Arcadia Group adviser Linklaters has questioned Olswang on whether its client Retail Acquisitions Limited (RAL) broke its contract and breached covenants to pay the firm’s fees for the sale of BHS.
In a letter published by the Department of Work and Pensions select committee today (15 July), Linklaters asked Olswang partner David Roberts whether the firm’s clients had broken an obligation following the sale.
The committee has questioned partners from several LB100 firms as part of the ongoing inquiry into the sale of BHS to RAL by retail tycoon Philip Green’s Arcadia Group for £1 last year.
The question comes from the claim that Dominic Chappell’s RAL used £7.15m of funds from a sale of BHS’s main distribution centre to help pay off a loan to Allied Commercial Exporters (ACE) when it was meant to put it back into the business.
Linklaters asked whether ‘Olswang (and RAL) accept that the payment to ACE of approximately £7.15m in August 2015 raised by the sale of Atherstone warehouse … was in breach of RAL’s obligation clause’.
According to the letter, the clause asks that all proceeds raised by such a sale would be retained by BHS for the day to day running of the business.
Linklaters’ letter said: ‘Please explain Olswang’s involvement in relation to the ACE loan … and the August 2015 sale of the Atherstone warehouse.’
The letter, dated 23 June, also asks them to provide a response for the government select committee.
In a separate letter to the firm, dated 21 June, Linklaters asked Roberts if he was aware that the sale of BHS’s North West House property had been used to pay Olswang’s legal fees ‘in breach of the covenants in clause 6.2 of the BHS sale agreement and at Mr Roberts’ specific request’.
The firm said that both oral and written evidence given to the committee show that around £1.2m was paid by RAL to Olswang in fees. The sale of North West House raised £32m for BHS, but only £25m was ultimately received by the retailer.
The questions raised by Linklaters add to those of Green, who detailed the breach of covenant issue before the committee back in June.
Green told the joint committee: ‘The £7m never materialised. It only transpired at the end of this whole process that the £7m remained in the Olswang bank account.’
Olswang declined to comment and would not confirm if the firm had responded to the inquiries. Linklaters declined to comment.
matthew.field@legalease.co.uk
