Darty Holdings SAS v Geoffrey Carton-Kelly

For purposes of section 239 of the Insolvency Act 1986, the relevant decision to prefer a creditor may precede the payment, but the court must identify the operative decision on the facts. A contractual arrangement, expectation or pressure making repayment likely does not itself amount to a company’s decision. A decision conditional on board approval or ratification is not operative until the board makes the further decision. Appellate courts must respect trial judges’ factual and inferential findings unless an identifiable error is shown or the decision cannot reasonably be explained or justified. Here, the only operative decision was made by the company’s board at completion, when there was no desire to prefer. The preference claim therefore failed.

Comet Group plc was indebted to Kesa International Ltd under an intra-group revolving credit facility. As part of the disposal of Comet to companies controlled by OpCapita, the transaction documents contemplated repayment of approximately £115.4 million of that debt. Comet entered administration later in 2012 and subsequently liquidation. Its liquidator applied under section 239 of the Insolvency Act 1986, alleging that the repayment was a preference.

Falk J held that the repayment was a preference and that the substantive decision had been made when the sale and purchase agreement was entered into on 9 November 2011: [2022] EWHC 2873 (Ch); [2023] BPIR 305. Darty Holdings SAS appealed. The central issue was when Comet made the operative decision to repay the debt, and whether that decision was influenced by a desire to prefer Kesa International Ltd.

1. Appeal allowed. Lewison LJ delivered the judgment, with Newey LJ and Elisabeth Laing LJ agreeing. The remaining grounds did not arise.
2. Under section 239 of the Insolvency Act 1986, the decision influenced by a desire to prefer may precede the actual giving of the preference. The date and character of that decision are questions of fact in the particular circumstances. A contractual obligation to repay is neither necessary nor sufficient.
3. Where the transaction involves more than one decision, the court must identify the operative decision for section 239. A decision conditional on board approval or ratification is not operative; a further decision by the board is required: Goodwood Investments Holdings Inc v Thyssenkrupp Industrial Solutions AG [2018] EWHC 1056 (Comm). The sale agreement was not a decision by Comet. It required Kesa to procure future steps by Comet, and Comet was not a party to it. The expectation that Comet would comply, and the commercial pressure making refusal difficult, did not amount to an operative decision by Comet.
4. The appellate court applied the established restraint governing appeals on fact, including evaluations and inferences: Henderson v Foxworth Investments Ltd [2014] UKSC 41; FAGE UK Ltd v Chobani (UK) Ltd [2014] EWCA Civ 5. The evidence did not support the inference that Mr Enoch had made an operative decision on Comet’s behalf. He signed for the Kesa parties, not Comet; the alleged decision was not communicated; and the evidence of the later board’s consideration of alternative finance was inconsistent with an earlier operative decision. The court also noted the danger of findings on matters not put to witnesses, as illustrated by Chen v Ng [2017] UKPC 27.
5. Re Drabble Bothers [1930] 2 Ch 211 and Re MC Bacon Ltd [1990] BCC 78 were materially different because the persons whose intentions mattered were actual decision-makers. The only operative decision here was the decision of Comet’s board on 3 February 2012, and it was not influenced by a desire to prefer. The statutory preference claim therefore failed.

• Court of Appeal (Civil Division). Darty Holdings SAS’s appeal was allowed. The court held that the only operative decision to repay the intra-group debt was made by Comet’s board on 3 February 2012, without a desire to prefer.
• High Court of Justice, Business and Property Courts, Insolvency and Companies List (ChD). Falk J held that the repayment constituted a preference and that the relevant decision had been made when the sale and purchase agreement was entered into: [2022] EWHC 2873 (Ch).