The principal of the first college to be put in administration has agreed to never work in the education sector again, FE Week can reveal.
In what is thought to be a sector first, Paul Hannan (pictured right) will be fined £250,000 if he breaches the ban which has been imposed following a three-year investigation by BDO, the liquidators for both Hadlow and West Kent and Ashford Colleges.
However, a secret deal has been struck between his deputy Mark Lumsdon-Taylor (pictured left) and BDO that keeps the details of his “undertaking” under wraps. Lumsdon-Taylor, who appears to have already agreed to pay £5,000, will be forced to pay further compensation if he breaches this confidential agreement, and on that basis the liquidators have withdrawn all claims against him in full.
Both leaders of the Hadlow Group resigned in 2019 after applying for emergency funding from the government to keep the colleges open, as Hadlow had run up £40 million in debts, while WKAC owed over £100 million.
The college entered the new education administration process later that year and were moved into liquidation in August 2022. Top Department for Education civil servants previously revealed how the process has cost the taxpayer around £60 million, with a “gut-wrenching” £6 million spent on administrators’ fees alone.
Hundreds of staff lost their jobs and thousands of students had to be moved to other colleges.
The government’s Insolvency Service has been investigating the conduct of the former leaders of the Hadlow Group since the catastrophe unfolded, but it concluded last year that “no further action” should be taken.
However, liquidators BDO have also been investigating the former directors and came to a different outcome.
A recently published creditors’ report states that the joint liquidators “undertook detailed investigations for over three years and intimated claims against Mr Paul Hannan in a letter before action”.
Hannan “disputed liability regarding the claims” and a “full and final settlement was reached on commercially acceptable grounds without any admission of specific liability”.
The settlement required an undisclosed “nominal initial payment”, which was received by the liquidators.
A “further payment of £250,000 in the event of breach of Mr Hannan’s personal undertaking not to take a position in the education sector as a trustee, director, governor, principal, manager, consultant and/or employee,” the report added.
It means that while Hannan has not received an outright directors’ ban from the Insolvency Service, he has been barred from working for another college.
FE Week could not reach Hannan for comment.
‘It’s right that those responsibile are held to account’
Lumsdon-Taylor “strenuously disputed all liability”, according to the same BDO report, which revealed his settlement required an initial nominal payment of £5,000.
Lumsdon-Taylor has also “given an undertaking to the joint liquidators” but this is “subject to confidentiality provisions between the parties”.
In the event of a breach, Lumsdon-Taylor will “pay compensation and on that basis the joint liquidators have withdrawn all the claims in full”, the report said.
Responding to the report, a representative for Lumsdon-Taylor told FE Week: “The Hadlow College compulsory liquidation notice confirms that the joint liquidators have withdrawn all claims against Mark J Lumsdon-Taylor unequivocally and in full. This reconfirms our position that there was no case to answer for any ‘claims’ reported or otherwise stated. This matter is concluded.”
Lumsdon-Taylor refused to share any details about the undertaking he has agreed with the liquidators.
The Hadlow and West Kent insolvencies were the first carried out under the laws passed in 2017 which created a special administration regime for colleges.
Julian Gravatt, deputy chief executive of the Association of Colleges, said he is “fairly sure” that this is the first case in which liquidators have “agreed restrictions with former college employees”.
Gravatt said the insolvencies were “exceptional cases in a sector where leaders have an impressive track record of professionalism and skills at leading and managing complex organisations with great probity and integrity”.
“Where things go seriously wrong, it’s right that there are investigations and that those with responsibility are held to account for their actions,” he added.
The liquidators’ fees are different to the £6 million charges paid during the education administration process. BDO’s report reveals the joint liquidators have also racked up remuneration costs of more than £200,000 between August 2022 and August 2023, at an average rate of £175 per hour.
Significantly reduced hourly rates have however been agreed for this work between BDO and DfE. For example, standard charge out rates for a BDO partner ranges between £869 to £994 per hour, discounted to £320 for DfE, and for the £1,304 per hour rate for the BDO tax department has been discounted to £221 per hour.
The process and costs could drag on for years, with the creditors’ report revealing they may need to wait until 2026 for the college’s land at Court Lane to be sold. This is due to a “pre-emption agreement” which currently requires the land to be offered to a third party before it can be sold on the open market.
BDO said it could not provide any further detail than what is already included in its report.