Robert and Richard Hodges, along with two other co-directors, were alleged by liquidators to have taken more than half a million pounds out of Nixon & Hope, which owned Floors-2-Go, a flooring company that once had stores nationwide and employed hundreds of people.
The brothers failed to co-operate with the liquidators after it went into administration in July last year and have been given suspended prison sentences for breaching a court order to hand over documents, reports The Times.
Mr Justice Baker said that Robert Hodges, 46, was “not a man of his word” in a summary judgment in favour of the liquidators. Documents seen by The Times show that he was paid £700,000 in less than two years, including more than £150,000 in unaccounted-for expenses, and £339,000 more than he was owed. His explanations for this were “in the territory of fancy”, the judge said.
He also found that the directors of Nixon & Hope effectively had “given away” Floors-2-Go’s brand and assets in a deal to which “no director acting reasonably” could have agreed. He ordered them to pay £250,000 to the company, which the liquidators said was the minimum the assets were worth.
In separate committal proceedings, the judge said that the behaviour of Robert Hodges, “reveals [him] as a person who does not give thought to his ability to keep his word; rather, he is prepared to say whatever is necessary to achieve his personal objective or to serve his personal ends”.
Nixon & Hope went into administration in July last year. MB Insolvency, the administrator, called in BDO as liquidator after it had difficulties working with some of the company’s directors. The threat of imprisonment had led to the Hodges brothers returning with “their tail between their legs”, according to a person with knowledge of the proceedings, and they have since been much more co-operative.
It was the third time that Floors-2-Go had gone into administration.
In a case heard at the Chancery division of the High Court in Birmingham, it emerged that the Nixon & Hope directors were using mobile phones and personal emails for Floors-2-Go business. The court was also told how several key documents had been lost when a van allegedly was stolen in Glasgow.
The brothers, as well as Parjinder Sangha, 60, and David Vizor, 55, who also were Nixon & Hope directors, agreed to let an IT expert comb through their emails to find any relevant documents going back to 2011. Richard and Robert Hodges agreed to pay for the IT expert.
Houses were put on the market, cars were sold and loans were sought from spouses to cover costs, but money did not reach the IT expert before the court’s deadline. Mr Vizor, a trained solicitor, offered to sell his “one asset”, a Rolex watch, when he realised that a failure to pay would mean contempt of court, but it was too late. Mr Vizor and Mr Sangha were fined while the Hodges brothers face what the judge called “the clang of the prison door” should they slip up again.
Floors-2-Go was founded in Birmingham in 1999 by the brothers and their father, Robert Hodges. In its first few years of business, it went from a warehouse-based cash-and-carry venture to high street stores in prime locations. It floated on AIM in 2004, when it was valued at £70 million and had 132 stores across Britain.
Encouraged by their success, the brothers launched the business the United States, opening 62 stores that sold hardwood flooring. The entrepreneurs were accused of living “like celebrities” in a case brought after the American venture collapsed after two years in January 2007. Robert Hodges lived in Gables Estates, Miami, which one Florida estate agent described as “one of the most prestigious waterfront addresses in the country”.
The company’s 650 creditors claimed a combined $19 million, according to The Miami Herald. The claims were reported to have been settled when the parent company was made bankrupt. Robert Hodges sold his house in Miami and flew back to the UK, leaving creditors no way to contact him, American court documents show. When one creditor hired a private investigator to track him down to serve an order for him to pay $750,000, he claimed that he was in a local pub and never got the documents.
A judge in the United States concluded that he had “failed to persuade the court he was telling the truth” over the course of proceedings in 2010.
Just before the American venture collapsed, Jon Moulton’s Alchemy Partners backed a £52.4 million management buyout of Floors-2-Go soon after Robert Hodges returned to Britain in December 2006. However, the company ran into trouble when the financial crisis hit and the housing market ground to a halt as homeowners put renovations on hold, and Floors-2-Go was put into administration in July 2008. It was rescued by the Hodges brothers, who bought 80 shops a month later. Administrators closed 52 stores and more than 100 people lost their jobs, but 300 jobs were saved. The brothers called in administrators for the second time three years later. About 200 jobs were lost this time and 53 stores closed, with Mr Vizor and Mr Sangha taking on 35 stores through Nixon & Hope in 2011.
The Hodges brothers became directors in December 2012 but were involved in the business from the start. Their third stint as directors ended in administration with receivers called in to Nixon & Hope on July 4 last year. In its three-year life Nixon & Hope produced one set of audited accounts, which showed a turnover of £29.6 million and net profit of £137,000.
Mr Justice Baker found that all four directors were in contempt of court. He fined Mr Vizor £1,800 and Mr Sangha £4,500, but described the actions of the Hodges brothers as “in an altogether different category”. Robert Hodges was given a six-month suspended jail sentence; Richard Hodges was given a fourth-month suspended sentence.