Two former directors of collapsed retailer BHS must pay at least £18m after the company’s liquidators successfully sued them for wrongful trading and trading misfeasance.
The 88-year-old high street icon fell into insolvency with huge debts, large job losses and a pension deficit in 2016, just a year after being bought by a consortium led by businessman Dominic Chappell. Eight years later, many of the stores remain unoccupied.
At the time, the scale of the collapse was major news, not least because Chappell, who has since served time in prison for tax evasion, bought the company in 2015 from entrepreneur Sir Philip Green for just £1.
Now, BHS’s liquidators have brought legal claims against Chappell and two other 2015/16 directors of the BHS group of companies, Lennart Henningson and Dominic Chandler, for more than £130m, as part of an attempt to claw back some of the company’s huge losses.
Henningson and Chandler’s trial took place late last year, whereas Chappell’s was postponed while he receives treatment for cancer. His trial is due to take place later this month. Trial judge Mr Justice Leech said in yesterday’s ruling that none of his findings are binding on Chappell’s forthcoming trial.
At the heart of the case was the liquidators’ assertion that BHS’s new management “knew or ought to have known” that the company had “no reasonable prospect” of avoiding administration or liquidation long before the company collapsed.
BHS’s former directors denied this, claiming the business could have been turned around after Green sold it. They said they sought insolvency advice early in 2016 after a disappointing Christmas trading performance.
In a four-week trial in November and December last year lawyers for the liquidators took the judge though the events prior to the liquidation, and in a detailed 500-page ruling handed down yesterday, Leech J went though the allegations in detail.
He found that the pair were liable for a claim of wrongful trading in September 2015. He dismissed five other claims. He said both men should contribute £6.5m each to the company.
He said that the pair should also pay around £5m for trading misfeasance, adding that their liabilities may well not end there.
“I have also held that if Mr Henningson and Mr Chandler had complied with their duties on or before 26 June 2015 and on or before 8 September 2015 the companies would not have continued to trade but would have gone into insolvent administration immediately,” the judge said.
“I made no further findings in relation to the appropriate measure of damage and I will give the parties the opportunity to make further submissions on that issue.”
Wright and others v Chappell and others
[2024] EWHC 1417 (Ch)
Business and Property Courts (Mr Justice Leech) 11 June 2024
Photo © Tolga Akmen/Lnp/Shutterstock
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