Anthony John Wright and Geoffrey Paul Rowley (Liquidators of BHS Group Ltd, SHB Realisations Ltd, Davenbush Ltd and Lowland Homes Ltd (All (in Liquidation)) v Dominic Joseph Andrew Chappell
| Jurisdiction | England & Wales |
| Judge | Mr Justice Leech |
| Judgment Date | 11 June 2024 |
| Neutral Citation | [2024] EWHC 1417 (Ch) |
| Court | Chancery Division |
| Docket Number | CR 2016 002220, CR 2016 002221, CR-2016-002222, CR-2016-002224 |
[2024] EWHC 1417 (Ch)
Mr Justice Leech
CR 2016 002220, CR 2016 002221, CR-2016-002222, CR-2016-002224
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST
IN THE MATTER OF BHS GROUP LIMITED, SHB REALISATIONS LIMITED (FORMERLY BHS LIMITED), DAVENBUSH LIMITED, LOWLAND HOMES
LIMITED (EACH IN LIQUIDATION)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Mr Joseph Curl KC and Mr Ryan Perkins (instructed by Jones Day) appeared on behalf of the Applicants
Ms Lexa Hilliard KC and Ms Rachael Earle (instructed by Bark & Co) appeared on behalf of the Second Respondent
Mr Daniel Lightman KC, Ms Charlotte Beynon and Mr Tim Benham-Mirando (instructed by Olephant Solicitors) appeared on behalf of the Third Respondent
Hearing dates: 6–10, 15–17, 20–24, 27–29 November 2023
–8 December 2023
Judgment circulated 15 May 2024
APPROVED JUDGMENT
Mr Justice LeechTable of Contents
I. Introduction [1]
A. Preliminary Matters [1]
B. Procedural Matters [18]
II. The Facts [31]
C. Background [31]
D. Project Harvey [56]
E. Day One: 11 March 2015 [108]
F. 12 March 2015 to 17 April 2015 [130]
G. 18 April 2015 to 26 June 2015 [173]
H. 27 June 2015 to 7 September 2015 [238]
I. 8 September 2015 to 23 December 2015 [265]
J. 14 January 2016 to 25 April 2016 [326]
K. Subsequent Events [424]
III. The Evidence [433]
L. Witnesses of Fact [433]
M. Expert Witnesses [454]
IV. The Law [461]
N. Wrongful Trading [461]
O. Misfeasance [519]
V. Knowledge [573]
P. Completion [573]
Q. Day One: The Realistic Financial Position [687]
R. The 17 April Board Meeting [701]
S. 6 May 2015: The Second LOC Facility [741]
T. 26 June 2015: Ace II [746]
U. 13 July 2015: The July 2015 Turnaround Plan [774]
V. 26 August 2015: Atherstone [828]
W. 8 September 2015: The Grovepoint Facility [833]
VI. Wrongful Trading [852]
X. Functions [854]
Y. The Knowledge Condition[866]
VII. Misfeasance [949]
Z. The Trading Misfeasance Claim [953]
AA. The Individual Misfeasance Claims [1006]
VIII. Causation [1108]
BB. Wrongful Trading [1110]
CC. The Misfeasance Trading Claim [1111]
DD. The Individual Misfeasance Claims [1115]
IX. Quantum [1131]
EE. The Trading Misfeasance Claim [1131]
FF. The Individual Misfeasance Claims [1133]
X. Section 1157 [1137]
XI. Discretion [1139]
XII. Summary of Findings [1153]
I. Introduction
A. Preliminary Matters
This is my reserved judgment after the trial of the claims brought by Mr Anthony Wright and Mr Geoffrey Rowley of FRP Advisory Trading Ltd (the “ Joint Liquidators”) together with certain of the companies of which they are joint liquidators against the Mr Lennart Henningson, the Second Respondent, and Mr Dominic Chandler, the Third Respondent. Mr Dominic Chappell, the First Respondent, did not participate in the trial and is not bound by this judgment for reasons which I will explain. Mr Keith Smith, who was originally named as the Fourth Respondent, settled the Joint Liquidators' claims and played no part in the trial either.
Mr Joseph Curl KC and Mr Ryan Perkins represented the Joint Liquidators at trial instructed by Jones Day. Ms Lexa Hilliard KC and Ms Rachael Earle represented Mr Henningson instructed by Bark & Co and Mr Daniel Lightman KC, Ms Charlotte Beynon and Mr Tim Benham-Mirando represented Mr Chandler instructed by Olephant Solicitors (“ Olephant”). I am grateful for the assistance which counsel and their teams gave me and where I refer to a submission or an argument advanced by leading counsel or by leading and junior counsel in this judgment, I do so as a form of shorthand and in the knowledge that those submissions were the product of the hard work and expertise of their entire teams.
Mr Chappell represented himself in person. Mr Adrian Ring, who was formerly a partner in Lawrence Stephens, and who is now a consultant at New Media Law LLP, represented or assisted Mr Chappell at various stages of the proceedings. Paul Schwartfeger of counsel appeared on his behalf for the adjournment application below and Mr Chappell himself briefly appeared at the trial in person.
The Joint Liquidators brought the claims on behalf of four companies in the British Home Stores Group (the “ BHS Group”): British Home Stores Group Ltd (“ BHSGL”), the holding company of the group, British Home Stores Ltd (“ BHSL”), a subsidiary of BHSGL and the group's principal operating company, Davenbush Ltd (“ Davenbush”), a direct subsidiary of BHSGL and fellow subsidiary of BHSL, and Lowland Homes Ltd (“ Lowland”), a subsidiary of BHSL. I will refer to them collectively as the “ Companies”.
On 25 April 2016 all four Companies went into administration. On 2 December 2016 BHSL went into creditors' voluntary liquidation and the Joint Liquidators were appointed. It was renamed “SHB Realisations Limited” but I will continue to refer to it throughout this judgment as BHSL. On 15 and 16 January 2018 BHSGL, Davenbush and Lowland also went into creditors' voluntary liquidation and on 18 January 2018 the Joint Liquidators' appointment was filed at Companies House.
Mr Chappell, Mr Henningson and Mr Chandler were directors of all four Companies and took office after the acquisition of the BHS Group by Retail Acquisitions Ltd (“ RAL”). On 11 March 2015 Mr Chappell and Mr Henningson were appointed as directors of all four. On 18 and 20 March 2015 Mr Chandler was appointed as a director of BHSGL and BHSL respectively and on 17 April 2015 he was appointed a director of both Davenbush and Lowland. On 18 March 2015 Mr Smith, who was Mr Chappell's uncle, was appointed a director of BHSGL but he did not hold the same office for any of the other three Companies. On 6 July 2016 Mr Chandler resigned as a director of all four Companies and on 8 September 2016 Mr Henningson also resigned. BHSGL had a fifth director, Mr Darren Topp, who was also a director and the CEO of BHSL. He gave evidence at the trial. But he was not a Respondent to the claims.
By Application Notice dated 11 December 2020 (the “ Application”) the Joint Liquidators commenced proceedings against the Respondents under section 212 (“ S.212”) and section 214 (“ S.214”) of the Insolvency Act 1986 (the “ IA 1986”). They brought three categories of claim against Mr Henningson and Mr Chandler to which I will refer as the “ Wrongful Trading Claim”, the “ Trading Misfeasance Claim” and the “ Individual Misfeasance Claims”. I will also use the term the “ Misfeasance Claims” to describe the Trading Misfeasance Claim and the Individual Misfeasance Claims collectively. I briefly explain their nature before moving on to address certain procedural matters.
The Joint Liquidators alleged that from the date of the acquisition and their appointment Mr Chappell, Mr Henningson and Mr Chandler either knew or ought to have known that there was no reasonable prospect of avoiding insolvent liquidation. This allegation formed the basis for the Wrongful Trading Claim under S.214. It also formed the factual basis for the Trading Misfeasance Claim. In summary, the Joint Liquidators alleged that even if the Respondents were not liable for wrongful trading, they failed to consider the interests of the creditors and if they had done so, they would have immediately filed for administration. Finally, they made nine individual claims in relation to individual assets or funds of the Companies. The Individual Misfeasance Claims largely (although not entirely) explain why Lowland and Davenbush are parties to the Application.
By Order dated 22 February 2021 ICC Judge Barber gave directions for the service of Points of Claim, Points of Defence and Points of Reply and upon service of these statements of case Mr Chandler applied to strike out parts of the Joint Liquidators' case by Application Notice dated 25 November 2021. Deputy ICC Judge Schaffer dismissed this application and Mr Chandler appealed against that decision.
On 19 August 2022 Edwin Johnson J allowed the appeal in part: see [2022] Bus LR 1510. He held that it was necessary for the Joint Liquidators to plead the alternative dates at which they alleged the Wrongful Trading Claim should be tested and also to plead causation and quantum in relation to each of those dates. He gave them an opportunity to amend or the claims would be struck out. He held, however, that the Court had a degree of flexibility in relation to the date or dates on which the Joint Liquidators had to prove that the directors had the requisite knowledge for the Wrongful Trading Claim. He stated this at [101]:
“So far as the second question is concerned, the case law demonstrates that the court has a degree of flexibility, in terms of adherence to the pleaded date or dates on which the Knowledge Condition is said to have been satisfied. There is no hard and fast rule. Essentially the question is one for the trial judge, and ultimately depends upon what is fair to the parties. As both In re Sherborne and In re Continental demonstrate, there may be problems for a liquidator in relying upon an unspecified date or an unpleaded date, if the introduction of that date as the Knowledge Date will cause prejudice to the other party. In the present case, and by reference to both 17 April 2015 and the Alternative Dates, I understood both parties to accept that the trial judge would have some flexibility, if the trial judge was to consider that the Knowledge...
To continue reading
Request your trial
-
Anthony John Wright and Geoffrey Paul Rowley (Liquidators of BHS Group Ltd, SHB Realisations Ltd, Davenbush Ltd and Lowland Homes Ltd (All (in Liquidation)) v Dominic Joseph Andrew Chappell
...the defined terms and abbreviations which I used in the principal judgment which I handed down on 11 June 2024 the NCN of which is [2024] EWHC 1417 (Ch) (the “ Judgment”). Where I refer to paragraphs below, I intend to refer to paragraphs in the Judgment unless otherwise stated. In the Jud......