City lawyers faced the wrath of MPs during May and June in an inquiry over the sale of BHS. The April collapse of the retailer, following its sale by Sir Philip Green’s Arcadia Group for £1 to Dominic Chappell’s Retail Acquisitions, caused political fallout for advisers on the deal, including law firms.
Partners from Olswang, Linklaters, Eversheds and Nabarro all appeared before a joint committee of MPs from the Work and Pensions and the Business, Innovation and Skills departments.
Linklaters partner Owen Clay advised Arcadia on the sale of its retail asset; Nabarro partner Ian Greenstreet advised Arcadia owner Taveta on pensions; Eversheds partner Emma King acted for the trustees of the BHS pensions scheme; while Olswang acted for Chappell and Retail Acquisitions.
Olswang corporate partner Stephen Hermer was questioned by MPs on the firm’s due diligence of Chappell, who had been declared bankrupt twice in the past. Hermer said that there was a ‘question mark’ over Chappell’s business acumen, but in the context of a rescue bid, with the aim to save BHS and thousands of jobs, the sale went ahead.
Olswang was accused of a lack of due diligence in the sale. When called before the inquiry, Green stated that neither Olswang nor Grant Thornton UK, the financial advisers on the sale, knew Chappell ‘from a hole in the wall’.
However, some law firms involved felt that certain MPs had overstepped the line in the inquiry. After Linklaters’ Clay declined to answer a question from the committee member about his advice to Arcadia, citing legal privilege, the committee chair Frank Field made comments to the press that were later called ‘highly defamatory, untrue and not protected by parliamentary privilege’ in a letter from Linklaters partner Andrew Hughes.
One risk and compliance director at an international practice told Legal Business the primary duties of the law firms involved were to their clients, but still questioned their role in the deal. ‘Both Linklaters and Olswang might be wondering “is this a good deal to be involved in?” for their reputation, but I don’t think this is a case where they have necessarily done anything wrong.’
Although Chappell had been declared bankrupt, the risk manager said this would not have been ‘the be all and end all’ in the due diligence if Chappell had backers for the sale.
‘If someone had to come to us who had a huge track record of financial failure, we might have considered whether we wanted to get involved in this, not because we have a legal duty not to, but because we wouldn’t want the whole thing to unravel in the way that it has.’
Meanwhile, the blame game over the BHS collapse continues. Ahead of the latest evidence sessions, Field said Chappell and Retail Acquisitions still needed to account for their actions, ‘some of which appear to be quite extraordinary’.
At press time, the inquiry was still ongoing with evidence yet to come from financial advisers, BHS directors and Arcadia representatives.
matthew.field@legalease.co.uk