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BHS Group Case

Rowley and Wright (the joint liquidators), BHS Group Ltd (in liquidation) & ors v Chappell, Henningson, Chandler โ€“ our analysis...



๐—” ๐—น๐—ฎ๐—ป๐—ฑ๐—บ๐—ฎ๐—ฟ๐—ธ ๐—ท๐˜‚๐—ฑ๐—ด๐—บ๐—ฒ๐—ป๐˜ ๐—ถ๐—ป ๐˜๐—ต๐—ฒ ๐—•๐—›๐—ฆ ๐—š๐—ฟ๐—ผ๐˜‚๐—ฝ ๐—–๐—ฎ๐˜€๐—ฒ, ๐—•๐—จ๐—ง, ๐˜„๐—ถ๐—น๐—น ๐˜๐—ต๐—ฒ ๐—บ๐—ถ๐˜€๐—ณ๐—ฒ๐—ฎ๐˜€๐—ฎ๐—ป๐—ฐ๐—ฒ ๐˜๐—ฟ๐—ฎ๐—ฑ๐—ถ๐—ป๐—ด ๐—ฐ๐—น๐—ฎ๐—ถ๐—บ ๐˜„๐—ถ๐˜๐—ต๐˜€๐˜๐—ฎ๐—ป๐—ฑ ๐—ฎ๐—ป๐˜† ๐—ฎ๐—ฝ๐—ฝ๐—ฒ๐—ฎ๐—น, ๐—ฎ๐—ป๐—ฑ ๐—ฐ๐—ฎ๐—ป ๐˜๐—ต๐—ฒ ๐—ฑ๐—ถ๐—ฟ๐—ฒ๐—ฐ๐˜๐—ผ๐—ฟ๐˜€ ๐—บ๐—ฒ๐—ฒ๐˜ ๐˜๐—ต๐—ฒ ๐—น๐—ถ๐—ฎ๐—ฏ๐—ถ๐—น๐—ถ๐˜๐—ถ๐—ฒ๐˜€?


Last month, the UK courts delivered a landmark judgment involving the BHS Group and its directors, marking the first recognition of "misfeasance trading." This decision has substantial implications for directors, creditors, and insolvency professionals.


Key Takeaways:


๐—๐˜‚๐—ฑ๐—ด๐—บ๐—ฒ๐—ป๐˜ ๐—ข๐˜ƒ๐—ฒ๐—ฟ๐˜ƒ๐—ถ๐—ฒ๐˜„: While the primary claims of wrongful trading were dismissed, the court found the directors liable for the novel claim of "misfeasant tradingโ€.


๐——๐—ถ๐—ฟ๐—ฒ๐—ฐ๐˜๐—ผ๐—ฟ ๐—Ÿ๐—ถ๐—ฎ๐—ฏ๐—ถ๐—น๐—ถ๐˜๐˜†: The directors, including Mr. Henningson, were found liable for a significant sum. Mr. Henningson alone was ordered to pay ยฃ6.5 million, significantly less than the ยฃ160 million originally claimed but still a considerable sum for an individual to meet from his personal assets.

๐—ฃ๐—ฟ๐—ผ๐—ณ๐—ฒ๐˜€๐˜€๐—ถ๐—ผ๐—ป๐—ฎ๐—น ๐—”๐—ฑ๐˜ƒ๐—ถ๐—ฐ๐—ฒ: The judgment raises questions about the reliance of directors on professional advice, as the court gave little weight to the top-tier legal and accounting guidance the directors of BHS received.

This judgment prompts several critical questions for the insolvency community:


๐Ÿญ) We donโ€™t know yet if this finding will be subject to appeal. However, it would be surprising if the defendants do not seek permission to appeal given the misfeasant trading claim has not yet been subject to the scrutiny of the Court of Appeal or the Supreme Court. In the meantime, the new misfeasant trading claim increases the scope of claims available to office holders against directors.


๐Ÿฎ) Do the directors have the necessary assets to meet these substantial liabilities? If not, is there a directors' and officers' insurance policy in place that might cover these liabilities, and to what extent after meeting the defence costs?


When considering the credibility and economics of claims against directors, the strength of the legal claim and recoverability risk both need careful consideration. Optimise has extensive experience in supporting high value insolvency claims and a robust approach to assessing the recovery risk to avoid the dreaded โ€œpyrrhic victoryโ€.

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