French retailer sued for £115m by liquidator to Comet
French retail group Fnac Darty is being sued for £115m by the liquidator to Comet, the UK electrical chain it used to own.
Fnac Darty sold Comet for £2 a year before it collapsed but received £115m as part of a controversial financing agreement with the new owners. The failure of Comet in 2012 left UK taxpayers footing a £44m bill and more than 6,000 staff losing their jobs.
The claim against Fnac Darty, which was called Kesa Electricals before it sold Comet to Hailey Acquisitions in 2011, has emerged as part of a trove of information published in relation to the collapsed UK electricals retailer.
Geoff Carton-Kelly, liquidator to Comet and a partner at FRP Advisory, has alleged that the £115m payment breached insolvency rules as it meant Darty was paid ahead of other creditors to the business.
The case is being brought to recoup money for Comet’s creditors, the largest of which is Hailey Acquisitions, which was owed £186m and ranks first in line for payments as a secured creditor – as well as HM Revenue & Customs and the Insolvency Service. Hailey Acquisitions has so far received £60m from the liquidation.
Hailey Acquisitions was backed by private equity vehicle OpCapita, which was itself a consortium of investors that included Elliott Advisers and Greybull Capital.
The case follows the conclusion of a five-year investigation by the Institute of Chartered Accountants in England and Wales, which ordered Deloitte and its former partners Neville Kahn and Christopher Farrington — the administrators in charge of winding down Comet — to pay over £1m in fines.
The institute said they were not independent or objective owing to their relationship with Hailey Acquisitions, which was also a client of Deloitte.
Following the outcome of the investigation, a confidentiality order was lifted on a 2018 High Court judgment that revealed details about how Comet was managed and then sold by its directors, and allegations about the conduct of its administrators.
The judgment said the Deloitte administrators did not take “any steps to interview or raise any questions with Comet directors about anything” over the course of a five-year engagement for which they were paid more than £10m.
“It appears that they, in fact, took a positive decision not to do so,” the judgment said. It added the administrators “instructed their staff not to send” letters to the directors of Comet seeking details about their financial incentives connected to the deal.
The judgment also cast a fresh light on concerns about the validity of the £186m security held by Hailey Acqusitions over all of Comet’s assets. It said Mr Kahn and Mr Farrington as administrators to Comet did not ask “obvious” questions of its owners, who had previously been their client, the judgment said. “The answers might lead to the conclusion that . . . the Comet directors did not act in the best interest of creditors as a whole”, it added.
Darty did not immediately respond to a request for comment.
Deloitte said in a statement it regretted that its work as administrator of Comet was “below the professional standards expected of us, as were certain elements of our work during the administration”. Mr Kahn said: “I am glad that we have come to an agreement after a very long review process and the whole matter can now be put behind us.”