Magic circle firm Linklaters came under fire in parliament last night from MPs over alleged failures to identify that the buyer of collapsed retail giant BHS had previously been declared bankrupt.
In a hearing into the role of advisers following the collapse of BHS, Frank Field MP, chair of the House of Commons Work and Pensions Committee, yesterday claimed that Linklaters and Olswang had failed to carry out proper due diligence on the buyer of the retail giant.
Linklaters had advised Arcadia on the disposal of BHS, while Olswang advised Retail Acquisition Limited on its purchase. Retail Acquisition is 90% owned by Dominic Chappell, who had twice previously been declared bankrupt.
Field suggested that the two firms ‘failed so sadly' in their due diligence.
He said: ‘We have got people like Sir Philip Green and Lord Grabiner QC who are very busy people who paid two legal firms to check up on the proper nature of the person they were selling to and it turns out this person was twice bankrupt, where do you think it puts those firms who told these key people that this was a good person to sell to?’
He added: ‘Don’t you feel responsibility that there are people paying you presumably very good fees and that there were two lots of firms involved and neither discovered the most obvious thing about this person?’
Owen Clay, a corporate partner at Linklaters who advised Arcadia, told the committee it was not Linklaters' responsibility to carry out due diligence on the buyer as they were not its client. He added that he was satisfied that Olswang had carried out detailed due diligence.
David Roberts, a corporate partner at Olswang, will appear before MPs on Wednesday in connection to his role advising on the acquisition.
Clay said that if there had been any sense of impropriety Olswang would have had nothing to do with the deal.
When pressed on whether Olswang was wrong to conclude that there were no concerns about the buyer, Clay said: ‘Hindsight is of course a wonderful thing.’
But he added: ‘At the time [lawyers at Olswang] had clearly been given a lot of information and they had clearly done a lot of work and they clearly got the impression that [Chappell] was being very open with them and they clearly had no sense at any time there was any bad faith or dishonesty.’