Reader Rights: Making sense of Rich Energy endgame

The whole Haas F1 team saga with title sponsor Rich Energy is a fiasco beyond anyone’s wildest imagination and inevitably raising a myriad of questions begging what is the endgame in this whole saga.

We have reported that Haas could loose north of $40-million of unpaid dues, some suggesting they have yet to see any money at all and now with the first instalment due the penny has finally dropped for the American team who are now set to sue for their money.

The Twitter gang-bang has been outrageous, to say the least, the belittlement and sheer mad tweets that rage from the account – allegedly run by Storey have won him or the company any friends. The latest one aimed at Red Bull is straight out the gutter of Trollville:

To be honest, this site has run out of words to keep on describing this never-ending soap-opera, but in a moment of good timing a reader who will pass as our latest deep throat (of sorts) popped this into our email box this monring:

“Thank you for continuing to provide timely and in-depth content on GrandPrix247. You seem to have content no one else has (that is until they copy it from your site!!!).

“I’ve been following the Rich Energy – Haas F1 saga with interest. Some time ago I told another F1 correspondent that Haas needed to distance themselves from Rich Energy as quickly as possible.”

So here goes for some GP247 community reporting:

Now that Rich Energy seems to have imploded quite dramatically, in a manner that has become an embarrassment for the Haas F1 team, and its effect on morale cannot be underestimated.

Which leaves us with some thoughts to be considered.

From the outset, many questions have been asked about the Rich Energy sponsorship, especially in respect of what due diligence was conducted on Rich Energy and William Storey, prior to Haas F1 signing the sponsorship agreement.

Consider that the Haas F1 sponsorship with Rich Energy was announced on 25 Oct. 2018.

It appears the Whyte Bikes v Rich Energy copyright infringement lawsuit was in full flight prior to and at the time of the Haas F1 sponsorship announcement. In her decision dated 14 May, 2019, Her Honour Judge Melissa Clarke makes reference to the issues to be determined at trial as coming “from His Honour Judge Hacon’s list of issues compiled at the Case Management Conference on 1 May 2018.”

ATB Sales Limited v Rich Energy Limited [2019] EWHC 1207 (IPEC) at p7.

Additionally, the case number on the Whyte Bikes copyright infringement suit is “Claim No: IP-2017-000235”. The ‘2017’ would appear to indicate the filing year, with 000235 the case number. See, ATB Sales Limited v Rich Energy Limited [2019] EWHC 1207 (IPEC). So it would appear that the initial complaint was filed sometime in 2017.

It is not unusual in litigation that suits are commenced, pleadings exchanged and then a protracted period of discovery ensues which delays the actual trial date for many months or years depending on the complexity of the case.

As an example, the suit by Uralkali against the administrators of the Force India F1 administration was filed in September 2018. The case management conference was only just held in July 2019. This case management conference settled the timetable for further steps up to trial, which is scheduled to take place between October and December 2020.

Of more concern as relates to due diligence, is the court decision dated 27 July 2018 related to the Force India F1 Team bankruptcy. The written opinion seems to indicate that the “investment” by Rich Energy in the Force India F1 team, was in fact a sponsorship agreement for a total of $30 million.

The Honourable Mr. Justice Barling notes in his decision that although a sponsorship agreement for $30 million had been signed between Force India and Rich Energy, with the money to be payable on execution of the agreement, the money never arrived!!

IN THE MATTER OF FORCE INDIA FORMULA ONE TEAM LIMITED (Reg’d No. 02417588) [2018] EWHC 3852 (Ch), at p26. 

The judge ultimately ruled that the $30 million was not sufficient to pull Force India out of bankruptcy so there was never any further discussion as to the delivery of the money associated with the Rich Energy “sponsorship.”

IN THE MATTER OF FORCE INDIA FORMULA ONE TEAM LIMITED (Reg’d No. 02417588) [2018] EWHC 3852 (Ch), at p40.

Then there is the financial statement of Rich Energy filed with Companies House. The sponsorship was announced on 25 Oct. 2018. At that time, no financial statements were filed by Rich Energy for fiscal year-end 2018 and the company fiscal year-end was extended from 30 Sept. 2018 to 31 March 2019.

No additional financial statements were ever filed with Companies House. All financial statements that were filed, were unaudited and did not include a profit and loss statement to accompany the balance sheet.

While this is permitted since Rich Energy was considered a small company under UK law, a quick read of the balance sheet filed for 30 Sept 2017 raises questions as to exactly how it was determined the company had the financial power to fulfil a reported $44 million sponsorship?

Possibly additional financial information relating to Rich Energy or M. Storey was made available to the party conducting the due diligence review but it is well settled that those who rely on unaudited financial statements for major commercial undertakings, typically do so at their peril.

Haas F1 has continued to display permitted Rich Energy branding to date if for no other reason than to continue to carry out their duties under the sponsorship contract to reduce the chances for countersuit for breach should they later bring their own action against Rich Energy/Lightning Volt, Ltd. for breach of contract.

They now appear to have legal representation by the Ebury Partnership based on letters to Neville Weston, a shareholder in Rich Energy, and to Rich Energy for the attention of William Storey, posted by Rich Energy on Twitter.

The Ebury Partnership is a law firm incorporated on 22 Feb. 2018 and has two officers, Mr. David Jeremy Courtenay-Stamp and Mrs. Elizabeth Ann Courtenay-Stamp. See,

David Jeremy Courtenay-Stamp was previously associated with MacFarlanes, LLP, a major London law firm, but resigned on 31 August 2018.

Mr. Courtenay-Stamp does have prior experience in commercial matters related to F1 and was reported to have been the head of MacFarlanes’ Formula 1 practice.

However, even a solicitor with Mr. Courtenay-Stamp’s experience may have a tough time obtaining redress for Haas F1. The ever-growing factors arguing against any recovery include:

  • The financial condition of Rich Energy/Lightning Volt, Ltd. as evidenced from the 30 Sep. 2017 balance sheet.
  • Lack of information related to turnover and profits which, coupled with social media claims that it is difficult, if not impossible to find Rich Energy product on store shelves, raises questions as to whether the company can actually produce and distribute product.
  • Additional legal claims against Rich Energy including the new suit by Red Bull GMBH and more importantly, Whyte Bikes intention to file insolvency petitions against Rich Energy / Lightning Volt, and Mr. Storey.
  • Change in the registered address of Rich Energy to that of the BDG Group, and change in ownership with Mr. Storey’s 6,400 shares now owned by Mr. Matthew Bruce Kell. BDG Group states on its website, “As the UK’s leading unlicensed Insolvency Practitioners we offer a genuine alternative to our clients which will give you a clean bill of health going forward.

So what remains are a number of ancillary questions:

  • Who acted on behalf of Haas Energy in arranging the sponsorship?
  • Did they receive the customary commission for major sponsorship deals?
  • Who originally brokered the sponsorship deal?
  • Who did the due diligence investigation/review?
  • How did the due diligence investigation not question: the unaudited financial statements; lack of profit and loss statement (assuming it was not provided privately to the due diligence reviewer); failure to file timely 2018 financial statements; extension of fiscal year?
  • More importantly how did the due diligence review: fail to identify or take into serious consideration the existence of an ongoing Copyright infringement suit which existed prior to and at the time the sponsorship was being arranged; or the failure of timely delivery of sponsorship money by Rich Energy to Force India F1 for the sponsorship agreement between Rich Energy and Force India F1 as evidenced by publicly available court documents?
  • Did the sponsorship contract contain clauses or attached affidavits attesting to the unrestricted ownership by Rich Energy of all copyrights, trademarks, etc. and an indemnification agreement holding Haas F1 harmless in the event of litigation related to those marks (important as a defense against claims such as contributory infringement).

Hopefully, Haas F1 are properly protected by appropriate language in the sponsorship contract. Whether they will ever recover any money due under the sponsorship agreement is questionable.

Time to move on to more pressing and manageable issues especially as relates to their drivers.

Report submitted by a lawyer-reader who wrote: Feel free to credit “deep throat”

Inside Line: Haas to lose $44-million with Rich Energy fiasco?