The founder and former chief executive of digital pharmacy Phlo has been ordered to pay over £1.7m to the company after he made and “concealed” payments to another online pharmacy where he was director.
In a decision published on October 28, Scottish Court of Session judge Lord Richardson ruled that Nadeem Sarwar had breached his duties as Phlo’s director under the Companies Act 2006 by hiding monetary transfers from other Phlo employees and acting “dishonestly”.
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The court heard that between August 4, 2022, and March 30, 2023, Sarwar had transferred funds from Phlo’s Royal Bank of Scotland account into its account with banking platform Tide, before transferring the money to Universal Pharmacy Limited (UPL), another online pharmacy he was director of.
Sarwar admitted that he had made payments from the Tide account to UPL but said that “he had done so in order to enable UPL to make payments to a lender, Cubefunder, in respect of loans which had been taken out by UPL for the benefit of [Phlo]”.
He argued that the payments should be viewed as “part of a continuous running account between the two companies” and “strongly and vehemently denied that he had misappropriated funds”.
“Falsified bank statement”
Sarwar also maintained that he had never personally benefitted from the payments and “took the actions he had in order to ensure [Phlo’s] financial survival”.
But according to Phlo, Sarwar “deliberately concealed his actions” from other company directors, even providing colleagues with a “falsified bank statement” when concerns about the transfers were raised.
It argued that “in making the payments to UPL”, Sarwar “had not acted in accordance with [Phlo’s] constitution” and had used his power for an “improper purpose”.
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Several of the witnesses for Phlo also told the court of admissions Sarwar had made to them.
Paul Munn, another of the company’s directors, recalled receiving a phone call on July 15, 2024, during which Sarwar told him “he had done something really bad and really stupid” and “admitted to transferring [Phlo’s] funds both to his personal account and to UPL”.
Adam Hunter, Phlo’s chief commercial officer at the time of the transfers, also told the court of a conversation with Sarwar in which the former chief executive admitted to using more than £1m from Phlo to “pay off personal debts”.
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Lord Richardson found Sarwar’s contention that the payments were intended for Cubefunder to be “unsupported by any documentary evidence”.
He noted that “from the outset of its use”, Sarwar went “extraordinary lengths” to conceal the Tide account from those responsible for managing finances at Phlo.
The judge said he was “not satisfied that it has been established that the payments were made to UPL for the purpose of either promoting the economic interests of [Phlo] or endeavoring to ensure its survival”.
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He added that he was “entirely satisfied” that Sarwar had “acted dishonestly” and in breach of his duty under the Companies Act 2006.
“I do not consider that an intelligent and honest director would reasonably have believed that making an increasing unsecured loan to UPL was reasonably for the benefit of the pursuer,” he said.
Lord Richardson ruled that Sarwar had failed in his duty to act within powers and to promote the success of the company, and ordered him to repay the full £1.756m to Phlo.
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Sarwar told C+D that the decision “is under appeal” and that a reclaiming motion has been lodged with the Inner House of the Court of Session.
“As the proceedings remain live, it would not be appropriate to comment further,” he said.
It comes after a pharmacist and wholesale business owner has been sentenced to six years in prison for his role in defrauding the NHS out of £1.3m.
And it follows the Advertising Standards Authority upholding a complaint against Phlo over an ad that it said promoted prescription-only weight loss drugs to the public.
