The High Court has today handed down judgement on Sir Philip Green’s attempt to supress, by way of an injunction, parts of the Financial Reporting Council’s report on the 2014 pre-sale audit of BHS that contained “serious criticisms” of Taveta management.
The FRC levied its largest ever penalties on PWC and the senior partner responsible for the audit, Steve Denison, accepted a 15 year ban from audit work. Both admitted the misconduct.
Commenting on the judgement, Rt Hon Frank Field MP, Chair of the Work and Pensions Committee, said:
"Mr Justice Nicklin needed much wisdom to make this judgment. The high court has put aside the special pleading of a plaintiff whose financial resources are almost unlimited. In doing so, it has struck a judgment that such individuals have a very high test to meet if they are to succeed in gagging a regulator, whose report is of interest to so many citizens. We will be writing to the Insolvency Service to ask them to reopen their investigation into BHS’ former directors in light of the FRC’s findings".
The skeleton arguments put forward by Taveta and the FRC’s lawyers in open court give a clear indication of the seriousness of the FRC’s criticisms of Taveta management. In attempting to justify supressing parts of the FRC’s report, Taveta’s own public submission says the regulator’s findings contain "serious criticisms of the Claimant, its directors and its employees" publication of which could "give rise to serious and potentially irreparable harm to the Claimant and its directors and employees." It goes on to describe the "sustained assault" by the FRC on "the approach taken by management in preparing BHS’ 2014 financial statements", publication of which would have "a very real potential to damage the reputation of the individuals concerned, in particular Paul Budge as Group Director and Ms Hague as Group Financial Controller".
The FRC’s public submission describes the discredited audit carried out on financial statements prepared by BHS management, and states "after investigation, the Executive Counsel concluded that the basis of the going concern statement was obviously insufficient in the face of the pending sale; the assumptions behind the impairment review were not supported by evidence obtained by PWC and were not reasonable". In the court hearing Taveta’s QC suggested that description should be toned down to "optimistic". The FRC will shortly decide how it intends to publish its report.