Re: The Food Retailer Operations Limited (in liquidation); Cohen & Crooks v Co-operative Group Limited & ors [2026] EWHC 1228 (Ch)

22nd May 2026

On 21 May 2026 Mr Justice Cawson handed down judgment dismissing claims brought by the liquidators of The Food Retailer Operations Limited alleging that a corporate restructuring which took place in 2015 was a transaction at an undervalue or a preference under sections 238 and 239 of the Insolvency Act 1986. Although the liquidators conceded at trial that their claim should be capped at a much lower level, the claim as issued was the highest-value claim under ss. 238 and 239 IA 1986 ever brought.

The judgment follows a seven-week trial in which the successful Respondents, who were members of the Co-op Group, were represented by James Potts KC, Andrew Short KC, Matthew Parfitt, Jack Rivett and Conor McLaughlin, instructed by Addleshaw Goddard LLP.

Central issues addressed by the court included:

• The identity of the “transaction” which was subject to challenge;
• The value of the consideration for that transaction, including releases from liabilities to pension schemes, and bank and bondholder guarantees;
• Whether, in particular, a withdrawal of share capital by a member of a registered society was a transaction for no consideration;
• Whether the society became insolvent in consequence of the transaction, and what “in consequence” means in this context;
• Whether the defence under s. 238(5) IA 1986 was available to the Respondents;
• Whether the transaction had a preferential effect; and
• Whether the society which entered into the transaction was influenced by a desire to prefer the Respondents.

The determinative issues, on which the judge ruled in the Respondents’ favour, were that a withdrawal of share capital by a member of a registered society is not a transaction at an undervalue, and the Respondents had rebutted a presumption that the society which permitted that withdrawal was influenced by a desire to prefer the Respondents. The court rejected the liquidators’ allegations that the directors of the society had not acted in good faith. These issues resulted in the dismissal of the claims.

As well as these determinative issues, the judgment breaks new legal ground and makes important observations about the law on almost all of the wider questions which arose.

Particular examples of note are the judge’s acceptance of the Respondents’ argument that the withdrawal of share capital by a member of a registered society is not a transaction for no consideration. The judge distinguished the Court of Appeal’s decision in BTI v Sequana [2019] EWCA Civ 112, [2019] 1 BCLC 347 in which the payment of a dividend by a company was held to be a transaction for no consideration, and also Dickinson v NAL Realisations Ltd [2017] EWHC 28 (Ch), [2018] BCC 506 in which a company’s purchase of its own shares was also held to be for no consideration. The withdrawal of share capital from a registered society was held to be of a different character altogether, reflecting a specific right arising from the original subscription for the shares, which represented the consideration for the subsequent withdrawal.

The case is also the first decided case to explore what it means for a company (or society) to become insolvent “in consequence of” a transaction which is the subject of challenge under ss. 238 or 239 IA 1986. These sections require a company to have been insolvent at the time of the transaction or in consequence of it. The “in consequence” part of this gateway had never been examined before. The judge held that there needs to be a sufficient causal connection between the transaction and the eventual insolvency, and considered that the two-year lookback period, which forms a temporal gateway for such claims, was also the relevant window for assessing the consequences of a particular transaction.

The judgment also contains a careful analysis of what, exactly, a “transaction” is, and stresses that “common sense” is a crucial criterion. The judge rejected the liquidators’ argument that the only relevant transaction was the withdrawal of share capital. The judge held that, in this case, selecting only a single component was not a common sense approach to a complex corporate restructuring in which none of the components would have happened without all of the components, even though there were a variety of parties, and some of the agreements and arrangements occurred on separate dates.

Although the claims were dismissed, the judge considered whether the claims would have been subject to a “creditor cap”, i.e. the liquidators would not be entitled to recover more than would be required to make the insolvent estate whole by paying all creditors’ claims in full. This point was ultimately conceded by the liquidators at trial.

A copy of the judgment can be found here.