There is a noun which seems like a subject "the fire". There is a noun - "the paper files" - which looks like the object of "the fire". So, the context here demands an active verb. "Were destroyed" is a passive verb form (the past simple passive), not an active one and so can't be right.

The bookkeeper was pleased to find that, although the fire ____ the paper files, the records on the computer's hard drive were intact. +(C) had destroyed ==> At moment 1, the fire DESTROYED the paper files (simple past, active voice, singular). Another way to say this would be: At moment 1, the paper files WERE DESTROYED by the fire (simple past, passive voice, plural). Later, at moment 2, the hard drive records were intact. You see: both moments 1 and 2 are past, but moment 1 is before moment 2. So, at moment 2, the fire HAD DESTROYED the paper files (or the paper files HAD BEEN DESTROYED BY the fire) but the records WERE intact. -(B) were destroyed ==> Not the fire was destroyed by the paper files, but the paper files were destroyed by the fire. Besides, WERE is plural, which cannot be used with FIRE, which is singular. And the verb tense here wouldn't be simple past (WERE) but past perfect (HAD BEEN DESTROYED), because it is about a past event before another past event: See my explanation above about option (C).

It has to do with verb tense. The verb tense in the first part of sentence, has to match the time frame of the second part. ''was pleased'............'had destroyed'..... They are the same verb tense. It has to do with agreement between the subject and verb and combining the phrases together.