West Midlands car industry activists are poring over the fine detail of the government report into the collapse of MG Rover to establish whether there are grounds to bring a civil action against the so-called Phoenix Four, the executives who bought the car company from BMW for £10 in May 2000.
MG Rover watchers are said to be angry at the extent to which the Phoenix Four benefited personally while overseeing the demise of Britain’s last volume car manufacturer. They believe the report, compiled after a four-year investigation by two government inspectors, has opened the door to civil action.
“Company law on fiduciary responsibility is complex and unclear,” said Nick Matthews, an academic at Coventry University and car industry analyst for 15 years. “The inspectors agree that it is uncertain, particularly in respect of the deal to buy MGR Capital. What they have said is that the only way to establish for sure whether laws have been broken is through the courts.”
The inspectors devoted 100 pages of their 850-page report to the Phoenix Four’s investment in MGR Capital. This was the car finance joint venture with a subsidiary of the banking group HBOS, now part of Lloyds TSB, that bought the Rover cars finance and lease loan book from BMW for £313m in 2001.
However, the interest in MGR Capital was acquired independently of Phoenix Venture Holdings, the businessmen’s master company, which owned MG Rover. Their involvement in MGR came through the Phoenix Partnership, a private vehicle for the four and Kevin Howe, the man they brought in to run the car company.
The inspectors drew attention to the complex boardroom paperwork that accompanied the transaction and pointed out that company law is uncertain. “The points should rather, it seems to us, be aired if and so far as necessary in court proceedings with full legal argument,” they said.
Union leaders said it was not clear if they would lead a civil action, admitting there was unlikely to be much appetite – or funding – for ex-workers to bring a case themselves.
Richard Burden, Labour MP for Birmingham Northfield, said that it was “unacceptable” if , as the report claimed, the Phoenix Four had misled him and his constituents.
“The report makes the charge that when I and others raised questions about the structure of the company and the remuneration of the directors, at least some of the responses we received were misleading. If true, this is very serious. Not only will they have misled me as the local MP, they will also have misled my constituents and their own employees. That is unacceptable.
“The report also alleges that one of the Phoenix Four gave misleading answers to a committee of the House of Commons of which I was a member. If this is true, the directors must answer to that.”