The BDO partner who worked on an insolvency at the centre of a £250m negligence lawsuit today denied that the firm agreed to set a restructuring strategy with a consortium of banks as a precondition to being appointed as administrators.
The case concerns the 2010 liquidation of London office block One Blackfriars, now the site of the 52-storey skyscraper known as The Boomerang. The case is a dispute between the current joint administrators, Adrian Hyde and Kevin Murphy of CVR Global, and the former administrators of the building, BDO.
CVR is claiming damages of more than £250m from BDO, alleging that BDO “improperly agreed” with a syndicate of banks “to conduct a ‘light touch’ administration” that would get their money back quickly, at the expense of other creditors.
They also allege that the site was sold to property developer Berkeley Group for less than it was worth, even though higher offers were received.
Giving evidence under cross-examination today, BDO restructuring partner Sarah Rayment said that it was normal for restructuring professionals to work out a strategy before being appointed to jobs, but that doesn’t tie them to a set course of action.
Rayment and fellow BDO partner Shay Bannon were the previous joint administrators. Bannon died in 2018.
At today’s hearing CVR’s lawyer, Simon Davenport QC, put it to her that she was “told by the banks and [law firm] BLP that they needed a strategy before appointment”, and that the strategy was a precondition to BDO’s appointment.
Rayment said it was not a precondition. “If we had disagreed with their strategy, we would have told them we disagreed,” she said.
“Nine times out of 10… there would be an outline strategy of what we would do once we got into office,” she said. “We make the decisions as to what objective we follow.”
She also said that, while the banks “wanted their money back”, she didn’t accept that there was a “quick sale” of the site.
She added that there was general agreement that it was important to “preserve the planning” on the site.
“This didn’t go to the market for five to six months, so I don’t think it was a quick sale,” she said.
The “syndicate” of banks was made up of RBS, Allied Irish Bank and Santander UK, according to court documents.
In the lawsuit, the current administrators allege that the former administrators “wrongly treated the objective of the administration as realising security under the direction of the company’s secured creditors (the syndicate), and on theirs terms”.
They then “wrongly allowed the syndicate to control the administration”, they allege. As part of this, they allege that the former administrators agreed to work with law firm BLP and real estate company CBRE and that “CBRE acted thereafter on the instructions of the syndicate, considered them to be their true client, and continued to provide strategic advice to them”.
Giving evince today, Rayment said that if they had disagreed with the appointment of BLP or CBRE, they would have said so.
The current administrators allege that the former administrators didn’t market the site properly.
“The resulting sale was an unconditional disposal for cash, after minimal publicity, within a tight timeframe driven by the syndicate’s internal redemption programme,” they allege. “The price accepted was just enough to see the syndicate repaid.”
They also allege: “Higher offers for the site were rejected or ignored, bidders were encouraged to bid at the level of the secured debt, and little or no attempt was made to encourage competition between bidders to come up with increased offers or to negotiate robustly with bidders on an informed basis.”
However, BDO denies all the allegations. A BDO spokesperson said: “We properly discharged our duties as administrators and consider the claim to be speculative and without merit. We are defending the matter vigorously in court.”
The case, which stated last week, is scheduled to last for four more weeks.
Due to the coronavirus lockdown, the case is taking place via videoconference.
(1) Adrian Charles Hyde (2) Kevin Anthony Murphy (as joint liquidators of One Blackfriars Ltd) v (1) Antony David Nygate (in his capacity as representative of the estate of James Joseph Bannon, former joint administrator of One Blackfriars Ltd) (2) Sarah Megan Rayment (as former joint administrator of One Blackfriars Ltd)
