mr Robinson, when asked what alternative
explanation he could offer for the various items of documentary
evidence pointing to the conclusion that the payment by Pergamon
AGB of £200,000 ended up in Transfer Technology Ltd's accounts,
told me: "I think there was a cock-up in the accounting procedure."
122. Of course this possibility cannot entirely
be ruled out. But I do not regard this is a satisfactory response
by Mr Robinson in view of the cumulative weight of the documentary
evidence. Nor, in any case, does it account for the significant
information provided by the National Westminster Bank, whose accuracy
has not been challenged.
What was the payment of £200,000 to Transfer
Technology Ltd used for?
123. The purpose of the £200,000 credited
to Transfer Technology in December 1990 appears to have been to
reduce the level of indebtedness to the company of Roll Centre.
The evidence pointing to this conclusion is that:
— a receipt of £200,000 was recorded
in Transfer Technology Ltd's books on 10 December 1990 (this was
subsequently confirmed by an entry in the company's nominal ledger
for 30 December 1990)
— the schedule provided by Transfer Technology
Ltd to Ward & Rider[103]
on 3 March 1991 shows that £200,000 out of the debt of over
£500,000 owed by Roll Centre to Transfer Technology Ltd was
paid off on 10 December 1990.
Why was it necessary to reduce Roll Centre's debt
to Transfer Technology Ltd?
124. The need to reduce the Roll Centre debt
to Transfer Technology Ltd arose directly from the proposed sale
of the latter company to Central and Sheerwood. The debt consisted
of two distinct elements: the balance due on payment for a machine
sold to Roll Centre by Transfer Technology Ltd; and a loan to
Roll Centre. It was the second element which potentially posed
a problem for the disposal of Transfer Technology Ltd. This was
because any outstanding debt to that company would be carried
forward into the new company formed from the take-over by Central
and Sheerwood. Since Mr Robinson was to be on the board of the
new company, a loan by Central and Sheerwood to Roll Centre—a
company in which Mr Robinson had a significant element of control
and a material financial interest—might be construed as
a loan to Mr Robinson. Loans by plc companies to their own directors
are prohibited under sections 330-338 of the Companies Act 1985.
Accordingly, if the sale of Transfer Technology Ltd to Central
and Sheerwood was to proceed, that part of the Roll Centre loan
attributable to Mr Robinson would have to be extinguished.
Is it possible to be certain that the payment
of £200,000 which originated from Pergamon AGB was the ultimate
source of the funds used to pay off part of the Roll Centre debt?
125. As I have already observed, it is stretching
coincidence beyond the bounds of credibility to regard the payment
of £200,000 by Pergamon AGB which was debited to their account
on 11 December 1990 as having no connection with the credit of
the same amount recorded as having been received by Transfer Technology
Ltd around the same date. But in any case there is evidence to
indicate that the money originating from Pergamon was probably
the source of the funds used to pay off part of the Roll Centre
debt, in particular the facts that:
— Mr Robinson, when asked whether
a payment of £200,000 due to him for management services
had been used to reduce Roll Centre's indebtedness to Transfer
Technology Ltd said he could no longer recall the precise means
by which this had been achieved; however, he offered no other
plausible source of funds for this purpose (during our first interview
Mr Robinson speculated that the money might have come from either
his brother or Madame Bourgeois[104];
at our second meeting he did not include his brother as a possible
source)
— Mr Robinson's personal bank statements
for the relevant period show him to have been heavily overdrawn
and thus lacking the necessary liquid funds to relieve the Roll
Centre debt by £200,000
— when I put this fact to him and asked
whether, at the time, he had other liquid assets elsewhere, Mr
Robinson told me that he could have raised a loan himself for
this purpose; however, he has provided no evidence to show either
that he would have been in a position to do this or that he in
fact did so.
— the Coopers & Lybrand long form
report of 1990 stated that Roll Centre was "experiencing
serious cash flow and trading difficulties" at this time,
making it unlikely that it could have found a sufficiently large
sum from within its own resources.
126. Mr Davis, the then finance director of Transfer
Technology Ltd, told me that he drew the potential problem over
the Roll Centre debt to the attention either of Mr Robinson himself
or of his assistant, Mrs Price. Although Mr Davis did not recollect
anybody having offered to pay off the relevant part of the debt,
he believed that Mr Robinson probably gave him "the usual
response: 'Don't worry about it'." Mr Davis also confirmed
that: "that payment (of £200,000 in December 1990) was
treated as a reduction of the Roll Centre debt".
127. When I asked Dr Ahmed, the former managing
director of Transfer Technology Ltd, whether he was of the view
that Mr Robinson would have been involved in organising this payment
to settle part of the Roll Centre debt he replied: "If this
money is paid by Roll Centre and it is part of payment of his
loan then Mr Robinson will be aware of this, and he will be doing
that." And although Dr Ahmed was not himself aware of any
arrangement to use the £200,000 from the management fee for
this purpose, he did not regard this as necessarily surprising,
particularly if the payment had followed an indirect route. As
he put it: ".... if it was put in our account direct, I think
we would have known about it. If it had a little bit of a tour
before coming to us this would be a different situation."
128. Taking all this evidence into account, my
view is that Mr Robinson undoubtedly had a clear motive for reducing
the Roll Centre debt and that he also had access to the means
to do so, in the form of the £200,000 payment by Pergamon
AGB for management services provided to Lock by Mr Robinson and
his company, Transfer Technology Ltd.
129. Given Mr Davis's clear recollection that
he raised with Mr Robinson (or Mrs Price) the significance of
the Roll Centre debt in relation to the sale of Transfer Technology
Ltd Central and Sheerwood, it is, to say the least, surprising
that Mr Robinson appears unable to remember with any precision
either his own role in reducing Roll Centre's indebtedness or
the source of the funds which were used for this purpose. This
vagueness on Mr Robinson's part is all the more concerning in
the light of the passage contained in the Coopers and Lybrand
long form report on Transfer Technology Ltd which, referring specifically
to the Roll Centre debts, stated that Mr Robinson had indicated
that he was "prepared to offer a personal guarantee as to
the recoverability of these amounts, and [was] currently making
arrangements to pay £200,000 into The Group."[105]
130. That this undertaking by Mr Robinson was
duly fulfilled was confirmed by Mr Robinson's letter of 11 February
1991 offering to guarantee the outstanding loans to Roll Centre
and stating: "Less repaid in December 1990 £200,000".
Was the Pergamon AGB cheque for £200,000
made payable to Mr Robinson personally?
131. Mr Robinson denies having received the payment
of £200,000 which had been agreed with Mr Kevin Maxwell and
which was submitted to Mr Robert Maxwell for his approval. It
goes without saying that Mr Robinson's position is harder to sustain
if it can be shown that the relevant cheque was made out to him
personally.
132. The first and most obvious point to make
in this context is that the documentary evidence which could prove
conclusively one way or the other whether Mr Robinson (or some
account controlled by him) was the payee—namely the cheque
itself and the stub—are both missing.
133. But this does not mean that there is no
evidence at all which bears upon the issue. Relevant circumstantial
evidence exists in the form of the handwritten note by Mrs Caddock
on Mr Robinson's invoice -
"Geoffrey is not registered for VAT. Proposes
make cheque payable to him personally"
134. This note was written on a 'post-it' sticker
and was not therefore an integral part of the invoice, nor was
it dated. Nevertheless, Mrs Caddock confirmed in her evidence
to me that the handwriting was hers; that the note was added sometime
in early December 1990; and that she recalled the telephone call
from Mr Robinson which gave rise to it.
135. Moreover, Mrs Caddock strongly maintained
that she would not have written the note in the terms she did
unless Mr Robinson had specifically asked for the cheque to be
made out to himself. Had he wished the cheque to be made payable
to a company other than Transfer Technology Ltd. that is
what Mrs Caddock would have recorded on the invoice.
136. Also relevant is the Pergamon AGB cashbook
voucher recording a payment of £200,000 to 'Orchards'. This
document (which is dated 31 December 1991) was almost certainly
written up after the event by the administrators as part of the
process of regularising Pergamon AGB's books and tracing individual
payments. Even so, those responsible for processing the cashbook
voucher appear to have associated the payment of £200,000
with Mr Robinson's invoice—hence the use of the name 'Orchards'
as the payee.
137. On the basis of this evidence, and particularly
that of Mrs Caddock—whose credibility I have no reason to
doubt—I have formed the view, on the balance of probability,
that the Pergamon AGB cheque for £200,000 was made payable
to Mr Robinson.
138. I have addressed the issue of the identity
of the payee on the Pergamon cheque because it formed part of
the series of allegations in Mr Bower's book, on which Mr Heathcoat-Amory
drew in formulating the complaint against Mr Robinson. This matter
is not, however, of crucial significance since, as I understand
it, the cheque could have been endorsed over to a different payee.
Why did Mr Robinson not stick to his original
intention to have the cheque made payable to Transfer Technology
Ltd?
139. If, as I consider likely, the Pergamon AGB
cheque for £200,000 was made out to Mr Robinson personally,
the question arises: why did he change his mind after originally
indicating on the invoice that the payee should be Transfer Technology
Ltd?
140. My understanding of the reasons behind Mr
Robinson's decision to ask for a personal cheque is necessarily
based to some extent on speculation—given the haziness of
Mr Robinson's recollection of these matters and the absence of
supporting evidence. Some matters are, however, clear:
— Mr Robinson was keen to conclude
the sale of Transfer Technology Ltd. to Central & Sheerwood
— the assets realised by the sale would
have transformed his financial position (which, as indicated earlier,
appear to have been difficult in 1990, with a large personal bank
overdraft outstanding and cash flow problems at Roll Centre)
— the sale value for Transfer Technology
Ltd, as agreed between Mr Robinson and Mr Robert Maxwell, was
based on a tenfold multiple of profits.
— a straightforward payment of £200,000
into Transfer Technology Ltd. in the form of a management fee
might have fed through to the company's profit and loss account,
and could therefore have inflated the sale value by up to £2
million (ten times £200,000).
141. It is possible, therefore, that Mr Robert
Maxwell made it a condition of agreeing to the £200,000 management
fee that it should be paid in such a way that it could not—from
his point of view—artificially inflate the price to Central
& Sheerwood of acquiring Transfer Technology Ltd.
142. If this explanation of Mr Robinson's motives
is substantially correct, it would have provided a reason for
him to use the money probably paid to him through Pergamon AGB's
cheque in such a way that it could be applied to the reduction
of the Roll Centre debt.
143. The documentary evidence suggests that the
most probable route was that Mr Robinson, or someone acting on
his behalf with knowledge of the Transfer Technology account number,
paid in the cheque to the National Westminster branch in Tavistock
Square and this was transferred directly into Transfer Technology
Ltd's account at Colmore Row.
144. Mr Robinson could also have done this—though
this has to be a matter of conjecture—by paying the Pergamon
cheque into some account controlled by him (other than one of
those for which statements have been provided by Mr Robinson)
or indeed, into an account made available to him for this purpose
by some other person sympathatic to his objectives. He could then
have arranged for an equivalent sum to be paid out of that account—either
to Roll Centre, on the understanding that the intention was to
place the company in funds to pay off that part of its debt to
Transfer Technology Ltd. which could be attributed to Mr Robinson,
or directly to Transfer Technology Ltd. with a similar aim. Reducing
indebtedness in this way would not, I am advised, have flowed
through to the company's profit and loss account and thus inflated
its sale value.
145. But a further possible reason why Mr Robinson
might have wished to avoid treating the Pergamon AGB cheque for
£200,000 as a payment for management services (and a possible
explanation for his reluctance to admit to having received the
money), is the question of taxation. This was an issue raised
in Mr Heathcoat-Amory's second letter of complaint.
146. The advice I have been given suggests that,
if Mr Robinson had personally taken the £200,000 as a direct
payment for management services, and had treated it accordingly
for accounting purposes, it would have been liable to income tax,
and possibly VAT, after deduction of relevant expenses. Similarly,
if the payment had gone into Transfer Technology Ltd's accounts
as a fee for services it would have been liable to VAT and thereafter
to corporation tax (likewise, after deduction of relevant expenses).
In either case the net sum available to apply to the repayment
of the Roll Centre debt could have been greatly reduced—perhaps
by as much as 50 percent.
147. If, on the other hand, the transaction had
been so arranged that the funds paid to Transfer Technology Ltd
were applied directly to the reduction of the Roll Centre debt,
the £200,000 received by Transfer Technology Ltd would not
have been treated as income for accounting or tax purposes, thus
avoiding both VAT and corporation tax and any possible
effect on the profit and loss account. The advantage of this device
would therefore have been that it maximised the sum available
to pay off part of the Roll Centre debt, whilst meeting the conditions
which may have been set by Mr Robert Maxwell for authorising payment
of the management fee.
Is this description of the circumstances surrounding
the payment to Mr Robinson, if accurate, consistent with the principal
allegation in Mr Bower's book, on which Mr Heathcoat-Amory's complaint
was based?
148. Assuming that the description of events
surrounding the £200,000 payment—and Mr Robinson's
part in them—is accurate, it does not precisely correspond
to the central allegation in Mr Bower's book, on which Mr Heathcoat-Amory's
complaint was founded. This was that Mr Robinson had solicited
and accepted a management fee from Hollis Industries, the cheque
for which was paid into an account controlled by Mr Robinson for
his immediate and personal benefit (and that Mr Robinson had sought
to conceal this fact).
149. None of the personal financial records provided
to me by Mr Robinson supports Mr Bower's allegation, interpreted
literally, although I cannot, of course, be sure that I have had
access to records of every account controlled by Mr Robinson in
1990.
150. In practice, I do not regard this distinction
as significant. The essential point, according to my analysis
of the circumstances surrounding the £200,000 payment, is
that the arrangement Mr Robinson employed for handling the management
fee paid by Pergamon AGB was designed to facilitate (by removing
any legal obstacles relating to directors' loans) the sale of
Transfer Technology Ltd to Central & Sheerwood—a transaction
from which Mr Robinson, as virtually the sole shareholder of Transfer
Technology Ltd, stood to make a considerable personal financial
gain.
96 See
paragraphs 33-35 Back
97 See paragraph
35. Back
98 See paragraphs
109-123. Back
99 Hollis Industries
being the parent company of AM Lock and Lock International. Back
100 Or the payee;
see paragraph 35 (footnotes 27 and 29). Back
101 See
paragraph 41 and paragraphs 174 and 175 in the conclusions section
of this memorandum. Back
102 See
paragraph 35, second item relating to 7 December 1990. Back
103 Solicitors
for Central and Sheerwood plc at the time of the merger with Transfer
Technology. Back
104 See paragraph
53 and footnote 49. Back
105 Emphasis
added Back
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