Clerys liquidators no longer want sanctions for private equity executives

The liquidators of the operating company of Clerys have told the High Court they no longer believe that two private equity executives, who were also directors of the Clerys business before it was sold and shut down, should be sanctioned as directors due to their actions at the department store.

Kieran Wallace and Eamonn Richardson, the KPMG liquidators of OCS Operations, had previously sought the disqualification or restriction as directors of Rafael Klotz and Malcolm McLennan MacAulay, senior executives at the American firm Gordon Brothers, which sold Clerys to the Natrium consortium in 2015.

Hours after Clerys was sold to Natrium for €29 million, the business was controversially shut down and put into liquidation, leaving staff and concessionaires out of pocket as Natrium forged a plan to redevelop the property.

The liquidators had expressed concerns in legal correspondence about the conduct of Mr Klotz and Mr MacAulay over issues including whether concessionaires’ cash was properly ring-fenced and held in trust for them, and also over whether the two executives knew about Natrium’s plan to immediately shut the business and allowed the sale to proceed on that basis.

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Changed stance

In a hearing on Wednesday morning, James Doherty, barrister for the liquidators, told the court that the liquidators' stance over the executives' conduct has "changed quite significantly" in recent months.

He told the court that the share purchase agreement between Natrium and Gordon Brothers contained a confidentiality clause that had prevented the directors from revealing information, but the clause has now expired.

He said arising from information supplied by the two men’s solicitors, William Fry, in two letters in January, as well as a face-to-face meeting that month with Mr Klotz and MacAulay, the liquidators concerns now “have been alleviated”. Mr Doherty said it was now accepted the directors had acted responsibly.

He referred to the previously confidential share purchase agreement, now filed with the court, that suggested that Gordon Brothers had sold the business to Natrium on the basis of it being “a going concern”.

The liquidators, he said, now accepted that Mr Klotz and Mr MacAulay genuinely believed Clerys would be kept open for the short term at least, and if it was wound up, that it would be done on a solvent basis .

The barrister also referred to an apparent pre-sale understanding by Gordon Brothers that there was enough cash in the business to pay concessionaires whatever they were owed.

Early hours

Clerys was sold in the early hours of Friday, January 12th, 2015, and put into liquidation later that day, sparking public controversy. Mr Doherty referred in court to a letter sent on behalf of Gordon Brothers to lawyers for Natrium that weekend, in which it expressed “serious concern” over the closure. Lawyers for Natrium wrote back, Mr Doherty said, to remind Gordon Brothers that it had signed up to a confidentiality clause.

Brian Conroy, the barrister for Mr Klotz and Mr MacAulay, told the court on Wednesday that his clients "did not cause or contribute" to the closure of Clerys and knew nothing of what was about to unfold when it was sold.

He highlighted to the judge, Ms Justice Teresa Pilkington, that the liquidators were now accepting of his clients' position. The judge said she would take it into account when giving a ruling on Friday in relation to the proceedings taken against the two men.

The court was also told that Gordon Brothers recently agreed to pay the €785,000 that the 50 concessionaires lost out on due to the Clerys closure. The KPMG liquidators have agreed to oversee the payouts.