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

๐ ๐น๐ฎ๐ป๐ฑ๐บ๐ฎ๐ฟ๐ธ ๐ท๐๐ฑ๐ด๐บ๐ฒ๐ป๐ ๐ถ๐ป ๐๐ต๐ฒ ๐๐๐ฆ ๐๐ฟ๐ผ๐๐ฝ ๐๐ฎ๐๐ฒ, ๐๐จ๐ง, ๐๐ถ๐น๐น ๐๐ต๐ฒ ๐บ๐ถ๐๐ณ๐ฒ๐ฎ๐๐ฎ๐ป๐ฐ๐ฒ ๐๐ฟ๐ฎ๐ฑ๐ถ๐ป๐ด ๐ฐ๐น๐ฎ๐ถ๐บ ๐๐ถ๐๐ต๐๐๐ฎ๐ป๐ฑ ๐ฎ๐ป๐ ๐ฎ๐ฝ๐ฝ๐ฒ๐ฎ๐น, ๐ฎ๐ป๐ฑ ๐ฐ๐ฎ๐ป ๐๐ต๐ฒ ๐ฑ๐ถ๐ฟ๐ฒ๐ฐ๐๐ผ๐ฟ๐ ๐บ๐ฒ๐ฒ๐ ๐๐ต๐ฒ ๐น๐ถ๐ฎ๐ฏ๐ถ๐น๐ถ๐๐ถ๐ฒ๐?
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:
๐๐๐ฑ๐ด๐บ๐ฒ๐ป๐ ๐ข๐๐ฒ๐ฟ๐๐ถ๐ฒ๐: While the primary claims of wrongful trading were dismissed, the court found the directors liable for the novel claim of "misfeasant tradingโ.
๐๐ถ๐ฟ๐ฒ๐ฐ๐๐ผ๐ฟ ๐๐ถ๐ฎ๐ฏ๐ถ๐น๐ถ๐๐: 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.
๐ฃ๐ฟ๐ผ๐ณ๐ฒ๐๐๐ถ๐ผ๐ป๐ฎ๐น ๐๐ฑ๐๐ถ๐ฐ๐ฒ: 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:
๐ญ) We donโt 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.
๐ฎ) 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 โpyrrhic victoryโ.