Mr Smith is among thousands of people who own whisky that is worth far less than they paid for it. Last year he dispensed with pounds 3,750 for a cask of 1989 single malt from the now-defunct Napier Spirit Company. He, and many others, invested following reports that people could make 18 per cent a year on their holdings. According to Mr Smith, Scotch whisky brokers now value his spirit at just pounds 600.
The only people who might recover what they paid out are those who bought 1995 or 1996 casks, according to Mr Smith. "They might get back their investments, but anybody who bought 1989 or 1990 malts will lose the most. The worst-off are those who thought they were buying the better product," he says.
Unfortunately for Mr Smith and others, they cannot even rely on getting the low quoted trade prices because, according to the Scotch Whisky Association, there is no established secondary market for private sales of single casks of malt whisky since brokers normally only deal in bulk. The minimum number of casks that the trade will handle is 40 hogsheads. Hence Mr Smith's call to other whisky investors. "I realised early on that the only way we would get anything is to amalgamate holdings," says Mr Smith.
With the help of the Insolvency Service, he has written to Napier's creditors, who number more than 1,100, to establish the age and brands of their malts. He is now opening up the service to investors in other firms - Hamilton Spirit Management Company, for example - which have failed, or been closed down in the public interest by the Department of Trade and Industry.
So far, 400 investors have replied. When he has enough of each malt Mr Smith will contact brokers or distilleries to establish a price. Time, for now, is on the investors' side as most of the malts sold to private buyers are a few years from maturity.
The only alternative for investors is to bottle their Scotch for drinking. A hogshead, the typical investment, produces 400 bottles of whisky, and investors will also have to pay excise duty before they can take the whisky out of bonded warehouses. This duty amounts to around pounds 2,750 on a hogshead.
Many investors, including Mr Smith, bought their spirit without a bottling deal. Again, Mr Smith believes it will be easier for investors to bottle their whisky in bulk. "Many of the bottlers will not want to know about bottling a single hogshead of malt," he says. "The idea is to get together anyone who wants to bottle their malt. If you have 100 casks, they will do it."
q Paul Smith can be contacted on 01539 729555.