Gateley : Former BHS owner convicted of failing to provide information to the Pensions Regulator

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Dominic Chappell, the former owner of BHS, has been found guilty on three counts of neglecting or refusing to provide information or documents to the Pensions Regulator (tPR), a criminal offence under the Pensions Act 2004 (the Act).

Background

In April 2016, tPR served notice on Mr Chappell (sent to his then solicitors) under section 72 of the Act requesting documents and information in relation to the acquisition of BHS by Retail Acquisition Limited (which was majority owned by Mr Chappell). This was followed by a further section 72 notice in May 2016 seeking further information about the sale of BHS.

A third section 72 notice was issued in February 2017 seeking information from Mr Chappell about his allegations that tPR had leaked confidential information about warning notices issued to him.

Despite repeated assurances (and being granted a number of extensions) Mr Chappell failed to provide the information requested in the first two section 72 notices. He did not respond to the third. TPR therefore decided to prosecute him for failing to respond to the three notices.

Under section 77 of the Act, a person who without reasonable excuse neglects or refuses to provide information or documents requested under a section 72 notice is guilty of a criminal offence and liable for a fine (of an unlimited amount).

The Court's decision

District Judge Ashworth did not consider Mr Chappell's explanations credible and found him guilty of all three charges. He rejected all of Mr Chappell's explanations, which included that: he did not receive the first two notices until a much later date; he no longer had access to any of the relevant information; he had left the matter in the hands of his solicitors, and he understood an interview which he had attended with tPR in August 2016 had supplanted the section 72 notices.

The sentencing hearing was due to take place on 19 January but we understand that the hearing has been deferred.

What information can the Regulator require?

TPR has wide information gathering powers under section 72 of the Act (as well as powers to inspect premises under section 73). Under section 72, tPR can request any information and copies of any documents 'relevant to the exercise of its functions'. It can also demand oral answers to questions.

The term 'relevant to the exercise of its functions' is very wide: 'relevant' is a low bar - it would seem to cover any connection, however small - and tPR's functions include all of its statutory powers (e.g. its moral hazard powers) and its statutory duties (e.g. reducing the risk of claims on the Pension Protection Fund). For example, in the context of BHS, tPR was able to request any information or documents that might be relevant to its deliberations as to whether there might be grounds for issuing a contribution notice or a financial support direction to any of the parties involved.

The information request can be specific and/or generic in nature. For example, in its first notice tPR asked Mr Chappell for certain specific information but also for copies of any or all documents in relation to the various entities involved in the takeover of BHS and transactions between them. We have seen section 72 notices requesting copies of all emails and other correspondence between parties to a transaction, and copies of all notes of meetings and telephone conversations etc.

Who can tPR request information from?

Again this is very wide. The powers apply to the parties to a pension scheme (i.e. the trustees and the employer), their advisers (though see below in relation to legal advisers), but also to any other person who appears to tPR to be a person holding or likely to hold information relevant to its functions. It can therefore (as in this case) include individual shareholders, directors etc.

Are there any exemptions?

A person cannot be required to incriminate themselves or their spouse/civil partner and so can refuse to answer questions or provide information which would do so. But this does not extend to documents that are requestedif they were created independent of tPR's investigations. Therefore, subject to below, documents that existed prior to tPR's investigations must be disclosed, even if they are incriminating.

The other key exemption is legal professional privilege: tPR cannot require disclosure of communications between a person or company and their legal advisers where those communications are made for the purposes of receiving legal advice or in connection with, or in contemplation of, legal proceedings.

Offences and penalties

The Act sets out various offences for failing to comply with tPR's requests for information under section 72, or for obstructing inspections of premises under section 73.

Where a person, without reasonable excuse, neglects or refuses to provide information requested, or delays or obstructs an inspection of premises, he is liable for an unlimited fine.

The more serious offences of intentionally and without reasonable excuse altering, suppressing, concealing or destroying relevant documents, or knowingly or recklessly providing false or misleading information, carry a maximum sentence of an unlimited fine, a two-year prison sentence, or both.

This blog post was written by Michael Collins. For further information, please contact:

Michael Collins, partner, Pensions

T: 0121 234 0236

E: [e-mail]