Thanet District Council looks set to be forced to write-off a £3.4million debt it was owed after the collapse of Transeuropa ferry company.

A confidential report passed to the KM Group reveals lawyers have told the district council it has no prospects of recovering the money owed by the Transeuropa ferry company, which operated out of Ramsgate port.

When the company collapsed in April last year, it emerged the council had made a secret agreement with it to defer port fees - an arrangement designed to keep the company afloat while it sought additional investment.

The deal was agreed in 2011, when the council was run by the Conservatives and then continued when Labour took charge. Details of the deal were kept from most councillors.

At the time it went bust, Transeuropa and three subsidiary companies, together owed £3.4m to the council along with £12m to other creditors.

Doubts about the council's ability to recover the money surfaced when it emerged it was not a secured creditor - meaning it did not have priority over the company's assets.

Now a report, passed to the KM Group by Thanet Green councillor Ian Driver, shows lawyers have concluded the council had no realistic prospects of getting its money back.

Their verdict appears to underline the council's failure to become a secured creditor was a key reason why it has been left empty-handed.

The report says at the time of the collapse, Transeuropa Ferries - which owed the council £1.1m - was "hopelessly insolvent", the prospects of getting the money back were "remote" and the council "cannot reasonably expect to benefit from a creditors distribution".

In relation to the companies that owned the ferries, the lawyers were equally pessimistic.

In relation to the £1.07m owed by Forsythia Maritime, which owned the Larkspur ferry, the report concludes: "There is no realistic prospect of a distribution of any of the net proceeds of sale of the Larkspur to unsecured creditors such as the council."

The Larkspur was sold at auction to Oilchart, another creditor, for €750,000 - less than half its scrap value of €1.5m.

The same argument applied to Odyssy Maritime, which owned the ferry "Gardenia" and owed the council £772,000.

In relation to the Spirit of Ostend, which was leased to a fourth company that owed Thanet £387,000, the report states that under maritime law, the council could not seize it as it was located in Tilbury.

Cllr Driver said the report's conclusions, due to be presented to councillors next week, reinforced his call for an independent investigation.

He said: "I had no option to but to release this secret report in the public interest. It demonstrates staggering incompetence at the highest levels in Thanet Council.

"It is clear that had the council taken action in 2011/12 to secure the growing debts of Transeuropa and its associated companies against their assets, then losses to the taxpayers when the companies ceased trading in 2013 could have been very much less than the £3.4million.

"There should be an independent inquiry and heads should roll."

What do you think? Join the debate below.