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Phil Pearce, a builder, left his wife, Lesley, and young daughter, Diane, to move with Sandie Merrick into Mill Cottage. The Mill had been converted into a flat by the company that Phil had just formed with Joe Sugden. Phil and Sandie started an affair which was unveiled by Diane when she found out, to a packed audience in The Woolpack. Sandie's affair caused another village scandal, and Annie Sugden made clear her disapproval.

Phil was responsible for the incineration of Crossgill's farmhouse by burning old rags indoors. In January 1989 he was jailed for his involvement with an antiques fraud organised by Eric Pollard.

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