BHS Ltd ((in Administration))
| Jurisdiction | England & Wales |
| Judge | Mr Justice Birss |
| Judgment Date | 29 July 2016 |
| Neutral Citation | [2016] EWHC 1965 (Ch) |
| Docket Number | Case No: 2220 OF 2016 |
| Court | Chancery Division |
| Date | 29 July 2016 |
[2016] EWHC 1965 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
IN THE MATTER OF BHS LIMITED (IN ADMINISTRATION)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Royal Courts of Justice
Strand, London, WC2A 2LL
The Hon. Mr Justice Birss
Case No: 2220 OF 2016
David Allison QC (instructed By Stephenson Harwood And DLA Piper UK LLP) For The Company
Hearing dates: 22nd July 2016
Judgment Approved
This application relates to BHS Limited (In Administration) ("the Company"). BHS stands for British Home Stores. The Company ran the famous national retailing business in the UK whose financial difficulties have been well publicised. The business is still currently trading in administration. By the application the original administrators, Philip Duffy and Benjamin Wiles (of Duff & Phelps Ltd), apply to the court for the appointment of two further concurrent administrators, Geoffrey Rowley and Anthony Wright (of FRP Advisory LLP). The essential objective is that once the concurrent administrators are appointed, the original administrators will remain in office so as to continue to trade the business albeit with a view concluding trading activities and assets realisations in order to obtain the best return for creditors while the concurrent administrators commence concurrent investigatory work into the Company's affairs. The application has the overwhelming support of the creditors.
Circumstances
The background to the application is contained in the witness statement of Philip Duffy. I will refer to Philip Duffy and Benjamin Wiles as the original administrators and Geoffrey Rowley and Anthony Wright as the concurrent administrators.
The first exhibit to Mr Duffy's witness statement consists of the Company's accounts for the year ended 30 th August 2014. As the original administrators' Report to Creditors and Statement of Proposals ("the Statement of Proposals") explained, in these 2014 accounts the Company reported a loss of £69 million.
At that stage BHS Group of which the Company was a part was owned by the Arcadia group. The Statement of Proposals explains in section 3 that in early 2015 the BHS Group suffered further financial difficulties in that trade credit insurers cut or withdrew cover for a large number of BHS Group's major suppliers. On 11 th March 2015 BHS Group Limited, the Company's sole shareholder was sold by Taveta Investments (No 2) Limited (the owner of Arcadia group) to Retail Acquisitions Limited ("RAL"). Within the terms of the sale Arcadia Group Limited (AGL) wrote off £215 million of inter-company debt and took a floating charge in respect of the remaining £40 million loan to BHS Group Limited.
The Company continued to trade. The details of what took place in the rest of 2015 and early 2016 are set out in the Statement of Proposals. Mr Duffy explains that the trading at Christmas 2015 was poor and sales were £25 million below the sales for the same period in 2014. A Company Voluntary Arrangement was proposed by the Company on 4 th March 2016 and was approved by creditors on 23 rd March 2016.
On 18 th April 2016 Mr Duffy was asked by Sir Philip Green of AGL to attend a meeting with the directors of the Company. Although Sir Philip Green had been a director of the company, that was no longer the case. The 2014 accounts list the directors at that time (2014) as S Boyce, P Budge, I Grabiner and C Harris, in addition to Sir Philip Green. The company secretary was A Goldman.
On 19 th April 2016 Mr Duffy and Mr Wiles attended a meeting with the directors of the Company at which they indicated that the financing that was anticipated had not materialised and so asked Mr Duffy and Mr Wiles to be appointed as administrators.
On 25 April 2016, the directors appointed the original administrators as joint administrators of the company. Following their appointment the original administrators continued to trade the business of the Company with a view to achieving a better result for the Company's creditors as a whole than would be likely if the Company were wound up (without first being in administration). They have tried to achieve a sale of the business and assets of the Company as a whole on a going concern basis, but this has not proved possible. The original administrators commenced investigations into the acquisition of the BHS group by Retail Acquisitions Ltd and the conduct of the directors in the period since the acquisition by RAL.
On 7 June 2016, the administrators provided the creditors with a copy of their proposals for the conduct of the administration.
The Pension Protection Fund (PPF) is the largest unsecured creditor of the Company with an estimated claim of £571 million. The PPF proposed certain modifications to the original administrators' proposals. The proposed modifications included the requirement for the original administrators to apply to the court for the appointment of the concurrent administrators in order to commence concurrent investigatory work into the Company's affairs, with the original administrators remaining in office in to conclude trading activities and assets realisations ahead of a Creditors' Voluntary Liquidation.
The objective of the PPF is that this would ensure that there was no delay in the commencement of the investigations by alternative office holders into possible claims by the Company whilst at the same time enabling the Company to conclude its trading in administration.
On 23 June 2016, an initial creditors' meeting was held to consider the original administrators' proposals for achieving the purpose of administration. The proposals were approved with the modifications proposed by the PPF by 98.8% of the creditors present and voting at the meeting.
In their letter to the court dated 5 th July 2016 the PPF explains:
"Philip Duffy and Benjamin Wiles of Duff & Phelps (the "Administrators") were appointed as joint administrators of the Company on 25 th April 2016. We understand that the Administrators were appointed by the directors of the Company with the consent of the former owner of the Company, which also has security over the assets of the Company.
One aspect of the administration will be to investigate the affairs of the Company, and the conduct of its former and current directors, prior to the administration. In circumstances where such investigations are required and the directors, who may be the subject of those investigations, appointed the Administrators, the PPF's preference is that...
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