Danny McCance 5 Feb 2019 04:49pm

Luke Johnson considers Grant Thornton lawsuit

The chair of troubled café chain Patisserie Valerie has indicated that he wants to pursue legal action against its former auditors Grant Thornton

Luke Johnson pointed to the relevance of the recent AssetCo case, in which Grant Thornton was ordered to pay the AIM-listed company £21m over a negligence claim.

 He added, in an interview with Investor’s Champion, that he would push administrator’s KPMG to pursue a similar action against Grant Thornton.

"The Assetco case has possible relevance for a claim against them [Grant Thornton] as Patisserie Holdings’ auditors,” he said.

Grant Thornton is being investigated by the Financial Reporting Council for its Patisserie Valerie audit.

 This investigation followed the discovery of a £40m black hole in Patisserie Valerie’s accounts that eventually led to the chain falling into administration earlier last month.

Last week, potential Patisserie Valerie buyers were reportedly told by administrator KPMG that the company's accounts contained unreliable information dating back to 2014.

 “Johnson’s position as probably the largest creditor makes him best placed to push the administrators to take action,” said Christopher Boxall, co-founder of Fundamental Asset Management, which invests in Patisserie Valerie.

“However, the administrators will probably also be looking to take action against the directors as well, making for a unique scenario,” he added.

Last week, reports emerged that a group of shareholders and wealth managers were considering a group action against the café chain, focused around inaccurate information provided in RNS announcements.

At the time Philip Rubens, partner at Teacher Stern, the law firm undertaking the action, said he would not yet be ruling out including Grant Thornton in this action.

Separately, concerns have been raised over the “cosy” relationship between Patisserie Valerie, Johnson and administrators KPMG.

Boxall said that, having discussed the subject of legal action with various lawyers, he thought it would be difficult for a group of smaller shareholders to coordinate a direct claim against the auditors Grant Thornton, or the board.

Any such action, he said, would require support of at least one large institutional holder, which might prefer to take on an individual case itself.

“The administrators to [parent company Patisserie Holdings] will need to obtain funding to carry this through, which will come at a high price,” Boxall added.

Meanwhile, when speaking to the Business, Energy and Industrial Strategy Committee during its inquiry into the future of audit in the UK last week, Grant Thornton CEO David Dunckley said that the auditor “is not looking for fraud”.

Grant Thornton is not commenting. Luke Johnson has been contacted for comment.