Newspaper Code Cash Grab

RN Report The Shocking Tale

This chilling announcement appeared in the London Gazette recently:

'Meetings of Creditors
In the High Court of Justice (Chancery Division)
Companies Court No 9719 of 2007
DH WESTROPE (WHOLESALE NEWSAGENTS) LIMITED
(Company Number 01241895)
Notice is hereby given by Tony Flynn and Ian Carr, both of Grant Thornton UK LLP, 30 Finsbury Square, London EC2P 2YU that a meeting of the creditors of DH Westrope (Wholesale Newsagents) Limited, c/o Grant Thornton UK LLP, Melton Street, London NW1 2EP is to be held at Grant Thornton UK LLP, 30 Finsbury Square, London EC2P 2YU on 4 March 2008 at 11.00 am. The meeting is an initial creditors’ meeting under paragraph 51 of Schedule B1 to the Insolvency Act 1986 (“the Schedule”). I invite you to attend the above meeting. A proxy form should be completed and returned to me by the date of the meeting if you cannot attend and wish to be represented. In order to be entitled to vote under Rule 2.38 at the meeting you must give to me, not later than 12.00 noon on the business day before the day fixed for the meeting, details in writing of your claim.
T Flynn, Joint Administrator
7 February 2008. (458512)'

The world of newspaper distribution for wholesalers, particularly independent wholesalers is at best described as fickle. They are at the gift of the newspaper publishers and can be removed at relatively short notice, I think that it is no more than 90 days notice.

When you add in the fact that 'new' retailers have to hand over a 3 week 'deposit' to wholesalers as part of getting an account for supply that is supposed to be held in a separate account there is potential for trouble. The demise of DH Westrope is just such a case. I am told that this is not the first time that retailers have lost their deposit money due to bankruptcy.

Tony Flynn of Grant Thornton, the administers told Retail Newsagent:

‘It was very unlikely that the retailers would get their deposit money back. Given the short fall to the bank, there will not be anything left over in the pot’

Quite clearly for this to happen under the rules of the Newspaper Code of Practice is truly unacceptable, it pretty close to theft. In my view, a 'deposit' demanded as surety by a wholesaler against the retailers default is not the property of the wholesaler or their creditors. It remains the property of the retailer

The Code of Practice states in the annex to the undertaking:

3 Credit risk control

Successful applicants will be obliged to make a cleared deposit equal to three times the wholesaler's minimum entry level, which monies will be held in a separate interest bearing account. Such deposit shall entitle the retailer to receive interest, payable annually in arrears, at the National Westminster Bank Plc base rate, less an administration charge of 1.5% calculated on the sum of the deposit. The retention of the deposit will be reviewed after twelve months trading and refunded, subject to the account being maintained satisfactorily in accordance with the wholesaler's Terms and Conditions of supply. The holding of deposits beyond the twelve month period will be subject to review every six months. Should any account be closed or transferred, any remaining deposit shall be refunded subject only to the retailer's account being cleared in full.

Therre are two sentences within this annex that suggest to me that the directors of DH Westrope have acted incorrectly in allowing retailers deposits to be seen as the company's assets.

I hope that the NFRN are able to find away to assist its members who have been disadvantaged by this failure. Independent news retailers do not have a choice as to who they obtain supplies of newspapers and magazines from, but they should be able to expect that the industry will give protection for their deposit money that is demanded when opening an account.