Ex-managing director of City Link denies 'certainty of insolvency'


The former managing director of City Link has denied that job losses at the parcels firm were inevitable in the days before it went into administration on Christmas Eve.

David Smith and two other former directors of the "hopelessly insolvent" firm are standing trial accused of failing to notify the Government of redundancies before 2,356 workers were sacked on New Year's Eve.

Giving evidence on the second day of the hearing at Coventry Magistrates' Court, Smith said he believed a buyer could have been found for City Link, and that he focused on providing a "soft landing" for the firm.

The collapsed firm's finance director Robert Peto, its sole non-executive director, Thomas Wright and Smith all deny a single charge brought under the Trade Union and Labour Relations Act.

A prosecution brought by the Department for Business, Innovation and Skills alleges that City Link was "dead in the water" after failing to secure £25 million of investment on December 22 last year.

Answering questions from his counsel, Andrew Bodnar, Smith told the trial that job losses were not a certainty after a board meeting on December 22.

The 50-year-old, a qualified accountant, told the court: "Very clearly we were focused on moving to administration and trading through to Christmas without falling off the tightrope of wrongful trading.

"We only talked about the soft landing of the business and the orderly process of moving towards administration."

Smith, of Dickens Heath, near Solihull, said in his view there were many potential outcomes on December 22 other than just the single possible outcome "painted" by the prosecution.

Claiming redundancies could have been avoided if the business had been bought by one of several interested parties, Smith continued: "Inevitable in my mind means it's 100% it's going to happen."

Under questioning by prosecutor Paul Ozin, Smith disagreed with the lawyer that redundancies had been "inevitable or near inevitable" - triggering the need to submit a two-page form to the Business Secretary.

Smith told Mr Ozin: "Potentially there were other routes forward for the administrators.

"We were aware it (redundancies) was an option. It's a likelihood we didn't work through.

"It was very clear to me that there would be interest in the company in administration.

"There was a clear and credible bid on the table for £18 million. The business could have been sold - subject to the price consideration being right - with no employees losing their roles.

"It wasn't a certainty of insolvency."

Smith said he had yet to find work following City Link's collapse.

"At a personal level it's had quite a detrimental effect but far less I am sure than on many of the other people who were caught up in the maelstrom at the end of last year," he told the district judge hearing the case.

Peto, of Priors Marston in Warwickshire, told the court redundancies were "absolutely not" inevitable.

The 48-year-old, a former Royal Mail Group employee, said in his evidence: "I am really dreadfully sorry that it came to the situation it did. We believed we had a credible solvent solution."

A £20 million offer for City Link made in November last year had been taken seriously, Peto said, and a due diligence process had been followed.

A detailed account of City Link's collapse was also given to the court by Wright, who worked for London-based "turnaround" investment group Better Capital.

The 32-year-old, an associate director at Better Capital, which bought City Link in April 2013, said he had heard of the Insolvency Service form at the centre of the proceedings but had not seen a copy of it.

Mr Bodnar asked Wright: "What if anything did you consider to be the inevitable outcome of administration?"

Wright, from north-west London, replied: "I don't think there was an inevitable outcome. That's the entire reason for administration - to allow companies to continue rather than a liquidation."

Deputy District Judge David Goodman will give his verdict in the case on November 13.