Steve Fallon started out as a chartered accountant, but having got close to the petrol retailing industry through his work with accountants EK Williams, he fancied he could make a good living out of it and decided to jump in himself.
A successful partnership arrangement with a colleague, which began in the mid-80s, saw him involved with the running of six Shell licensee sites in the Manchester area (officially three each)by the start of the 90s. He transformed his sites into profitable operations and was doing very well thankyou. Then in June 1990, in a presentation at the NEC, Birmingham, along came the Shell Share franchise, and a new site format. “The general opinion was that Shell had a market leader and was going to take the market by storm,” says Steve.
While halfway through the obligatory training course that followed, Steve was approached by a Shell regional manager asking for help. “He wanted me to take on a closed site in Bolton where the retailer had failed the course. I was reassured that I was scoring highly and would pass the course no problem. His words were ‘this is where your future is going to be’. I saw this as Shell rewarding me for having helped out by turning round badly run sites. I discussed it with my family and went for it. The figures Shell gave me suggested I was going to make a lot of money, so I didn’t need the other sites.”
However, what he didn’t know, and would find out to his cost later, was that the figures were flawed. “I was told that in the first year the site would do 3.2 million litres and shop sales would increase 75 per cent to £3,500 a week. Plus we would have substantial car washing. In reality the volume struggled to get to two million and the shop hovered at around £2,300. And I had no car wash for six months.”
Steve soon got into trouble. The projected £40,000 profit turned into a £40,000 loss. He spoke to anyone and everyone at Shell about the problems, but he felt there had been a culture change with the introduction of Share and everyone’s hands were tied. However, his previous good experiences with the Shell personnel meant he had no reason not to trust their judgement, and in December 1991 he made the costly mistake of accepting reassurances that things would get better – and he continued. But so did the problems. His last day of trading was April 5, 1991. He had spent £30,000 on the franchise, and his overdraft was running at £115,000. He went into voluntary liquidation.
“I felt angry and frustated. I was 35 and on the scrapheap,” says Steve. After some unsuccessful attempts at finding a fulfilling job, he went on the dole while he pondered his next move. Then a friend gave him a photocopy of a famous case – Esso versus Mardon – which was a classic case of misrepresentation. It took him 12 years, but the retailer won...
“In July 1992 we issued a writ against Shell. It was swatted away but we fought on. Delaying tactics by Shell meant it took us until November 1999 to get into court. We had to prove that the figures Shell had provided for the site had been produced recklessly.
“We had a two-day hearing at a high court in London, where Shell had brought five or six witnesses, a forensic accountant, a barrister, solicitors – everybody. For the first day and a half, I gave my evidence and was cross-examined. After the recess for lunch on day two it was Shell’s turn... the company offered no evidence. The judge was absolutely horrified. Dragging it out for all those years had just been a tactic to make us give up and run out of money. On top of that there was an attempt to settle the case just as it was about to start in court. The words were: ‘We’ve offered £50,000, I suggest you take it because you’re going to lose.’ It was like a bombshell. I told the barrister to carry on and throw everything at it.”
The judgement against Shell was fraudulent misrepresentation. But sadly that wasn’t the end of the story. “Shell had been crafty in asking for a split trial – the first to decide liability and the second to decide quantum for damages,” says Steve. “It took another 12 months to get to court. The judge reserved judgement because he was utterly confused. He came up with the scenario that because I carried on after December 1991 I had acted recklessly and failed to mitigate my losses. That meant the losses after that point were excluded from the award. On a claim worth £300,000 I was awarded £40,000. And because Shell had paid an amount – £75,000 – into court years earlier which exceeded my award, I got nothing.” Ironically for Steve the remaining Shell Share operators were later given generous compensation and the scheme brought to an end.
His advice? “Don’t sign any deal with a major oil company. They’ve got very deep pockets, and they always want to win. It doesn’t matter whether they are right or not.”