Round one on Comet to the liquidator

Eight months before it went into administration, Comet repaid a loan to a potentially connected party as part of a wider sale. It was intended that a sale of shares in Comet to another party was to happen immediately before the loan repayment took place, but, in fact, the loan was potentially repaid around 20 minutes before the share sale.

The liquidator sought to determine this issue by way of a strike out application. The lender sought to have it determined as a preliminary issue, but both parties agreed that, if the ICCJ found that there was no connection between lender and borrower, the preference claim would fail as the repayment was made over six months before the administration.

Having considered the terms of the relevant documents, the ICCJ found that the repayment took place before the share sale, regardless of the intention of the parties.

The question on connection was an issue as to whether the owner of the shares, prior to their sale, had the ability to exercise its voting rights in respect of the shares. On this issue, the ICCJ was not prepared to look behind the register of members and that, regardless of the contractual obligations set out in the sale documents, the entitlement to vote remained with the share owner, who was connected with the lender and therefore the lender was connected to Comet under the insolvency legislation.

Finally, the ICCJ disagreed with the Respondent’s suggestion that the transaction complained of was not just repayment of the loan and upheld the Liquidator’s application.

Carton-Kelly v Darty Holdings SAS [2020] EWHC 1707 (Ch)

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