Co-op has five weeks to engage in settlement talks over a £450m-plus legal claim to avoid it proceeding to trial.

The claim was lodged last year by liquidators for The Food Retailer Operations, a company formerly comprised of 36 former Somerfield stores and a non-trading property portfolio which Co-op sold in 2016. The company collapsed into administration within a year of Co-op offloading it to an arm of restructuring specialist Hilco.

Liquidators have been investigating transactions which took place earlier, when the company remained a Co-op subsidiary, known as Somerfield Stores Ltd. According to a winding-up progress report filed at Companies House last week, the investigation has focused on the company selling nearly 500 former Somerfield stores in 2015 to other Co-op Group entities for almost £500m, which was subsequently distributed to Co-op.

The investigation, which has included interviews with former directors of the company, set out to establish if grounds existed to litigate for the benefit of creditors. In February last year it led the joint liquidators to issue a claim against companies within The Co-op group for “in excess of £450m”. The claim is also seeking an account of profits Food Retailer Operations would have made had the 2015 transaction not taken place “and/or the transfer back to the company of the assets which were sold”.

The claim is listed at the Business and Property Courts. A deadline was set in a February hearing, giving the two parties until 31 May to engage in settlement talks to avoid the claim proceeding to trial next year.

Co-op bought the 880-store Somerfield supermarket chain for £1.57bn in 2009.

It did not provide a comment on the latest development in the legal claim. 

In February last year, when the claim was lodged, it said: “Co-operative Group Limited and certain of its subsidiaries (Co-operative Group Food Limited, Co-operative Foodstores Limited and Rochpion Properties (4) LLP) are aware that a claim has been issued by the liquidators of The Food Retailer Operations Limited in connection with transactions which took place in 2015 and 2016 relating to the Somerfield supermarket business acquired by Co-op in 2009.

“The amount claimed is in excess of £450m plus further unquantified amounts of interest and costs. Co-op strongly disputes both liability and quantum of the claim and the claim will be vigorously defended.”

Co-op’s sale of the subsidiary in May 2016 saw the 36 Somerfield stores transfer to the Budgens symbol before the company entered administration nine months later.

Joint administrators at PwC said in March 2017: “Food Retailer Operations Ltd operated 34 convenience stores across the UK, which trade under the Budgens brand and employ 815 people. It also held the leasehold interests in a further 36 non-trading stores, two non-trading properties and the head office of the former Somerfield business.

“Since its acquisition of the stores from Co-op in July 2016, the Company had experienced difficult trading conditions. This resulted in the Company being placed into administration despite sustained efforts to make the business more commercially viable.”