Darty Holdings SAS v Geoffrey Carton-Kelly

The Court of Appeal allowed the appeal against Falk J's finding that the repayment by Comet of £115.4m to its group treasury company was a preference under section 239 of the Insolvency Act 1986. The court held that the operative decision to make the repayment was the Comet board meeting on 3 February 2012, not the earlier negotiation and signing of the SPA on 9 November 2011. A decision conditional on later board approval was not, in the court's view, an operative decision for the purposes of section 239. The court applied established principles about appellate restraint on findings of fact and reversed the judge's inferential finding that Mr Enoch had made an operative decision on behalf of Comet in November 2011.

This was an appeal from Falk J ([2022] EWHC 2873 (Ch)) by Darty Holdings SAS (successor to Kesa International Ltd) against a finding by the High Court that repayment by Comet Group plc of intra-group unsecured debt of £115,415,524 to KIL on completion of a sale (the Disposal) amounted to a preferential transaction under section 239 of the Insolvency Act 1986.

Background and procedural posture:

• Comet, owned within the Kesa group, was sold to OpCapita-related purchasers under an SPA dated 9 November 2011, with completion on 3 February 2012. As part of completion, Comet repaid a large element of intra-group debt owed to KIL.
• Comet later entered administration (2 November 2012) and liquidation. The liquidator applied under section 239 to set aside the repayment as a preference. Falk J found the repayment was a preference because she inferred that the "real" decision to repay was taken earlier (around the SPA) and was influenced by a desire to prefer.
• The present appeal challenged the judge's inferential finding as to when the company (Comet) decided to repay, and thus whether the statutory requirement in section 239(5) (that the company was influenced by a desire to prefer) was satisfied.

Issues framed by the court:

• When, as a matter of fact, did the company give the preference (i.e. when was the operative decision to repay made) for the purposes of section 239?
• Whether that decision was influenced by a desire to prefer a connected creditor (KIL).
• How to treat conditional or preparatory decisions and the role of board approval and ratification in identifying the operative decision.

Court’s reasoning and outcome:

• The Court of Appeal emphasised appellate caution in overturning inferential findings of fact but applied that caution to the present record and evidence.
• The court concluded there was insufficient evidence to support Falk J's inference that, on or about 9 November 2011, Mr Enoch (Kesa's Group General Counsel and a Comet director) made an operative decision on Comet's behalf that it would repay the KIL debt. The SPA itself did not make Comet a contracting party and contained mechanisms (including board approvals and clause 9.4 termination rights) consistent with a future board decision on completion. Conditional arrangements, even if commercially compelling, did not substitute for a decision taken by the company.
• The only operative decision identified on the evidence was the board meeting of the new Comet board on 3 February 2012. The parties accepted that the directors who decided on that date were not influenced by a desire to prefer. On that basis the appeal succeeded and the repayment was not set aside as a preference by this court.

The court also commented on the evidential context (deleted emails, witness credibility and the relative roles of negotiators), and reiterated the distinction between commercial pressure and an operative company decision influenced by a desire to prefer.

Appeal allowed. The Court of Appeal held that the operative decision for the purposes of section 239 was the Comet board meeting on 3 February 2012 when the repayment was approved; there was no sufficient evidential basis to infer an earlier operative decision by Mr Enoch on behalf of Comet on or about 9 November 2011, and a decision conditional on later board approval did not constitute the relevant company decision tainted by a desire to prefer.

Appeal from Falk J, High Court of Justice, Business and Property Courts (Insolvency and Companies List (ChD)) [2022] EWHC 2873 (Ch). Permission to appeal was granted by Falk J. Hearing before the Court of Appeal on 26-27 September 2023; judgment handed down 09 October 2023 [2023] EWCA Civ 1135.