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VOLUME 38 NUMBER 6

THE COMPANY LAWYER

COMMENTGuidelines for cooperation and communication between courts in cross-border

insolvency matters: too far or not far enough?169

ANALYSISPayday loans: filling the gaps in the short-term loan market

172Sir Philip Green: Villain or Victim? An analysis of the circumstances leading up to

the administration of the BHS Group180

NEWS190

COMPANY LAWYER BRIEFINGThe private fund limited partnership: the reform company lawyers have been

waiting for?192

New IOSCO initiative to facilitate monitoring cross-border financial misconduct195

INTERNATIONALConcept of control under Takeover Code 2011

197

*684571*

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Sir Philip Green: Villainor Victim? An analysisof the circumstancesleading up to theadministration of theBHS GroupMark Stamp*

Corporate governance; Corporate insolvency;Directors’ liabilities; Occupational pensions

“Whatever the legal issues, there is a mega, mega,mega — moral responsibility”1

IntroductionThe Parliamentary Report2 into the affairs of BHS leadingto its administration in April this year makes eye-wateringreading. It paints a picture of corporate greed,incompetence and neglect, all at the expense of BHS’semployees and pensioners.Sir Philip Green came in for significant personal

criticism by the select committee as the architect of BHS’sdemise

“who chose to run these companies as his ownpersonal empire, with boards taking decisions withreference to a shared understanding of his wishesrather than the interests of each individualcompany”.3

The committee also concluded that they “found littleevidence to support the reputation for retail businessacumen for which [Sir Philip] received his knighthood”.4

Nor did the criticism cease even once Sir Philip agreedto put aside £363 million to fund a new scheme for BHSpensioners.5While generally welcomed, it was describedby some members of the select committee as “not

satisfactory”,6 and press commentary speculated that thereal motivation behind the settlement related to the threatsto remove Sir Philip’s knighthood.7

However, it was not just Sir Philip Green who camein for criticism. Lord Grabiner, as chairman of TavetaInvestments (No.2) Ltd, the owner of BHS, was describedas “docile”8 and “complacent”9 in failing to provide anyindependent oversight or challenge to Sir Philip Green’sdecision-making. The buyer of BHS, Retail AcquisitionsLtd (RAL) and their board members were described as“exploit[ing] BHS for their personal gain”, with DominicChappell being “the worst culprit”,10 who “had his handsin the till”.11 In addition, advisers on all sides wereseemingly complicit in BHS’s demise and solely focusedon securing their fees.The purpose of this note is to attempt to uncover, moral

indignation aside, the extent to which the actions thatwere the subject of withering criticism by the selectcommittee were actually unlawful and, on a related note,what changes to the law may be necessary to prevent asimilar situation arising in the future. This note looks atthe issues relating to the BHS situation in the followingsections: (1) background; (2) dividend payments; (3)pensions schemes; (4) the sale of BHS; (5) directors’duties and corporate governance; and (6) proposals forreform.12

BackgroundBHSwas a nationwide department store founded in 1928by a group of American entrepreneurs, who modelled iton theUS version ofWoolworths. The company expandedsteadily and by 1970 employed 12,000 workers in 94stores across the UK, becoming established in the mindof the UK consumer as one of the leading retail brands.In 1986 BHS merged with Habitat and Mothercare toform Storehouse Plc and was subsequently sold to SirPhilip Green in 2000 for £200 million.In 2000, BHS had made a net loss of more than £45

million. Initially it performed well under Sir Philip’sleadership and, between 2001 and 2004, generated profitsof £317million, paying significant dividends to Sir PhilipGreen’s family companies. At the beginning of 2002, theBHS pension funds were £17 million in surplus.

*LLB (Soton), LLM (Wisc), LLM (Cantab); Partner at Milbank, Tweed, Hadley &McCloy LLP. I would like to thank JamesMackay of Milbank, Tweed, Hadley &McCloyLLP for his help in the writing of this article and Camilla Barry, Partner at Macfarlanes LLP, who reviewed those parts relating to pensions. Any opinions expressed anderrors made are entirely my own.1 Frank Field, Hansard, HC Vol.615, col.985 (20 October 2016).2 The First Report of the Work and Pension Committee and Fourth Report of the Business, Innovation and Skills Committee of Session 2016–17 (25 July 2016), HC 54(BHS report). References to the “select committee” throughout this article are to this joint committee.3BHS Report (25 July 2016), para.135.4BHS Report (25 July 2016), para172.5This amount comprised £343 million to be put into a new scheme and £20 million for set-up costs. See Pensions Regulator, Press Release (28 February 2017).6 Iain Wright, Twitter (28 February 2017).7See, for example, theDaily Telegraph headline “Sir Philip Green puts £363m into pension fund of collapsed retailer BHS after threats to strip his knighthood” (28 February2017).8BHS Report (25 July 2016), para.132.9BHS Report (25 July 2016), para.136.10BHS Report (25 July 2016), para.138.11BHS Report (25 July 2016), para.171.12The directors of TIL and TIL2 commissioned an opinion by Lord Pannick QC and Michael Todd QC, which disputes a number of the select committee’s criticisms (the“Taveta Opinion”). It is a fair exposition of the relevant law but, given the reason for which it was prepared, is by its very nature self-serving and selective in its analysisof the issues and facts. See https://www.parliament.uk/documents/commons-committees/work-and-pensions/Taveta-Response-BHS-161016.pdf. The select committeeobtained an opinion fromGabriel Moss QC to review this opinion: https://www.parliament.uk/documents/commons-committees/work-and-pensions/Note-from-Gabriel-Moss-QC-on-Pannick-opinion.pdf [Both accessed 5 April 2017].

180 The Company Lawyer

(2017) 38 The Company Lawyer, Issue 6 © 2017 Thomson Reuters (Professional) UK Limited and Contributors

By 2005, profits were dropping rapidly as new andmore exciting retail entrants, such as Primark and Zara,came to the market. Various discussions were held withAsda and Debenhams in 2006 to sell the business, butultimately commercial terms could not be agreed. BHShas never made a profit since 2009. In July 2009, as partof an internal group restructuring, BHSwas sold to TavetaInvestments (No.2) Ltd (TIL2). TIL2 was held by a solecorporate shareholder, Taveta Investments Ltd (TIL). SirPhilip’s wife, Lady Green, held an 88 per cent stake inTIL, with the remaining shares dispersed through anumber of minority shareholders.In 2013, after commencing discussions for the sale of

BHS with Paul Sutton, Sir Philip Green discovered thatMr Sutton was a convicted fraudster and serial bankruptand, although he continued negotiations for some time,ultimately terminated them. Subsequent negotiations wereheld with Dominic Chappell, a former professional racingdriver who also had a history of multiple bankruptcies.13

Chappell proposed to acquire BHS through his investmentvehicle RAL, and the deal was concluded on 11 March2015. Just over a year later, on 25 March 2016, BHS wasput into administration—11,000 workers were maderedundant and the pension funds were reported to be £571million in deficit.In February 2017 a deal was agreed with the Pensions

Regulator by which Sir Philip Green contributed £363million towards a new pension fund for the benefit ofBHS pensioners. This had the effect of enabling BHSpensioners either to move their pension to a new schemeor, if their pension entitlement was less than £18,000, towithdraw their entitlement as a lump sum. The newscheme is to provide benefits which are higher than thosewhich would have been achievable if the original schemeshad been transferred to the Pension Protection Fund (sinceit avoids its automatic 10 per cent discount from initialentitlements) but approximately 12 per cent lower thanwould have been achieved if BHS had met its pensionobligations in full.14

Dividend paymentsIn essence, the charge levelled against Sir Philip Green15

is one of unjust enrichment. BHS paid out £423 millionin the 2002–2004 period. This level of dividend payment,together with the trading losses and increasing pensiondeficit in the years that followed, left BHS in a far weakerposition by 2014 than it had been in 2000 when acquiredby Sir Philip Green.

In addition, the select committee noted that Sir Philipwas able to boost profitability in the short term throughsale and leaseback of certain BHS stores to a companyowned by Lady Green.16 Although this gave rise to acapital receipt by BHS, and hence short-term profitability,there was an ongoing additional annual cost in terms ofrental payments of £153 million, which depressed futureprofit. It was also tax efficient, given the family companyinvolved was registered in Jersey. Ultimately, theseproperties were sold back to BHS as part of the RALacquisition.The rules on dividend payments are clearly set out both

in common law and ss.829–853 Companies Act 2006.17

Dividends can only be paid out of distributable reservesif the preceding year’s accounts indicate there aresufficient reserves to do so. If such accounts do not sodemonstrate, then interim accounts have to be specificallyprepared which establish that sufficient distributablereserves are available.Accordingly, no dividend payments can be made if

there is a deficit on shareholders’ funds on the balancesheet (i.e. arising from accumulated losses) until suchtime as the deficit is eliminated either by a reduction ofcapital or injection of additional capital. Overlaying thesetechnical rules are the directors’ fiduciary obligations setout in s.172 Companies Act 2006, requiring each directorto act in a way in which he/she considers, in good faith,would be most likely to promote the success of thecompany for the benefit of its members as a whole, andhaving regard to the factors set out in that section, whichinclude the likely consequences of any decision in thelong term, the interests of company employees and themaintenance of “high standards of business conduct”.18

Clearly, just because a company has distributablereserves does not mean that it is wise or sensible to payout all such reserves as dividends: the competing needsof the business for capital investment and additionalworking capital have to be taken into account by thedirectors in any decision to recommend or pay a dividend.Turning to the BHS case, no issue has ever been raised

as to the validity of the payment of the dividend from adistributable reserves perspective. The focus of the selectcommittee’s interest was principally on the wisdom ofthe payments given the subsequent administration of BHS.When viewing this objectively, there is no basis toconclude that Sir Philip Green did anything unlawful or,indeed, at the relevant time, inappropriate. Clearly, inretrospect, the payment of these extremely large dividendswas unwise but, at the time, BHS was a profitablecompany, its finances appeared stable and there was noreason to anticipate its future financial troubles.

13Chappell claims that he was hired by Sutton to work on his bid for BHS. Sutton, on the other hand, claimed that he was only employed as Chappell’s driver in anarrangement intended to compensate Sutton for money lost in a failed property development run by Chappell.14 “Sir Philip Green strikes BHS pension deal with regulator”, BBC News, 28 February 2017.15Throughout the BHS Report references are made to Sir Philip Green. Strictly this is not always accurate since, in a number of cases, the references should be to the relevantGreen family-owned company—see the corporate structure chart at Fig.4, para 116 of the BHS Report (25 July 2016), Fig.4, para.116. To be more readable this articleadopts a similar convention.16BHS Report (25 July 2016), para.15.17At the time the dividends were paid, the Companies Act 1985 was in force, but the rules were essentially the same.18Companies Act 2006 s.172(i)(a)–(f). These specific factors to be taken into account were not in force at the relevant time that the dividends were paid. The law at thattime relied on equitable rather than statutory rules which required directors to act generally in the best interests of the company.

Analysis 181


The duty to promote the success of the company isprimarily a subjective duty and, provided that the directorshonestly believe that payment of dividends was inaccordance with s.172, then that is normally enough.19, 20

There is, however, an overriding objective element to theduty so that if no director could have reasonably takenthe view that the payment of the dividend promoted thesuccess of the company, the court could intervene.21

Generally, however, a court will not attempt tosecond-guess a director’s commercial decision and, inreviewing the appropriateness of any decision, will takeinto account the circumstances at the relevant timereasonably apparent to the director (without reference tofuture events). Given the gap between the payments ofthe dividends under scrutiny (the last of which was in2004) and the administration of BHS in 2016, there isvery little to suggest that the directors of BHS would beconsidered to be in breach of their fiduciary duties.Furthermore, even if the directors had been in breach,there would have been few implications under Englishlaw. A director’s fiduciary duties are owed to thecompany alone. In reality, however, absent solvencyissues, where a company is owned by a single shareholder,attempting to differentiate between the interests of thecompany and that shareholder is largely theoretical.Accordingly, it would be for the company (or the

owning shareholder through the statutory derivativeaction22 process) to bring any claim against the directorsfor breach of duty. Clearly where the director andshareholder is, in effect, the same person, no proceedingswill be brought. Of course, the position might have beenentirely different if the dividends had been paid shortlyprior to BHS going into administration.23 Not only wouldthe payment of the dividend be capable of being clawedback under the Insolvency Act 1986,24 but theadministrator or liquidator could bring a claim in thecompany’s name against the directors for breach of theirfiduciary duties.25 This, however, was not the case here.

Pension schemesThe second area on which the select committee focusedwas the pension schemes. BHS has two defined benefitpension schemes (i.e. schemes that pay out a pension ofa pre-determined amount on retirement, normally related

to a proportion of the retiree’s final salary). When BHSwas acquired by Sir Philip Green in 2000 the pensionschemes had a small surplus of £45 million. At the timeof BHS’s administration the schemes were collectively£345million in deficit. The pension schemes had entereda period of formal assessment for entry into thecollectively funded Pension Protection Fund (PPF).26 Thisalso triggered a debt for the deficit calculated on a buy-outbasis under s.75 Pensions Act 1995 (i.e. for the cost ofpurchasing annuities to guarantee the benefit formembers) generating an increased deficit of £571million.The reasons for the increase in the deficit over the

period from 2000 were not addressed by the selectcommittee in their report, but the BHS schemes were notalone in seeing the rise of a significant deficit. Thebanking crisis in 2008 and the subsequent fall in the valueof equities and bond yields, together with the rise in lifeexpectancy, put pressure on all final salary schemes,including BHS’s, over this period. The select committeedid note that the BHS deficit rose disproportionatelyhigher than in comparable schemes.27

Throughout this period there had been ongoingdiscussions with the trustees of the pension schemes aboutBHS making additional contributions to reduce andeventually eliminate the deficit. By 2009, the deficit hadrisen to £166 million (£7 million in 2006),28 but thetrustees’ continuing discussions with the company provedfutile and BHS refused to make significant additionalcontributions. On the basis of the annual contributionsthen made, the deficit would have taken 12½ years to beeliminated in 2009 and 23 years in 2012.29 The medianfor other company schemes was eight years. Indeed, suchwas the concern over the lack of funding, the PensionRegulator (tPR) had commenced an investigation into theposition.30

In 2013, a restructuring of the BHS pension scheme(codenamed “Project Thor”) was proposed: TIL2, theholding company of BHS, would make a one-offcontribution of £54 million and currently employedscheme members would be transferred to a new schemewith lower pension entitlements, while the existingscheme (comprising retired and non-consentingmembers)would be taken over by the PPF. In essence, scheme

19 See Re Smith and Fawcett Ltd [1942] Ch. 304 CA.20Companies Act 2006 s.170(4) states that the codified general duties of directors under the Companies Act 2006 are to be interpreted and applied in the same way as thecommon law rules or equitable principles.21Charterbridge Corp Ltd v Lloyds Bank Ltd [1970] Ch. 72 Ch D at 74.22A derivative action is one brought on behalf of the company by a shareholder where the board refuses to do so. The procedure is set out in ss.260–264 Companies Act2006 and requires leave of the court.23The cases indicate that the company must be on the verge of insolvency before a court will intervene. A risk of insolvency is not enough. A helpful exposition of the lawis set out in paragraphs 191 and 192 of the Taveta Opinion, paras 191 and 192.24Under s.238 Insolvency Act 1986 transactions at an undervalue can be set aside and the provisions of s.214 (wrongful trading) imposes personal liability on directors fordebts of a company in certain circumstances.25As soon as it appears that a company has solvency issues then the duties of directors are focused towards creditors’ interests rather than shareholders’:West MerciaSafetyware Ltd v Dodd (1988) 4 B.C.C. 30 CSA (Civ Div). This duty is expressly preserved by s.172(3), Companies Act 2006.26The Pension Protection Fund is a scheme funded by the Government and levies payable by all eligible pension funds to provide compensation to members of definedbenefit pension schemes where the relevant employer goes into insolvent liquidation and there are insufficient assets within the scheme to cover the level of compensationthat would otherwise be payable by the PPF. The amount of compensation payable is usually significantly less than members would have received if the employer hadremained solvent. See http://www.pensionprotectionfund.org.uk [Accessed 5 April 2017].27BHS Report (25 July 2016), para.22 and n.43, based on tPR, Scheme Funding Statistics (May 2014).28BHS Report (25 July 2016), para.19 and Table 229BHS Report (25 July 2016), para.23.30BHS Report (25 July 2016), para.22



members would bear three-quarters of the cost of thepensions restructuring. Given the nature of the transaction,the restructuring was put before tPR for approval.In January 2013, Project Thor was put on hold—the

select committee believed that the real reason underlyingthis decision was the investigation being carried out bytPR as to whether the “moral hazard” provisions containedin the Pensions Act 2004 would produce a better resultfor the PPF and Sir Philip’s unwillingness to divulge therequested information.31 A detailed analysis of this areaof the law is outside the scope of this article but, inessence, these provisions give tPR power to issue aContribution Notice or a Financial Support Directionunder s.38 and s.43 Pensions Act 2004, respectively. AContribution Notice requires a specified amount to bepaid into the pension scheme by an individual or acompany where tPR has concluded there is a deliberateattempt to prevent the recovery of the debt either to thepension fund or the PPF, or an act or deliberate failure toact has detrimentally affected in a material way thelikelihood of the accrued scheme benefits being received.32

A Contribution Notice can be imposed in respect of anunderfunded scheme on an employer or person33

“connected” with or “associated” to34 an employer, suchas controlling shareholders and other companies directlyor indirectly under common control.35AFinancial SupportDirection does not require any “misconduct” and, like aContribution Notice, can be served on connected andassociated persons, but not on individuals. The sponsoringemployer must be either a service company36 or beinsufficiently resourced37 and the Direction may be givento former employers.38 In both cases tPR must be of theopinion that it is reasonable to impose the Notice orDirection having regard to the factors set out in the Act,which broadly include the degree of connection whichthe entity has with the scheme, the financial circumstancesof the person, any benefits the person has received froman employer or the scheme and, in the case ofContribution Notices, the purpose of the particular act orfailure to act, to prevent the recovery of the debt.39

Accordingly, TIL2 and TIL would probably be treatedas connected with BHS given that all were under controlof the same person (in this case, Lady Green). Sir PhilipGreen and his wife could have a Contribution Notice (but

not a Financial Support Direction) imposed on them ifthe requirements of that section were met, given that LadyGreen is an associate of BHS by virtue of her indirectcontrol and Sir Philip Green, as her husband, is treatedas similarly associated. Nor does it matter that, followingthe sale to RAL, such persons are no longer associated.Under both the Contribution Notice and the FinancialSupport Direction, tPR is able to look back (six years inthe case of a Notice and two years in the case of aDirection), so that if the connection was present at thattime such persons fall within the ambit of the section.40

Notwithstanding the settlement that was ultimatelyagreed with tPR, it would have been difficult for them todemonstrate, in relation to the sale to RAL, that TIL2 ormembers of its group acted deliberately to avoid theirobligations to the pension schemes. It would have to showthat the sale was a sham or a sale at an undervalue toRAL41 and, even if it could do this, on the basis of theBonas case,42 any Contribution Notice would be limitedto the amount of such undervalue. More probably, tPRwould have focused on a Financial Support Direction onBHS Ltd, the employer, TIL2 or any company within thatgroup on the basis that it is reasonable to do.43

Pausing there, at the time of the sale to RAL there were,following the abandonment of Project Thor, nosubstantive arrangements in place for the reduction of thepension scheme’s current deficit, nor had tPR served anyContribution Notice or Financial Support Direction. Oneof the reasons for the lack of progress was that tPR lackedthe information needed to make a decision. It had notexercised its statutory information-gathering powers andrelied on the informal route of the trustees requesting theinformation from the company. The reasonableness testwhich tPR is required to apply in determining whether toissue a Contribution Notice or a Financial SupportDirection necessitates tPR having financial informationrelating to the company and the persons that may be thesubject of any Notice or Direction.This highlights the role that tPR undertakes in relation

to schemes. In its evidence to the Select Committee, tPRmade it clear that its purpose was more regulatory innature than supervisory, and that its moral hazardprovisions were designed in part to “act as a deterrent topoor behaviours”.44 tPR has, on a limited number of

31BHS Report (25 July 2016), para.35.32 It is difficult to establish these grounds, and the amount of recovery may be limited: see Bonas Group Pension Scheme;Michael Van de Wiele NV v the Pensions Regulator(17 January 2011), Warren J, Upper Tribunal (Tax and Chancery Chamber), FS/2010/0007. See http://www.bailii.org/uk/cases/UKUT/TCC/2011/B3.html [Accessed 5 April2017]. tPR sought a Contribution Notice for £5 million and settled at £60,000.33An individual can only be made the subject of a Financial Support Direction if he is an associate of an individual that is an employer, which is not the case here.34These terms are given the meaning set out in ss.249 and 435 Insolvency Act 1986.35 For these purposes a holding of more than a third of the voting power at a general meeting will constitute control: s.435(10), Insolvency Act 1986.36Defined as meaning that the company’s turnover is solely or principally derived from amounts charged for the provision of the services of its employees to other membersof its group: s.44(2) Pension Act 2004.37Defined as meaning that net assets of the company are less than 50% of its share of the buy-out deficit of the scheme and where any connected or associated companiesin its group do have sufficient net assets to make up the difference: s.44(3) Pensions Act 2004.38A helpful summary of tPR’s powers are set out in the Clearance Guidance published by tPR and set out at http://www.thepensionsregulator.gov.uk/guidance/guidance-clearance.aspx [Accessed 5 April 2017].39 Pensions Act 2004 s.38(7), s.43(7).40 Pensions Act 2004 ss.38(5)(c) and 43(9), respectively.41 See discussion under section “Sale of BHS”.42See Bonas Group Pension Scheme (17 January 2011), Upper Tribunal (Tax and Chancery Chamber), FS/2010/0007, http://www.bailii.org/uk/cases/UKUT/TCC/2011/B3.html [Accessed 5 April 2017].43This analysis assumes that BHS Ltd had net assets which were less than 50 per cent of the buy-out deficit in the scheme. Based on its latest available accounts (lastpublished as of 2014), this undoubtedly seems to be the case.44Letter from tPR to Frank Field MP, dated 24 June 2016.

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occasions, had success in implementing its moral hazardprovisions, but it can take a number of years before itactually invokes such powers. There is no requirementfor either buyer or seller to seek tPR approval prior toany sale being made, although either party can apply forvoluntary clearance. Voluntary clearance is, however,rarely requested as there is no statutory timetable orprocess which sets out how such clearance may beobtained. tPR made it clear that, without substantialadditional funding, it would be unable to adopt a moreinterventionist approach.The select committee were, however, critical of tPR

as “reactive” and, “slow-moving” and for not showing“more urgency”45 in engaging with BHS and the pensionscheme trustees. However, the select committee did notaccept Sir Philip Green’s contention that inaction by tPRwas at the heart of the failure to reach a solution on thefunding of the pension schemes.The sale of BHS, particularly from the pensions

perspective, was remarkable. On a conventional saleinvolving an underfunded defined benefit scheme, apurchaser would carry out considerable due diligence soas to quantify the size of the deficit46 and understand thelevel of risk involved, in particular as to whether tPRcould exercise its moral hazard provisions at some timein the future. Part of this due diligence would commonlyinvolve discussions with the trustees and their views onthe purchaser’s covenant and future funding needs. Inaddition, there would be, as part of the sale and purchaseagreement, an appropriate allocation of risk between thebuyer and seller with the seller possibly agreeing areduction in price or providing an indemnity to underwritecertain additional contributions beingmade to the pensionfunds to reduce or eliminate any deficit.47

In BHS’s case RAL did instruct both Grant Thorntonand Olswang to review the pension arrangements, buttheir ability to do a thorough job was constrained, giventhe limited information made available to them and theirlack of access to the trustees or their advisers, such thatOlswang noted that their “analysis and advice is limitedto the types of issue which arise on a transaction of thissort”.48 In effect, Olswang were saying that in absence ofrelevant information their observations were purelytheoretical. Indeed, Olswang went further:

“we are not able to give any material comfort… thatit will be possible to avoid an insolvency postcompletion given the sheer size of the pensionsdeficit.”49

This report would have given most purchasers pause forthought, but not RAL. Notwithstanding the absence ofpension due diligence, the lack of any comprehensivepension warranties and the inability to communicate withthe trustees or their advisers, RAL proceeded with thesale.So why did RAL proceed when no sensible purchaser

would have done so? The answer appears to be eitherhopeless optimism or because it had nothing to lose giventhat it was not devoting any of its own resources to thepurchase.Olswang concluded its report with:

“Finally, we note however the commercial comfortthat the directors are taking from the representationsfrom Sir Philip Green that he will continue to supportthe business post Completion and that he has a bigcommercial interest in ensuring that the Groupcontinues to trade (given the large concessionarrangements with Dorothy Perkins, Wallis andEvans) and also due to the reputational risk he isexposed to should BHS fail. We do not doubt thesecommercial matters and note that great comfortcould be drawn from such.That being said, there is no legal obligation on

him to do so.”50

Going back to the original question posed: did Sir PhilipGreen or TIL2 actually breach any law? The answerappears to be no. tPR had not issued a s.7251 notice toobtain information it required for any decision on whetherto exercise its moral hazard provisions, preferring insteadto use the more informal route of the trustees requestingthe information fromBHS. Nor was tPR’s consent neededbefore any sale was made. On the basis of informationprovided to the select committee, Sir Philip Green(although acting in a dilatory and cavalier manner by notengaging with the trustees or putting in place a realisticplan for addressing the deficit) was not acting unlawfully.Given the absence of any legal liability, what are the

lessons that arise from the collapse of BHS from apensions perspective? First, not surprisingly, the systemof regulation is not designed to deal with a situation inwhich a buyer is prepared to take a disproportionateamount of risk. Most buyers in a similar situation to RALwould have withdrawn from the sale or substantiallyreadjusted the economics to ensure the pension fundswere put on a more stable financial footing. Having saidthat, why should the members of pension schemes (andthe PPF levy-payers) suffer prejudice attributable to thenaivety or recklessness of a buyer? Indeed, the Instituteof Directors has recently called for tPR to be able to

45BHS Report (25 July 2016), para.49.46There is a statutory requirement in s.224 Pensions Act 2004 to have an actuarial valuation conducted every three years on a pension fund’s assets. Outside this period,trustees may commission a more informal valuation but a purchaser would have to conduct due diligence to establish the level of deficit at the time of purchase.47The Sale and Purchase Agreement that was signed on 11 March 2015, provided a minimal level of warranty protection on the pension schemes.48Olswang Letter, dated 7 March 2015 to Swiss Rock Plc and RAL.49Olswang Letter, dated 7 March 2015 to Swiss Rock Plc and RAL.50Olswang Letter, dated 7 March 2015 to Swiss Rock Plc and RAL. Of course, this is a lawyer’s way of saying “you must be mad to go ahead but you are the businesspersonand understand risk better than me”.51Pensions Act 2004 s.72 gives tPR the right to require trustees, advisers or employers or any other person appearing to tPR as having relevant information to produce suchinformation to it as set out in the relevant notice served under that section.



prevent acquisitions if this would result in materialprejudice to the relevant pension schemes.52 Furthermore,this sentiment has been recognised by the chief executiveof tPR, who has asked for the power to be notified of,and for rights to intervene on, sales of companies withan underfunded pension scheme.53

Enhancing the powers of tPR may be the way to go,but with twomajor caveats. First, tPRwill need to changeculturally from a reactive, paper-driven regulator to onewhich is more proactive, swift and commercially savvy.The challenge is that if any formal notification processis unduly prolonged and administratively burdensomethen it will adversely impact upon the M & A process.Indeed, many sales are beneficial for pension schememembers since they enable the business to be drivenforward by a new owner who is often prepared to makeinvestments that the current seller would not otherwisemake, and give trustees an opportunity to obtain anenhanced contribution as the price of obtaining theirconsent to any weakened covenant that may be associatedwith the new buyer.Secondly, this first objective cannot be achieved unless

it is properly funded by central government, sincesignificant recruitment will be needed in order to ensurethat a streamlined and efficient process is introduced. Onewould have thought that such additional investmentshould, in the scheme of things, be relativelymodest, andgiven that it might well save future claims on the PPF,be cost-efficient. Currently, the PPF does not involve acost to the taxpayer given its nature of funding but, giventhe adverse social impact for pensioners of schemesentering the PPF, there is surely a compelling case forcentral government to resource the additional fundsnecessary for tPR to peform an enhanced role. Havingsaid all that, it will take a number of years before tPR willbe ready and able to fulfil this role in a manner whichdoes not prejudice the implementation of ordinary coursecorporate activity.The secondmajor area that requires reform is the ability

of the trustees and tPR to get information from acompany. Again, the system is not designed to deal withthe situation where a company simply refuses to have asubstantive discussion with the trustees. This is a veryrare situation, given that a constructive dialogue betweenthe trustees and company is normally consideredmutuallybeneficial. But, if this is not the case, the trustees’ roomfor manoeuvre is limited. The trustees do have a coupleof “nuclear weapons”, including altering the investmentstrategy of the fund to more secure investments (fixedinterest rate instruments, gilts. etc.), to reflect the weakercovenant of the company or buyer, which will have theimpact of increasing the deficit given the lower rate of

return. Equally, the trustees can, in some cases, requireadditional contributions from the employer or trigger awinding up of the fund. The problem is that each of these“solutions” can damage the scheme and its membersmorethan assist them by economically prejudicing the companyand hence its ability to trade profitably and make futurecontributions into the scheme.So what is the solution? If tPR does get the power to

vet sales for their impact on pension schemes then, inconsultation with the trustees, it will be able to addressthe issue arising from lack of engagement. However,where no sale is proposed, it would seem to make sensethat the trustees are granted some statutory rights (perhapsa more tailored version of tPR’s rights) to obtaininformation from the company so at least they can makeinformed decisions about the exercise of the powers thatthey do currently have.For the reasons stated above, it would be unfair, unwise

and impractical to put the responsibility solely on tPR toensure that sales of companies with an underfundedpension scheme only take place where there is noprejudice to its scheme members. The real solution, it issubmitted, lies in empowering the trustees (or, moreradically, the employees generally) to bring claims shoulddirectors fail in their responsibilities. This is discussed inthe section “Proposals for Reform” below).

The sale of BHSThe implication from the BHS Report was that the saleof BHS to RAL was not a bona fide transaction and wasprincipally done in order for the Group to avoid itsresponsibilities to the BHS pension funds. Indeed, itschairman, Frank Field, has written to, and met with, theSerious Fraud Office, encouraging them to investigatewhether money was moved in such a way as to attemptto mislead people into believing Mr Chappell was acredible buyer for BHS.54

On what basis could one claim that the sale of BHS toRAL was not a bona fide transaction? It is fair to say thatthe sale looked extraordinary in a number of ways. First,the buyer was represented by Dominic Chappell, amultiple bankrupt with no retail experience. Secondly,despite numerous assurances to the contrary, RAL wasnever able to produce the £35 million of equity55 that ithad promised to put into BHS. Indeed, the only fundingthat RALwas able to obtain was a £5million loan to RALfrom Allied Commercial Exporters on the day beforesigning.56 The terms of such financing werepunitive—notwithstanding that it was fully secured on aBHS distribution centre, the total redemption of the loanwas for £6 million, £2 million of which was due a week

52Lady Judge, the chairwoman of the Institute of Directors and former chair of the Pension Protection Fund, believes that consent should be required for sale of companieswith a turnover of at least £200 million and where the pension fund covers more than 2000 employees: Guardian, 10 October 2016.53Financial Times, 12 August, 2016. Interestingly, in her evidence to the select committee, the chief executive of tPR said that she thought it “disproportionate” for clearanceto be obtained prior to any sale.54Guardian, 27 July 2016.55“From an early stage, RAL’s proposal came with a substantial commitment to fund BHS. On 12 December 2014, Dominic Chappell talked his plans through with AnthonyGutman of Goldman Sachs. RAL would provide £120 million of working capital and £35 million of equity” (BHS Report (25 July 2016), para.90, referring to an email fromDominic Chappel to Anthony Gutman on 1 August 2015: “SwissRock to invest £35 million clean, unencumbered equity funds into BHS”).56BHS Report (25 July 2016), paras 99–104.

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after the sale and the remainder twomonths later. Arcadia,a member of the Taveta Group, came to the rescue on theoutstanding amounts by guaranteeing an HSBC loan toBHS and providing other loans and cash in the amountof £10 million.57 As the select committee noted “[SirPhilip] was both sides of the deal”.58

Thirdly, RAL did not take the steps that any sensiblebuyer would have taken on the sale. As discussedpreviously, and despite the warnings of its advisers, itproceeded without any visibility of the true extent of thesize of the deficit and in ignorance of whether a revitalisedProject Thor could be achieved. The select committeeconcluded that:

“[Dominic Chappell and RAL] … were manifestlyunsuitable owners of BHS. It is inconceivable thatsomeone with Sir Philip Green’s experienceseriously considered otherwise.”59

Does all this evidence amount to a sham or fraudulenttransaction? Clearly the evidence does not paint a positivepicture of the process or of the individuals engaged in it.In reality, the only basis for a charge to be brought wouldbe the common law offence of conspiracy to defraud but,absent some other compelling evidence, it will be difficultto establish any such case against Sir Philip Green or hisgroup companies.The fact that Chappell and RAL were men of straw

does raise its own issues as to the substance of thetransaction, but it is in no way conclusive. In respect ofthe funding of the transaction, it is not uncommon for aseller’s financial advisers to provide “stapled financing”to a buyer in order to facilitate the sale. Admittedly, thisis one step further, but it is not unheard of for sellers toprovide financial support to a buyer to facilitate a sale,whether in the form of guarantees, loan notes or evenretaining an equity stake, and the select committee wereunduly critical of Sir Philip Green in this respect. Finally,a seller has no duty to a buyer to ensure that it disclosesall relevant information or to ensure that its employeesor pensioners would be looked after following a sale. Nordoes the seller have to ensure it sells to a competent orknowledgeable buyer. Caveat emptor—let the buyerbeware—is the underlying principle.In conclusion, given the high burden of proof required

in any criminal prosecution, the necessary element ofdishonesty combined with the lack of any substantiveevidence means that any prosecution of Sir Philip Greenfor his involvement in the BHS sale seems, at best, a veryremote possibility.

Directors’ duties and corporate governanceThe select committee reserved its most damagingcomments for the issues surrounding the lack of corporategovernance on the BHS sale. The chairman of TIL2 wasLord Grabiner, a leading silk. The board had delegatedto a sub-committee the power to oversee the sale.Unusually, this sub-committee did not have specificparameters on its powers or the requirement to reportback to the main board with its recommendations. Thisis unusual (but not unlawful) because directors are notable to abrogate their responsibilities to a third person,but delegation is permissible with appropriate supervisionand appropriate constraints on a sub-committee’s poweris usually demonstrative of the directors being on the rightside of the line.The chairman and the board played no part in the sale,

and Lord Grabiner did not even know the identity of thebuyer. The select committee commented on the“remarkably docile attitude for a Chairman of the board”,60

particularly in relation to Lord Grabiner’s statement thatthe presence of all the non-executive directors would nothave made any difference to the decision as he “wouldnot be in a position to second guess the views of thenegotiators”.61

Michael Todd QC in the Taveta Opinion emphasisesthat the duties of the directors of TIL2 are owed to thecompany alone and, given that it was a wholly ownedsubsidiary, its sole shareholder was able to direct thedirectors to sign the Sale and Purchase Agreement withRAL or to ratify their decision to do. Accordingly, if thedirectors of TIL2 had taken the view that the sale to RALwas contrary to its interests, the only option would havebeen for them to resign and the sale would have proceededanyway.62

Both Michael Todd QC and Lord Grabiner seem to besaying that, given the chairman could have no influenceon the outcome of any decision relating to the sale ofBHS, it was quite legitimate for him (and the rest of theboard) to take no interest in it. Is this right? It is true thatLord Grabiner’s duties were owed solely to TIL2, thatthe sole shareholder of the company wanted the sale toproceed, and that if a director voted against the sale hecould be removed and replaced by one that would. Havingsaid that, should not a director, in relation to such a highprofile sale, have put himself in the position where hecould ask the question “what steps have been taken toavoid huge reputational damage to the company and allthose associated with it if the sale to this particular buyerdoes not work out in the short term?” In part, this wouldinvolve a discussion around the credibility of the buyerand his business plan, and the implications for TIL2 ifBHS failed shortly after the sale, measured against theeconomic and reputational damage to TIL2 if the sale did

57BHS Report (25 July 2016), para.101.58BHS Report (25 July 2016), para.102.59BHS Report (25 July 2016), para.112.60BHS Report (25 July 2016), para.132.61Lord Grabiner’s letter to Frank Field and Iain Wright dated 6 July 2016, para.15.62Taveta Opinion paras 89–104, 132–139; see BHS Report (25 July 2016), para.136.



not proceed and BHSwas, in any event, put into insolventliquidation. This is an issue which the directors of TIL2should have addressed and, far from “second guess[ing]the views of the negotiators”,63 it is a proper fulfilmentof a non-executive director’s duty to hold managementto account. If a director, having asked this question, doesnot receive a satisfactory answer then while he cannotstop the sale from proceeding, he could have his concernsminuted and, as a last resort, resign. In any event, he willhave done his duty to look after the interests of thecompany.Michael Todd QC was also of the opinion that “the

duties owed by TIL2’s directors to TIL2 were to obtainthe best price reasonably obtainable for TIL2 assets,namely shares in [BHS]”.64 Again, while this is the usualformulation of the duty on a sale, it misses out a keyingredient: it should have added to the end “in a mannerthat will not result in immense reputational damage tothe company”. The economics are key on any sale in theformulation of a director’s duties but they are not the soleingredient.65 The risks involved in a sale to RALwere notdiscussed by the full board, and while no claim will everbe made by TIL2 against its directors, that, in itself, isnot a sufficient basis for directors to abrogate their dutiesto a third person, in this case, the sub-committee.Accordingly, the Select Committee’s comment that “[LordGrabiner] was content to provide a veneer ofestablishment credibility to the group while happilydisengaging from the key decisions he had a responsibilityto scrutinise”, while harshly put, is probably fair.66

However, it is a step too far to say the weakness incorporate governance contributed substantially to BHS’sdemise. The UK Corporate Governance Code does notapply to private companies—there is no need to have anyindependent directors, or, indeed, any requirement fornon-executive directors to hold management to account.Lord Grabiner was not there for any reason other thanthe fact that Sir Philip Green wanted him there. No doubt,there were other good commercial reasons for LordGrabiner being on the board of TIL2, but company lawwas not one of them.Furthermore, it demonstrates a misunderstanding on

behalf of the select committee of the reason underlyingcorporate governance. It is there to protect the interestsof the company and to ensure, in public companies, thatshareholders are given an opportunity to hold the directorsto account. All of this falls away when you have acompany where there is only one shareholder (i.e. SirPhilip Green and his family). The only claimswhich couldbe made against the directors of the sellers (on the basisthat this company remained solvent) were by Sir PhilipGreen. Equally, he could ratify any decision that such

directors made, whether or not such decisions weretechnically in the best interests of the company. From acorporate law perspective, in reality, the interests of SirPhilip Green and TIL2 (at least while solvent) could betreated as synonymous.67

If the directors did not approve the sale for any reasonhe could have removed them or passed a resolutioninstructing them to approve the sale. Accordingly, toargue that poor corporate governance contributed toBHS’s demise is to miss the point that no minimum levelof corporate governance was so required. This raises thequestion: should it be? To impose some type of corporategovernance standard on private companies would be, itis submitted, wholly impracticable, resulting in anunnecessary administrative burden, even for large privatecompanies, with little commensurate benefit consideringthe current (and sensible) state of company law. In anyevent, the UK Corporate Governance Code (the Code) ispredicated on the basis of “comply or explain”, i.e. publiccompanies are free to deviate from the Code but mustcome up with a plausible explanation that is acceptableto their shareholders and the market more generally. Suchan approach does not work where there is a singleshareholder since there is no constituency to ensure thespirit of the Code would be upheld.In addition, who would ensure that whichever code

was in force was followed? The UK CorporateGovernance Code works because there is a regulatorybody, the FCA, who stands behind it. It wouldmake hugedemands on any regulator to ensure that privatecompanies were in compliance.

Proposals for reformIn light of TIL2 and Sir Philip Green not having breachedany law relating to the manner of the sale of BHS andtheir dealings with its pension schemes, what reformsmay be necessary to ensure that a similar problem doesnot arise in the future?In the parliamentary debate to discuss the BHS Report,

a whole host of possible areas for reform were raised,including constraints on payments of dividends for acompany with a pension fund in deficit, compulsoryengagement by the company with the trustees and tPR,extension of the CODE to large private companies, andmore tailored director’s duties.68 At the outset we shouldacknowledge the legal maxim that “hard cases make badlaw”. The circumstances surrounding the sale of BHSwere extreme—no commerciallyminded purchaser wouldhave bought BHS on the terms that RAL negotiated.Accordingly, for reforms to be introduced solely tocapture a case akin to this would both be unnecessary and

63Lord Grabiner’s letter to Frank Field and Iain Wright dated 6 July 2016, para.15.64Taveta Opinion, para.102.65Apart from reputational issues, conditionality of any offer will also be key.66BHS Report (25 July 2016), para.13b. Lord Grabiner in his evidence to the committee disputes the disparaging remarks made about him. In particular, he says that if hehad been at the meeting he might well have asked if there was a realistic prospect of the buyer implementing a turnaround of BHS but he is confident from all that he hadheard he would have replied in the affirmative. See Lord Grabiner’s letter to Frank Field and Iain Wright dated 6 July 2016, para.15.67Under the Companies Act 2006 and common law, duties of directors are always owed to the company and not its shareholders. In reality the interests of the companyand its single shareholder will almost always coincide so that the legal distinction between the company and its single shareholder becomes largely theoretical.68 Jeremy Quin, Hansard, HC, Vol.615, cols 994–995 (20 October 2016).

Analysis 187


result in an unwarranted constraint on legitimate businessdealing which, itself, could adversely impact on thepension schemes of the companies so constrained.69 Onearea of reform that is required is to enhance the power oftPR in the manner as discussed above. However, againfor the reasons given, tPR cannot be the sole protector ofthe rights of members of a pension fund, the lead role onwhich more naturally falls to trustees.Where the true remedy may lie is to give trustees a

right to bring an action against the directors if decisionswere taken that did not promote the success of thecompany by virtue of the directors failing to take intoaccount their interests. Accordingly, this proposal doesnot seek to promote the interests of the pension fundahead of the company but argues that its interests are tobe considered as part of the overall company welfare. Itis a major change to allow trustees to bring a claim sincecurrently this can only be done by shareholders. Despitethis, no substantial legislative changes would be neededsince most of the mechanics are already present in theCompanies Act 2006. Section 172 Companies Act 2006requires directors to promote the success of the companyfor the benefit of the company as a whole having regardto, among other things, the interests of employees. Thefirst, relatively small, amendment would be to extends.172 to include pension fund members as well asemployees as a relevant factor.Clearly, there needs to be a balance between the

legitimate needs of business and those of the pensionfund, so any right for an action to be brought by trusteeson behalf of pension scheme members would need to becarefully constrained so not to create a litigants’ charterand avoid trustees putting unfair pressure on a companyto resort to litigation to illegitimately strengthen its ownnegotiating position. Any action by the trustees wouldnot be a personal claim against the directors but, it issuggested, would be derivative in nature (i.e. brought inthe name of the company). Accordingly, the nature of thedirector’s duty does not change: it remains to promotethe success of the company, but the necessity to take intoaccount the interests of the pension fund would have realteeth. There is a statutory process already in place underss.260–264 Companies Act 2006 in respect of derivativeactions by shareholders which could be adapted for claimsby trustees. In essence, before any claim could be brought,leave of the court would be necessary and the trusteeswould have to establish, on the balance of probabilities,that the claimwould promote the success of the company.For example, where there was a significant deficit on ascheme without any substantive plan to reduce it withina reasonable period, and the directors are declaring largedividends, it may well not be in the best interests of the

company for those payments to be made and the trusteeswould have a reasonable basis to get leave of the courtto challenge the making of such payments.There would need to be an additional amendment to

s.262 Companies Act 2006: since any cause of actionagainst the directors belongs to the company, it would beopen to the shareholders to ratify their acts which wouldmean that the company would lose the right to bring anyclaim. Indeed, the court is currently unable to give leavefor derivative action proceedings if the acts have been,or are capable of being, ratified by the shareholders.Accordingly, it would be necessary to amend the

section so that, unlike the shareholders’ statutoryderivative action, it would not be possible for shareholdersto ratify the decision and so prevent directors being heldto account. While this does, on the face of it, seemillogical—since it is the shareholders who control thecompany—there is legal precedent for this. Prior to therule in Foss v Harbottle70 being reconstituted by theCompanies Act 2006 and the introduction of a statutoryderivative action, there was a concept of “fraud on theminority” which effectively meant any wrongdoing bythose in control of the company could not simply beratified by those wrongdoers. The case law went on toestablish that the action in question could only be ratifiedby a majority vote of independent shareholders.71

Accordingly, the common law was prepared to interveneto avoid majority shareholders prejudicing a minority.This proposal is simply an extension of this principle, butwould need the current law on derivative action to bemodified for trustee claims to prevent ratification byshareholders. In addition, any recovery from the directorsfor loss to scheme members would be paid to thecompany, as it is the company’s loss not the pensionscheme’s, but this could be addressed by giving the courtpower to require any sums recovered to be paid directlyto the pension scheme if it was thought fair andappropriate to do so. In respect of the trustees’ legal costs,since this is the company’s action it should be thecompany that pays (provided the trustees can establish aprima facie case). No doubt, these changes would increasethe premiums payable for directors and officers insurancebut this is part of the cost of ensuring that pensionschemes are properly funded.The situation becomes more complicated on a sale

because it will not be the directors of the company withthe pension schemewhomake the decision but its holdingcompany. Is it reasonable for the directors of the sellerto have regard to the interest of the pensions scheme ofthe target in making their decision to sell? This would bea major change to directors’ duties, since never beforehave they been owed to anyone other than the companyto whom they are appointed. Perhaps one can argue that

69See also Alastair Hudson, “BHS and the reform of Company Law” (2016) 37 Company Lawyer 364, where the author makes the case for wholesale changes to the existingframework involving among other things, extending financial assistance back to private companies, restricting payment of dividends to earned income, and the introductionof supervisory boards. Putting the political agenda to one side (the author drafted the Labour Party proposals for reform) these changes are largely unnecessary, fail toaddress the pensions issues and would amount to a significant interference with legitimate business activity.70Foss v Harbottle (1843) 2 Hare 461. This case established the rule that if a wrong is done to a company, then it is the company who is the proper party to bringing anaction.71 Smith v Croft (No.2) [1988] Ch. 114 Ch D.



the moral hazard powers of tPR are sufficient in ensuringthat directors of the seller do keep in mind the interestsof the target pension scheme. However, given the socialimportance of appropriately funded pension schemes andthe fact that the legislature has already recognised thatpersons related to an employer can have liability to fundpension schemes through tPR’s moral hazard provisions,it is not too far a jurisprudential jump to extend directors’duties in this manner.If this new derivative action was in place at the time

of BHS then, on the basis that the directors had failedsufficiently to take into account the interest of pensioners,Sir Philip Green (through his family companies) wouldnot have been able to ratify the action of the directorssince he and they would be beneficiaries of thewrongdoing. Perhaps Lord Grabiner and other membersof the TIL2 board would have acted differently if theyknew that an action could be brought against thempersonally on behalf of pensioners if they did not exercisetheir duties diligently and reflect upon the impact of thesale on the pension schemes.No doubt, there will be many who would see such a

change in the law as an unwarranted interference withthe ability of companies to do business. That is, of course,to some extent true, but it is a legitimate interventiongiven the grave consequences that can develop whendirectors ignore the interests of a pension scheme. Themotivation behind this is not to mire businesspeople in awave of litigation—just to provide trustees with theopportunity to bring a claim in extreme circumstances inorder to keep damaging behaviour in check.

ConclusionReturning to the title of this article, is Sir Philip Green avillain or victim? The case for villainy hardly needs tobe made out—Sir Philip’s lack of interaction with thetrustees, the sale of BHS to a person who appearedpatently incapable of running a major retail business, andhis performance before the select committee seem tounequivocally point to a person who had little interest in

the true welfare of BHS pensioners. Sir Philip’s criticswould say the payment of £363 million was only wrungout of him once tPR had started enforcement proceedings,and his motivation was to save his knighthood. Even so,this is not the whole story, and an astute advocate couldmake a credible case for some leniency. First, as we haveseen, Sir Philip may have acted unwisely but nothing hedid was actually illegal. Secondly, the payment that hemade required considerable negotiation as it needed tPRand two sets of trustees to agree to it. No sensible businessperson would pay a sum only to have it later contestedby tPR or trustees as being insufficient. There is also somejustification in his claim that his treatment before theselect committee was unfair and biased. In the TavetaOpinion, Lord Pannick argues that if this process wassubject to judicial review it would be set aside forapparent bias for pre-determination. This was on the basisthat Frank Field both before and during the process madea comment “which would suggest to the reasonableobserver that Mr Field had made up his mind beforehaving all (or any) of the evidence”.72 Of course, suchproceedings are not subject to such judicial review, sothe basis of Lord Pannick’s argument is purely theoretical.It is certainly true that this select committee process didappear unnecessarily combative at times but this was, inpart, attributable to Sir Philip’s equally pugnacious style.The absolute privilege given to its proceedings does meanthat wild accusations can be made without fear of judicialconsequence.73 There is, however, a wider issue at stakehere, since if such proceedings are seen as unfairlyprejudiced against participants then the information givenby witnesses will be more circumspect and, indeed, thosenot capable of being required to attend (in particularindividuals resident abroad) will just stay away.74 In thiscase, it is difficult to feel too grave a sense of injusticeon Sir Philip’s part—the select committee can fairly saythat the hearings and related public profile associatedwith them did, at the very least, hold Sir Philip’s feet tothe flames and facilitate what turned out to be a sensiblesettlement for BHS pensioners.

72Taveta Opinion, para. 6(3).73 See generally, on the powers of a Select Committee, Joint Committee on Parliamentary Privilege, Report of Session 2013–2014, HL Paper 30, HC100.74 For example, Kraft Foods declined an invitation extended by the Business, Innovation and Skills Committee for the company’s CEO, Ms Irene Rosenfeld, to appear asa witness in connection with the committee’s report into its acquisition of Cadbury. The refusal cited, among other things, Kraft’s suspicion that the committee “desire[d]to have a ‘star witness’ towards whom ill-founded allegations and insults can be made…” (“Is Kraft Working for Cadbury?”, 12 May 2011). More recently, the Swiss-basedticket resale company Viagogo declined to send a representative to appear before the committee taking evidence on the business of online ticket sales (BBC News, 21 March2017).

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