Extracted from newspad April 2017

Hundreds of present and former Roadchef employee shareholders, hit by the sale of shares, without their knowledge, from the company’s employee benefit trust EBT more than 20 years ago, could face years more delay before they get any compensation.This dire prospect emerged from a recent letter sent by the Roadchef trustee to update all the Roadchef beneficiaries. In it, it was revealed that:*Despite having had the file for almost two years, HMRC has yet to decide whether the ex-Roadchef employee shareholders will have to pay Capital Gains Tax (CGT) on their compensation payments, in addition to Income Tax and NICs, which collectively could amount to up to 36 per cent of the net proceeds.*Even after the tax payments are finally agreed, the proposed final settlement will have to go back to court for approval by the judge, which signals yet another lengthy delay in this seemingly never-ending compensation process.Newspad has been contacted by several former Roadchef employees who are incensed by the news that they will have to wait even longer before they get any compensation.Centre chairman Malcolm Hurlston is took suggestions from influential members of the Centre’s steering committee last week about ending the unconscionable delay in getting compensation payments finally paid to those who were cruelly robbed of their employee shareholdings shortly before the company was sold to Japanese investors.Former pheasant plucker, Tim Ingram Hill, who became Roadchef’s ceo, later masterminded its sale to Japanese investors, gaining tens of millions from his personal Roadchef shareholding, which by then had grown to more than 60 percent.However, at the High Court compensation case mounted many years later by the Roadchef trustee, the judge ruled that the maximum compensation which could be claimed from him had shrunk to £29.6m, plus compound interest and grossing up, whilst Ingram Hill’s lawyers said the maximum reclaimable was £13.5m.A tax payment of £20m made by Ingram Hill, on the sale of his shares to Nikko, and a lost investment of £12.5m in a shares exchange he was required to make as a condition of the takeover, had to be deducted from what the trustee could reclaim in compensation on behalf of the employee shareholders, ruled Mrs Justice Proudman.The case, brought by the Esop trustee in the High Court, Chancery Division, apparently ended three years ago when Mrs Justice Proudman ruled that: “A transfer of shares from one EBT to another (EBT2) was void because the trustees of the transferring EBT did not properly consider the criteria for the exercise of their power and the transfer was made for an improper purpose. Roadchef (Employee Benefits Trustees) Ltd v Hill & Anor [2014] EWHC 109 (Ch) (29 January 2014).In her ruling, the judge said: “The options (for which he paid nothing) dealt Mr Ingram Hill all the cards; if the value of the shares went down, he did not have to exercise the options. If on the other hand they went up, he would make a huge profit. He was in the position to negotiate the takeover of Roadchef. In fact he did negotiate such a takeover, the price did rise and he did make a killing.”However, it took another year before Ingram Hill agreed an out of court compensation settlement, the size of which is still subject to a ‘gagging’ order.“The judge found that the transfer was part of a preconceived plan to acquire the shares, and that Mr Ingram Hill had exerted improper pressure on the other directors, who simply did what they were told, believing they had no other choice,” the trustee’s lawyer, Cardiff based Capital Law, said in a statement after the ruling. There is no suggestion that Mr Ingram Hill broke any law by transferring employee shares from one trust to another set up by him.An extraordinary complication – according to an anonymous source – was that Mrs Justice Proudman effectively ruled that it was not only the original road services station staff, who were members of the Esop, who had to be compensated. Others in line for compensation payments could be:

• a few hundred other employees who were not members of the Roadchef Esop
• even current Roadchef employees may well get some cash, even if they were never members of the Esop.

This share out formula seems extraordinary, but – according to speculation - both Capital Law and the trustee REBT1 felt obliged to accept the interpretation placed on Mr Gee’s original trust deed by Mrs Justice Proudman.  It is suspected that more than 2,000 Roadchef employees, taken on during the last 17 years by the new owners of Roadchef after its sale could get some of the compensation cash too.It is believed that the original employee Esop participants will share 61 percent of the net proceeds; the second category – ‘non-qualifying’ employees - get will 30 percent and current (non originals) employees will share the remaining nine percent.However, such is the reach of the ‘gagging’ court orders, that no-one associated with the case will confirm or refute the speculation.HMRC has yet to sign off the tax bills, despite repeated requests by the Esop Centre and by Capital Law. Tax inspectors have ignored the Centre’s repeated requests too for transparency regarding the way in which it is dealing with the tax issues on the grounds that it never comments on individual cases.All qualifying staff at Roadchef, which has 21 UK service stations, were set to benefit after their former md Patrick Gee, who had led the 1983 MBO of the firm, decided to give them about 20 percent of its shares in the mid-1980s. However, he died while the scheme was being set up and his successor, Ingram Hill, unveiled one of the UK’s first Esops a year later. Roadchef staff received an initial 12.25 per cent of the equity – reserved for them on an equal basis. Gee’s estate later gifted more shares to staff, who at one time held more than 30 percent of the shares. However, when Ingram Hill sold Roadchef to Japanese investors, the ownership had changed. By then he controlled 60 percent of the equity and the staff share was down to below five percent.The trustee’s claim queried the 1998 transfer of shares in Roadchef between two trusts, EBT1 and EBT2. The original EBT – called EBT 1 - operated an employee share ownership plan for the benefit of all qualifying Roadchef employees, while EBT2 was used to provide share incentives to senior management. The case concerned the circumstances in which the senior management trustees granted options over the shares to Ingram Hill personally, who served in senior posts at the company over the years, including as md, chairman and ceo.It was not until a change in the law that the Roadchef EBT trustee was allowed to bring in Harbour, a litigation funding company, which agreed to fund the case in court.Mrs Justice Proudman said in her ruling that: “REBTL’s factual allegation was that Mr Ingram Hill made certain deliberate and premeditated arrangements, as follows: He arranged for a company of which he was a director to be appointed as the trustee of EBT2 He arranged for the EBT2 trust deed to be amended so that he could benefit while remaining a director and the prohibition against directors benefiting did not apply to him. He arranged for REBTL to be appointed as trustee of EBT1 and then secured his appointment as director of REBTL. He persuaded REBTL to resolve to transfer all the un-appropriated shares then owned by EBT1 to EBT2. He then secured the grant to himself by EBT2 of share options over the shareholding. He exercised the options and sold the shares as part of the sale of Roadchef at the price of 131p per share, thus making a (net) profit from the sale of some £26.8m.”