Backlash over "non-ownership" of farms

by DOUGLAS SHEPHERD

The belated admission by the directors of the Avocet group of Borders-registered companies that they never owned three Berwickshire farms despite quoting valuations of £8-£10 million for the properties in company documents has sparked a furious reaction among shareholders.

But although management say they discovered the acreages and buildings were not in fact theirs in October 2018, an outstanding loan of £3.25 million - identical to the sum now being claimed by agricultural lenders - is included in a set of accounts signed off by the Avocet board on February 13th 2019. Tangible fixed assets of £6.480 million are also recorded in those accounts which cover the calendar year 2017.

As Not Just Sheep & Rugby reported earlier this week, Martin Frost, Avocet Group chairman, told 650 investors of the complicated ownership scenario surrounding the farms of Sunwick, Harcarse Hill and Greenwood in a letter circulated last Sunday on company-headed paper.

In the correspondence Mr Frost claimed the 'planned loan' from UK Agricultural Lending Limited "never happened to Orrdone Farms Limited [previously called Avocet Farms, and now insolvent]".

He stressed that Orrdone Farms did not purchase the three farms from Hamilton Orr Limited in 2016, as reported by joint administrators of the farm business. He added: "Regrettably, I, my fellow directors, and company accountants and auditors were misled into thinking that Orrdone had purchased the three farms."

The last set of published accounts for Avocet Farms Ltd - those for 2017 but not approved by the directors until February 2019 - mentions on page 13 that the company has 'other loans' of £3.25 million outstanding, the same amount as shown in the firm's 2016 accounts. The money is said to fall due in two to five years time.

So-called tangible fixed assets at December 29th 2017 are shown as £6.480 million plus plant and machinery valued at £1.138 million.

An accompanying note to the accounts states: "Subsequent to the period end a dispute arose regarding one of the company's freehold properties. As a result of this dispute the directors have reassessed the value of this property and charged an impairment against it, to reduce the value to the lower of value in use and net realisable value".

And the 2016 annual accounts, also available on the Companies House website, show Avocet Farms had tangible assets of £6.480 million compared to just £900,000 in 2015. Freehold property is listed as being worth £5.811 million.

'Other loans' of £3.25 million is an item included under Creditors with the explanation "Other loans are secured against the freehold property. The loan attracts interest at a rate of 12% per annum, and is repayable in March 2019".

The Avocet Farms Ltd. file also contains details of a charge (borrowing arrangement) between the company (the borrower) and UK Agricultural Lending Ltd.(UKALL the lender) dated September 22nd 2016.

This document makes it clear 'this is a debenture over all your assets' and was Executed and Delivered as a Deed with the names of Mr Frost and a representative of UKALL appended, and witnessed by an Edinburgh solicitor.

The paperwork goes on to say: "If any of your debts or liabilities secured by this debenture are not paid when due UKALL can appoint a receiver, or take possession of the assets charged by this debenture and sell them".

In their report published in March of this year, Orrdone Farms joint administrators Emma Porter and Joanne Brown wrote: "In or around September 2016 the Company entered into a contract to purchase farms owned by Hamilton Orr Ltd held under two titles in the Scottish Borders namely, Harcarse Hill Farm and Sunwick Farm, including part of Greenwood Farm. The dispositions both state that consideration was for certain good and onerous causes. In September 2016 a loan of £3.25 million from UK ALL was secured. The loan provided was for a period of 30 months and due for repayment in March 2019."

A number of investors have taken to the pages of an Avocet Shareholders' Forum to express their views on recent events. 

In a post concerning the controversy over farm ownership, the contributor wrote: "By your own admission, you have known for 21 months that Avocet did not own the three farms in question, but you have neglected to provide this very material information to Avocet’s shareholders until just now.

"By your own admission, you knew in early October 2018 that Avocet did not own the three farms, but in an Information Memorandum issued by Avocet a month later through Asset Match for the purpose of raising funds, the appended financial statements clearly show Avocet Farms holding fixed assets of £8,321,044 in the fourth quarter 2018, which could only be the farms in question."