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Two former directors of BHS have been ordered to pay at least £18mn to cover a chunk of the losses racked up by the UK retailer before its collapse in a landmark ruling from a High Court judge.
Former BHS general counsel Dominic Chandler and another ex-director, Lennart Henningson, were on Tuesday found liable in a wrongful trading and misfeasance lawsuit brought by liquidators.
Dominic Chappell, the former bankrupt who led the purchase of BHS from Sir Philip Green for £1 in 2015 and received a prison sentence in 2020, could be on the hook for an even larger sum.
The judge has yet to rule on the sum he would need to cover, although he said he took the view that Chappell was “primarily liable” for losses at BHS.
Liquidators had accused the three former directors of seeking to “make money for themselves” at the expense of creditors in BHS, which had for decades been a British department store stalwart and whose collapse eight years ago was a national scandal.
In a 250,000-word judgment, Mr Justice Leech found that Chandler and Henningson had breached their duties as directors. Had they complied with them, he said, BHS would have ceased trading and been put “into insolvent administration immediately”.
The full scale of the pair’s liability is to be determined at a later date but is due to run into several millions.
The sum includes £6.5mn each arising from the wrongful trading claim. BHS liquidators FRP Advisory said this would mark the largest court award for wrongful trading since it was introduced by the Insolvency Act 1986. The total also includes at least £5.64mn for misfeasance claims.
Directors and officers insurance is in place to cover payouts, according to the judgment.
A further hearing to determine how the case against Chappell is to proceed is expected in coming weeks.
Lynn Dunne, dispute resolution partner at law firm Ashurst, who is not involved in the case, said the ruling was a “coup” for the liquidators as successful claims were “extremely rare”.
The department store chain failed a year after Chappell’s investment vehicle Retail Acquisitions bought it. Chappell was jailed for six years in 2020 after being convicted of tax evasion.
FRP has been pursuing directors in court proceedings in an attempt to recoup funds for creditors.
During a civil trial late last year, lawyers acting for the liquidators told the court that the directors knew or should have known that “there was no reasonable prospect” BHS would avoid insolvency or liquidation. They alleged that their conduct could be explained by a “mixture of incompetence and greed”.
In written arguments, Joseph Curl KC said the directors “carried out their roles with an extraordinarily high level of ineptitude. They also viewed the BHS Group as an opportunity to make money for themselves.”
Proceedings were initially also brought against another director, Keith Smith, Chappell’s uncle, although the claims against him were settled.
Lawyers for Chandler declined to comment, while those for Henningson have been contacted for comment.
Additional reporting by Laura Onita
