Anthony John Wright and Geoffrey Paul Rowley & Ors v Dominic Joseph Andrew Chappell & Ors (Re BHS Group Ltd & Ors (in liquidation))

This was a major insolvency and directors’ duties case arising from the collapse of companies in the BHS group. The joint liquidators sued former directors, arguing that they had kept the companies trading for too long and had also approved or allowed transactions that damaged the companies and their creditors.

The court examined a long sequence of events after the group’s acquisition in March 2015. The central commercial problem was that the businesses were under severe financial pressure, yet the board continued to pursue funding arrangements, asset sales and other transactions in an attempt to keep trading. The liquidators said that at various points the directors either knew, or should have known, that insolvent liquidation could not realistically be avoided.

The liquidators advanced three broad categories of claim. First, they alleged wrongful trading under section 214 of the Insolvency Act 1986. That required the court to decide whether, by certain dates, the directors knew or ought to have known there was no reasonable prospect of avoiding insolvent liquidation or administration.

Second, they brought what the judgment described as a trading misfeasance claim. In broad terms, the argument was that even if wrongful trading was not made out on every pleaded date, the directors still failed to consider creditors’ interests properly and should have caused the companies to enter administration earlier instead of continuing to trade.

Third, the liquidators challenged individual transactions and payments. These included ACE II, the Grovepoint facility, the purchase of Darlington, a Swiss Rock payment, an arrangement fee paid to Retail Acquisitions Ltd, and a secret commission issue. The court therefore had to look not just at the overall decision to continue trading, but also at whether particular steps were taken for proper purposes and with proper regard to the companies’ and creditors’ interests.

The court did not accept the wrongful trading case across all of the liquidators’ proposed knowledge dates. It dismissed the wrongful trading claim for the earlier dates KD1 to KD5, but held that the knowledge condition was satisfied on KD6, being 8 September 2015. In other words, by that date the relevant directors should have concluded that the companies had no real prospect of avoiding insolvent liquidation or administration.

The judge then found that if those directors had complied with their duties at that point, the companies would not have continued to trade and would instead have gone into administration. The court exercised its discretion to order Mr Henningson and Mr Chandler each to contribute £6.5 million to the companies’ assets on the wrongful trading claim.

The court also upheld parts of the trading misfeasance and individual misfeasance claims. It held, among other things, that Mr Henningson agreed to ACE II for an improper purpose and in breach of duty, that both Mr Henningson and Mr Chandler approved the Grovepoint facility in breach of duty in the alternative to wrongful trading, and that there was liability in relation to the Swiss Rock payment, the arrangement fee and the purchase of Darlington. Some other claims were dismissed.

The judgment is useful because it shows how a court analyses board conduct in the run-up to insolvency. The judge did not simply ask whether the business later failed. Instead, he worked through what the directors knew at different points, what information they had, what advice was available, and whether the board had a real basis for believing the business could survive.

A key theme was that expensive or complex funding is not automatically a rescue. If a facility merely buys time while worsening the position for unsecured creditors, directors may be criticised for approving it. The court also looked closely at whether directors had actually considered their duties, whether meetings and approvals were real and properly documented, and whether transactions were in the company’s interests rather than serving another party’s needs.

Another important point is that the court was willing to separate different dates and different transactions. Directors were not found liable on every allegation. That matters because it shows these cases are evidence-heavy and depend on what the board knew, what it recorded, and what a reasonable director would have done at the time.

Most small businesses will never face a case on this scale, but the operating lessons are very transferable. If your business is under serious cashflow pressure, the board should move from informal optimism to formal decision-making. That means regular financial updates, realistic forecasts, proper minutes, and clear records of why the board believes continued trading is justified.

If you are considering emergency lending, asset sales, connected-party payments or a turnaround plan, ask whether the step genuinely improves the company’s position or simply delays collapse at creditors’ expense. The closer the company gets to insolvency, the harder it is to justify risky transactions that consume cash, increase secured debt or reduce the assets available to unsecured creditors.

This case also shows the danger of incomplete approvals. If a board paper is missing, a valuation is not obtained, a meeting never really happens, or a transaction is pushed through before proper consideration, those gaps can become central later. Courts look closely at process because process often reveals whether directors truly exercised judgment.

If your company is in distress, use this as a board discipline checklist. It will not replace legal advice, but it can help you spot the kinds of issues that later become claims.

The aim is to show that the board was informed, active and realistic. A court is more likely to criticise directors who drift, rely on hope, or approve major steps without testing the downside for creditors.