A £250m insolvency negligence lawsuit, thought to be the largest of its kind, began this week against BDO in the UK’s High Court. The claimants in the court action allege that BDO “improperly agreed” to undertake a “light-touch” administration of a 52-storey skyscraper development project on London’s South Bank.
The UK’s fifth biggest accountancy firm became administrators to the One Blackfriars site, nicknamed ‘The Boomerang’, in 2010.
But now the liquidators of the company, Adrian Hyde and Kevin Murphy, who worked for restructuring firm CVR Global, have accused BDO of negligence in their role as administrators.
The opening statement from the liquidators makes two principal allegations against BDO. Firstly, that “without making any independent inquiry, the FAs [BDO] improperly agreed with the Syndicate pre-appointment to conduct a “light touch” administration.”
The Syndicate refers to the group of lenders – Royal Bank of Scotland, Allied Irish Bank and Santander UK – who demanded the administration of the company just a year after planning permission was granted on the site.
And secondly, that the One Blackfriars site was sold for far less than it was worth. The site was sold to property developer, Berkeley Group for £77.4m before being valued by Berkeley at £232m 18 months after it was bought.
Hyde and Murphy claim in their opening statement: “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.”
They argue that BDO acted as if the Syndicate of lenders were their “true” clients and that the sale of the site was carried out “within a tight timeframe driven by the Syndicate’s internal redemption programme”.
“The price accepted was just enough to see the Syndicate repaid,” court papers read.
When asked for comment, 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 is expected to last around six weeks.