The Coach House went bust two days after its entire kitchen staff walked out, a court heard today.
Father of the bride Simon Wharne took Coach House Brighton Ltd and its sole director, Nikola Beric, to Hastings County Court to pursue a small claim for the £3,000 he had paid for his daughter’s cancelled wedding reception.
At today’s hearing Mr Wharne argued that Mr Beric must have known there was a good chance he wouldn’t be able to honour the booking when he asked for the full payment to be made on April 22 – just a few days before it ceased trading on May 8.
But a district judge ruled that although the company itself was liable for the debt, there was not enough evidence that Mr Beric had broken trading laws so as to become personally liable.
Mr Wharne told the court: “From Mr Beric’s account he was having trouble attracting staff and running the restaurant in a profitable way.
“I understand he was trading in adverse conditions with a staff group that weren’t turning up for work.
“He’s continued to trade in conditions which aren’t likely to produce a profit.
“It was fraudulent because he was taking money for services he had little chance of providing.
“I have nothing against Mr Beric other than that I would like to have the money we paid back – it’s money that we can’t afford to lose.”
He told the judge about a previous company, Slonecorp Ltd, which had previously been used by Mr Beric to run The Coach House, but which had gone bust early this year.
Coach House Brighton Ltd had been set up to hold the lease to the building, but after Slonecorp Ltd ceased trading, it was used as the main operating company.
However, on May 8, Mr Beric told staff and customers this company would also cease trading – and the pub closed its doors.
In the meantime, a third company, Brewjam Ltd, had been set up, which Mr Beric told the court he had been intending to use to take the Coach House in a new direction.
Mr Wharne questioned what had happened to the restaurant’s assets such as its furniture and kitchen equipment.
Mr Beric said: “I’m very sorry for all the losses that have taken place. I was operating at the Coach House for 20 years.
“Unfortunately due to the sequence of events that had taken place, Coach House Brighton folded in May and the business was closed.
“No assets were taken from the business and I didn’t take any money from the business personally except my salary.
“There’s no funds in the account to pay for an insolvency practitioner and Companies House have given notice that it will be struck off in the next two months.
“It was my intention to continue trading. I had no plans to close the business down, it’s my only source of income and I have had nothing since then.
“Even if there’s no money in the account, if I have got a strong team of staff and the season was about to pick up the company could have turned around.
“There are ups and downs, it’s a seasonal business and summer is when you make your money and winter you lose money.
“Business hopefully balances out over the years. There’s been years where the company didn’t make money but it could bounce back over the next year.
“But with the kitchen staff resigning that is when I knew I couldn’t continue because it was an impossible situation to come back from.
“I never intentionally tried to close the business down or tried to cheat people out of money. When Slonecorp closed down, suppliers were paid and private events were honoured.”
Passing judgement, District Judge Crispin Owen said the situation was “an unhappy story” but while finding for Mr Wharne’s claim against the company, he dismissed it against Mr Beric personally.
He said: “The claim against Coach House Brighton must stand. However, Coach House Brighton has ceased trading and I’m not aware of the state of its assets but I’m assuming that they are extremely limited if there are any assets whatsoever.
“Therefore the question arises whether there’s any claim on Mr Beric.
“In Mr Wharne’s submission, Mr Beric had fraudulently traded, not necessarily by intent but by negligence in that he should have been aware of the trading situation of the company and that it was a risk of folding.
“However, it’s a long established principle of English law dating back to at least 1896 that companies are legally distinct from their directors and shareholders – they are separate legal entities.
“Only in very limited circumstances have courts been prepared to go behind this separate legal entity.
“One such state of circumstances may be if there’s fraud.
However, on the evidence before me and that’s of course on the basis of of which I must decide the case, I’m not persuaded on the balance of probabilities that the conduct of Mr Beric was fraudulent or that he engaged in unlawful trading.
“Mr Beric says there was a period of difficult trading conditions and staff relations leading to problem which led to the cessation of trading.
“On the basis of the evidence before me I accept that explanation. The claim against Mr Beric must fall.”
This is par for the course, unfortunately. Choccywoccydoodah did much the same thing, taking in deposits and asking for full settlement money in advance from customers even when they must have realised they had over-expanded the business and were going bust, just trying to stay afloat for a bit longer. Understandable for them, perhaps, but of no consolation to customers. Patisserie Valerie was a similar kind of thing, although there seems to have been a possible fraud involved with that. The lesson here – and I have every sympathy with Mr Wharne – is that if you pay a substantial deposit for something which is to happen in the future, but the company then wants the full amount in advance, then the company is basically in trouble. The auditing regime needs urgent reform and to be held to account. They are too willing to sign off accounts, even if, as halfway competent accountants (supposedly), they must be able to see that the enterprise has hit the rocks and is going bust, but they just sign off and do nothing to flag up to anyone that there is a big issue.
sad story and i assume Simon Wharne had to pay court costs too… is there some insurance against such risks?
No, the court awarded costs against Coach House Brighton Ltd – effectively meaning the court will pick up the tab