Duff & Phelps under fire over BHS fees

The work and pensions select committee has taken Duff & Phelps to task over its role as administrators to collapsed retailer BHS, after it emerged the firm’s final bill is likely to be £500,000 above its original £3.5m estimate.

In a letter to committee chair Frank Field, Philip Duffy, managing director of Duff & Phelps, said the firm is now expected to charge £4.03m, substantially more than the £3.5m detailed in the initial note to creditors in June 2016.

Field has taken issue with this as the increase in fees comes despite an arrangement which saw FRP Advisory appointed as concurrent administrators at the request of BHS. FRP Advisory took on exclusive responsibility for investigations into Sir Philip Green, Dominic Chappell and their respective companies, fellow directors and advisers. In the case of Sir Philip and his companies, Duff & Phelps did not commence any such work.

In his response, Duffy listed further elements of the administration that had not been completed at the point BHS went into liquidation on 2 December 2016. These included the finalisation of liabilities and claims against different parties and agreeing the surrenders of leases and commercial disputes.

The remaining work will be conducted by FRP Advisory as liquidator of BHS and this will cost around £800,000.

Duffy says there was ‘continued and unexpected’ dialogue with a number of parties about a possible sale, even after a closure had been announced, which added to costs, along with ‘numerous meetings’ with the concurrent administrators which added at least £100,000.

He said the firm’s average charge out rate was around £270, compared with a national average of £375 and the £500-plus rate used in the two biggest previous insolvencies, of Woolworths and Comet.

The correspondence also documents disagreement between Duff & Phelps and FRP Advisory about the timing of the liquidation. FRP Advisory argued that creditors were better served by an earlier liquidation but this was resisted by Duff & Phelps.

Another letter from the Pension Protection Fund (PPF) concerns a £35m charge – the amount initially offered to BHS trustees by Sir Philip but then withdrawn – that was forwarded to Sir Philip’s account by Duff & Phelps but returned after dialogue with the concurrent administrators.

A case of ‘handbags’ in Arnold Clark

The views of management, as well as human resource (HR) departments, need to be taken into account when handling disciplinary matters. This was shown in the case of Arnold Clark Automobiles Limited v Spoor UKEAT/0170/16/DA, concerning an employee with more than 42 years’ service and an otherwise exemplary disciplinary record who had been summarily dismissed for gross misconduct.

Spoor was a motor vehicle technician based in one of Arnold Clark’s automobile workshops.

He saw an apprentice was having a problem with a printer and tried to help but became annoyed when he was ignored and grabbed the apprentice by the collar, resulting in a short scuffle.

The matter was reported to the branch service manager, but as Spoor had already apologised and he and the apprentice had shaken hands, it was initially decided that formal disciplinary action was not required.

However, the HR officer considered that there needed to be a formal disciplinary process. A hearing was conducted and the decision reached that Spoor was guilty of gross misconduct and as such dismissed.

Spoor’s subsequent claim that the dismissal was wrongful succeeded. It was held that both the procedure followed and the decision to dismiss were outside the range of reasonable responses to the incident.

Comment: Great care is needed before summarily dismissing employees. The fact management decided the matter was not sufficiently serious to warrant formal action cast doubt on the process.

Grant Thornton investments hit profit

Grant Thornton UK LLP has reported a 2.5% increase in revenue to £534m (2015: £521m) as the tax service line showed strong growth in a year where the mid-tier firm invested heavily in IT and technology to support its client base.

Profit before tax was down year on year to £72m (2014: £82m) while the average distributable profit per partner was down 13.75% at £344,000, from a high of £398,000 for the last financial year.

Performance at the audit and tax lines improved from the previous year with tax showing a strong spike in growth. Tax revenue was up 7.6% to £104m (2014: £96m) while audit saw an increase of 4% to £148m (2014: £142m). Advisory was down marginally on the previous year to £282m (2014: £283m).

While revenue is not up as much as other firms this year, Grant Thornton has invested heavily in infrastructure and technology, which dented profits but puts the firm in a strong position to meet client requirements in the future, CEO Sacha Romanovich said.

Johnston Carmichael revenues top £40m

Johnston Carmichael, the Scottish based firm which is part of PKF UKI, has reported growth of 3% in the year ending May 2016, breaking the £40m revenue barrier for the first time.

The results show an increase in revenues from £39.6m to £40.8m and net profit before members’ remuneration up from £11.06m to £11.61m. The firm said diversification had driven growth as well as a 13% boost in the wealth advisory business.