Shepherd Cox Ltd
Many people have contacted us asking for an update on Shepherd Cox Ltd and to comment on the misinformation being spread by a small group of people so here it is.
First a brief summary of the facts.
1. The administration applications for the first six hotels (Travelodge Sedgefield, The Grand Hartlepool, The Jersey Arms Bicester, The George Hotel Darlington, The Sandpiper Hotel Chesterfield and the Comfort Inn Manchester North) were filed by ten Safe Or Scam clients earlier this year. An additional thirty six creditors lent their support to the applications.
2. Since these hotels were placed into administration another three Shepherd Cox hotels have followed (Allerton Court, Hallgarth Manor and The New Hobbit). These three were placed into administration by Luqa Ltd which has been a long-term supporter of Lee Bramzell and has profited from some of the investor hotels. We expect more hotels to go into administration in the next few weeks as the Administrator seeks to recover money which is owed to the six hotel companies.
3. It has been estimated that around £10m of investors’ money is currently unaccounted for.
4. Almost every hotel in the Shepherd Cox group was loss-making. It has been alleged that it was only through creative accounting practices and defaulting on guaranteed rental-payments to investors in Asia that the group was able to maintain the illusion of being solvent.
5. Investors introduced by some sales agents received favourable treatment at the expense of long-standing Asian investors. That preferential arrangement is one that we would like the Administrator to raise with the company directors.
6. Nine rooms at The Grand Hotel in Hartlepool, which were sold to investors in 2016, do not exist. Shepherd Cox’s explanation is that the solicitor held back some money with the inference being that Shepherd Cox did not receive enough money to fit-out the rooms. The truth is that the solicitor held back only £2,500 out of every £60,000 paid. Other rooms sold to investors in this hotel still have no bathrooms and cannot be let out to paying guests.
7. Shepherd Cox sold three bedrooms at the Jersey Arms to investors, despite twice being refused planning permission for those rooms to be used as hotel bedrooms. Those rooms are not guest bedrooms and still do not have planning permission.
8. Shepherd Cox sold bedrooms at the Sandpiper Hotel which cannot be used as guest bedrooms because they have no bathrooms and there is no space to construct bathrooms.
9. Shepherd Cox sold 33 bedrooms at The George Hotel in Darlington, but only 28 bedrooms are registered at the Land Registry. If investors at The George would like to contact us we can advise them if their rooms are registered. They can then do something about it. It does not affect their rights under the administration because they paid their money and will be recognised as creditors. We have some clients who have been affected by this.
10. The Administrator informed investors that the Shepherd Cox directors paid themselves large and unjust dividends which must be paid back to the companies.
So now to recent events.
A Directions Hearing was held this week relating to seven additional companies which the Administrator was applying to have placed into administration. We would normally say “seven Shepherd Cox companies”, but that is not strictly true. One of the companies was D&B Investment Property Ltd. It is nothing to do with Shepherd Cox hotels, except for the fact that the company is owned by the two Shepherd Cox directors, Lee Bramzell and Nick Carlile. This company is their own private property development company. What that means is that they transferred money out of at least one of the hotel companies to finance their own private property deals. That might explain why the hotel companies did not have enough cash to pay the guaranteed rentals.
A Directions Hearing is where both sides agree the framework with the Judge to enable them to present their cases over the next few weeks leading up to the full hearing. It is not a hearing where judgement on administration can be made unless both sides agree.
However, events took an unexpected turn. The Judge was obviously very concerned about the situation involving one of the companies, Shepherd Cox Ltd. Shepherd Cox Ltd is the oldest Shepherd Cox company. It was the sales agent for the very first hotels which were owned by Hotel Options. It sold rooms at the Lymm and Knutsford hotels in 2014 and then went on to sell rooms in its own Shepherd Cox hotels at Sedgefield and Hartlepool in 2015, followed by all the other hotels in 2016 – 2018. This is a very important company in the spider’s web of Shepherd Cox companies. It sits at the very centre. We believe it is likely to be the company which received a lot of the missing investor money, potentially including money from Lymm and Knutsford way back in 2014. That is one of the reasons why it was important that it be placed into administration so that an investigation can take place.
We have been told that the argument the Shepherd Cox directors were putting forward in defending the company against the administration application was that an administration was an inappropriate way to deal with the company. They did not want the company to be kept alive by an administration. They were asking the court to rule that it should go straight to liquidation and be dissolved. It is extremely rare for company directors to ask a court NOT to allow an administrator to try to save something from the company for the benefit of creditors.
The Judge clearly did not like this and took the decision to remove Lee Bramzell and Nick Carlile from positions of control in Shepherd Cox Ltd. He ordered that an Interim Manager be appointed to take over the running of Shepherd Cox Ltd until the full hearing. The Judge decided that the interim Manager should be the Administrator of the six Shepherd Cox companies.
Shepherd Cox Ltd is not in administration. It is being run by an administrator as Interim Manager until the full hearing. We have been told that the Judge also made it clear that he was granting the Interim Manager all the powers of an administrator. Hats off to the Judge !
Investors can make their own assessment, but it seems to us that the Judge could smell a cover-up and took steps to prevent it. The new Interim Manager will have full access to the Shepherd Cox Ltd bank accounts so it is another step forward for investors in finding out where the money went and potentially recovering some of it.
Now to the sales agents and their misinformation campaign. We have been asked a lot of questions by investors who have been approached by the sales agents and one or two investors who are working with them. The campaign is being led by Brett Allegre-Wood of Gladfish Property Investment and includes the Buy Association and Dirk Laeremans who was the Shepherd Cox Sales Manager for the Far East. That has not gone down well with a lot of our investors. Anyone who is seen to be working with Dirk Laeremans is viewed with deep suspicion by Shepherd Cox investors in Asia. They remember him as one of the people who was trying to persuade them to swap leases for shares. Until last month he was still showing on LinkedIn as the Head of Sales at Shepherd Cox Ltd, but that page has now been removed.
Investors are being led down the sidewalk and into the orange grove by one investor who is telling them they can buy the hotels for £1. We’ll call this team of sales agents and one or two investors “the Manipulators”. Here are the questions we have received and the answers.
1. Is SOS charging an upfront fee to join the legal action that your clients have established ?
We were charging £100 until recently to cover admin, but even that has been waived now.
2. If I join your client’s legal action am I part of the SOS Group ?
NO. Joining our group is by mutual consent. There are some disruptors who we will not accept. We will assist the legal action because that is what has been agreed, but there are other avenues we are pursuing exclusively on behalf of our group which do not involve the legal action. We will only accept people into the SOS group who we are happy working with.
3. Will SOS levy a fee on what I recover from the administration ?
NO. We have written to our group of investors telling them that we do not believe they will get much back from the administration because the market value of the hotels is not great and we will not charge them any fee.
4. Will SOS levy a fee on any sums recovered on third party legal actions ?
5. The Manipulators have said that SOS is advocating that we give up our leases. Is that correct ?
NO. That is a lie. The decision whether or not to surrender a lease is a personal decision for investors. Ultimately, we believe all investors will have to give up their leases, either voluntarily or through a court process at some point. We advise investors to take legal advice on their lease position because it is not as clear cut as they are being led to believe by the Manipulators.
6. Do you think we could buy the freeholds for £1 like the Manipulators have suggested ?
NO. This is real life. There will be better offers on the hotels even with all leases in place.
7. The Manipulators are saying the leases put us in a strong position. Do you agree ?
NO. There is possibly a temporary improved position in the short term if investors wanted to buy the hotels. They could possibly buy them at a discount, but they would still have to pay more than they are prepared to pay. Also, a proposal by an investor group would have to deal with some investors who do not want to join and there has been no information on how they would treat those investors. We recommend investors take legal advice because the leases carry financial liabilities. Our group understands the lease position and is acting accordingly.
8. The Manipulators want us to oppose the Administrator. Is this wise ?
Not usually, but investors are free to do what they want. Administrators and lawyers are entitled to charge for their time which will be paid out of the company assets. If investors are happy for extra costs to be incurred then that is their choice. Our group will not be fighting the Administrator. It was not an administrator who put investors into this mess. It was Shepherd Cox and the sales agents. Investors should take legal advice and not listen to the Manipulators because they have their own agenda.
9. The Manipulators are saying they have taken legal advice, but have not shown us anything. Are they telling the truth ?
Anyone can say “I spoke to a solicitor and he said….” Ask to see a copy of the written legal advice. Based on what investors are telling us, some of the statements are so wrong that we do not believe a competent solicitor would have given that advice. So the answer is that we don’t believe they have taken legal advice.
10. The Manipulators say that the Administrator will only allow my investment capital to be added as a debt if I give up my lease. Are they correct ?
NO. It’s a lie. The first Administrator’s Report includes a list of creditor rental arrears provided by Lee Bramzell of Shepherd Cox. When the Administrator submits his assessment it will include the buy-back + the rental arrears. The lease position of an investor is irrelevant as to whether a debt is owed or not so it does not matter if the lease is given up or retained. If in doubt, investors should drop a line to the administrator. Do not believe what the Manipulators are telling you.
11. The Manipulators say it is not worth me taking legal action because it is better for me to take over the hotel with other investors. Are they correct ?
NO. Investors can do both if they wish. One does not affect the other. If investors want to take over a hotel and also make a claim for the full loss of their investment they can do so. The lawyer will explain the reasoning behind that. The Manipulators are keen to persuade investors not to join the legal action.
12. The Manipulators say the law firm will not be able to calculate my losses for the legal action claim because the administration is still ongoing and therefore I should not bother. Are they correct ?
NO. It’s a lie. There is an established process. The law firm will advise.
13. The Manipulators are saying it is not worth taking legal action because it could take years and we may not win. Are they correct ?
It is a legal action and they can take a long time. It will take as long as it takes because nobody knows. It may settle quickly or it may drag on, but from where we sit we would ask investors what have you got to lose ? Investors are not having to pay for it. Law firms only take on no-win no-fee cases where they are confident of a win.
14. Will the intended opponents have enough insurance cover to pay out the full claim ?
The law firm will not take on a claim unless it is confident the opponent has the resources to settle it. The law firm is on a no-win no-fee arrangement so it wants to be paid at the end of it. Investors can be pretty sure this is the first thing their lawyer will check !
15. Do you genuinely think this was a scam or just poor management by Shepherd Cox ?
We genuinely think this was a scam from the start. We are confident this will be proven in the future as the investigations delve deeper into the companies and conduct of the directors.
16. Do you think the agents knew it was a scam ?
We don’t know, but from what we have seen it was being marketed as a low-risk investment which was clearly untrue. If the agents were a party to the sale of these rooms they have some liability to compensate investors whether they were a knowing accomplice or not.
Three key things to remember:
The sales agents and Shepherd Cox employees have a vested interest in misleading investors and preventing them from taking legal action.
If someone says “a lawyer told me….” ask to see the lawyer’s opinion in writing. If they can’t show it then it probably didn’t happen and investors are being manipulated.
If investors are offered a no-win no-fee full legal action by any law firm which includes taking the claim all the way through the UK courts they should seriously consider it. In our opinion 50% of something is better than 100% of nothing.
To view the previous article on Shepherd Cox please click here.
To view a more recent article on Shepherd Cox please click here.