Two former bosses of the collapsed department store chain BHS have been ordered to pay £110m to creditors in relation to breaching their corporate duties.
The ruling against Dominic Chappell, the former chief executive of BHS whose Retail Acquisitions team bought the chain for £1 from Philip Green in 2015, and his former colleague Lennart Henningson comes eight years after the retailer collapsed into administration owing creditors, including its pension fund, more than £1bn.
The compensation, which will ultimately go to creditors if successfully collected, relates to the directors breaching their fiduciary duties by continuing to trade rather than putting BHS into an insolvency process, thus failing to promote the success of the company.
Chappell, the thrice-bankrupt leader of Retail Acquisitions who spent millions of pounds from BHS on a yacht, a Bentley Continental and other luxuries, did not appear at a hearing in June or send a representative. The judge ruled against him, saying there was “no real prospect of defending any of the claims against him”.
FRP Advisory, the firm acting as liquidator to BHS, brought the case against the directors on behalf of creditors. It said the total amount due from directors, for which they are jointly liable, was likely to be £150m as a result of interest and Henningson’s failure to accept a timely settlement triggering penalties.
Tony Wright, a joint liquidator, said: “We are pleased that the court has found these directors accountable for almost all of the deficit suffered by creditors. It justifies years of effort by the liquidators and the Pension Protection Fund.”
Robin Henry, the head of dispute resolution services at law firm Collyer Bristow, said: “Liquidators have obtained a much larger judgment against the directors of BHS by using the novel claim of trading misfeasance than they did from their wrongful trading claim. This opens up a whole new avenue for recovering assets from directors of insolvent companies and trading misfeasance is an area of potential liability which company directors now need to be aware of.”
However, Lynn Dunne, a partner in the dispute resolution practice at the legal firm Ashurst, said: “Whilst this is a significant ruling, it remains to be seen how much of this the liquidators are able to recoup from the former directors and any relevant [directors insurance] policies which may cover some of the awarded damages.”
A former bankrupt and former racing driver with no retail experience, Chappell bought BHS from the billionaire Green for £1 in March 2015. Just a year into his ownership, the chain collapsed with the loss of 11,000 jobs and a £571m pensions black hole.
In 2020, Chappell was ordered to pay £9.5m into the BHS pension schemes after he failed in his appeal against a ruling by the Pensions Regulator, which had already secured a £363m cash settlement with Green to rescue the schemes.
In June, the judge said Chappell tried to “plunder the BHS group whenever possible” and must pay £21.5m, ultimately due to the department store’s creditors, for wrongful trading – the largest since the introduction of the Insolvency Act 1986.
In June, Henningson was held jointly liable, with a further director, Dominic Chandler, for a £13m payment relating to wrongful trading.
Chappell was jailed for six years in 2020 over “brazen” non-payment of tax. He was released late last year but returned to prison for a stint in March after breaching his licence conditions by partnering with the chef Marco Pierre White and his son to set up a trio of restaurants.
Chappell did not respond to a request for comment.
