Two former directors of a not-for-profit business in Aberystwyth have been found in “breach of their duties” and to have acted “unreasonably” by transferring ownership of the store’s grant-funded premises into a personal pension scheme.

The Craft premises at Aberystwyth Railway Station was transformed in 2006 using funding from public bodies including the Welsh European Funding Office (WEFO) and Ceredigion County Council.

The shop sells second-hand furniture and other domestic items and donates goods to charities to help furnish homes for vulnerable people.

Cardiff Civil Court heard how, in 2012, the two sole directors at the time, Derek Clifford Pope and Allison Cann, transferred the freehold of the property - valued at the time at £875,000 - into a SIPP personal pension scheme and then leased it back to the company at an eventual rent of £60,000 a year.

They transferred the freehold in tranches, over a period of around three years, rather than 10 years originally envisaged, for their own tax advantage, the court heard.

Ms Cann later resigned from her post in December 2015, and Mr Pope in March 2016.

In his court ruling, the Judge, His Honour Judge Jarman QC, said the two former directors had become “beguiled” by the possibilities of ownership of the asset and “each took their eyes off the interests of the company and focussed instead on their own interests.”

“Mr Pope and Ms Cann have derived economic benefit from the transfer of the property which amounts to conversion of it to their own use,” Judge Jarman found in his ruling.

Sharon Thomas, the current director of Craft, said after the ruling that it was “a fantastic victory for Craft and the community of Aberystwyth”.

“It’s a huge relief to Scott and me, as directors of the business,” she said.

“The actions of Derek Pope and Allison Cann in allowing Station Buildings to be transferred out of Craft’s ownership has caused the business a huge detriment over the years.

“Not only was Station Buildings taken from the company’s ownership, but we also had to find £60,000 per year to fund the rent.

“This meant that Craft could not take steps which we had previously taken to assist those who were most in need.

“This court ruling means that the future of Craft is secure and we can get back to focusing on what we do best, providing a service for the community to reduce, re-use and re-enjoy.”

Senior associate at Hugh James, Abigail Flanagan, who represented the claimants said: “This is a landmark decision on novel points of law which our client believes will lead to the recovery of, not only a valuable asset but also significant sums of money, which are very much needed.

“Yesterday’s judgment is a significant win.

“It will help to right the wrong and means the business will be able to continue with its hugely beneficial work for the community.

“We hope CRAFT can now go from strength to strength.”