CR-2023-002766 - [2025] EWHC 2818 (Ch)

The jurisdictional requirements are set out by Mellor J in the Rational Foreign Exchange Limited case at paragraphs [38] to [43] as follows.

“[38] The distribution of Relevant Funds back to customers must be by way of a distribution plan, drawn up in accordance with Rules 112(2) – (4) and approved by the Court: Rules 112 and 114.

[39] Prior to Court approval, the distribution plan must be put before the committee of customers/creditors for their approval (either with or without modification): Rule 113. If the distribution plan is not approved, the committee must have an opportunity to explain their position to the Court.

[40] If a shortfall exists between the amount of Relevant Funds held by a Company and the amount of admitted claims to Relevant Funds, then the administrators must use company monies to top-up the Relevant Funds insofar as is possible; Regulation 13(8). There is provision in Regulation 19(2) for how any remaining shortfall (after top-up) is to be dealt with in the distribution plan. Any shortfall is to be borne pro rata.

[41] The 2021 Rules prescribe specific elements that the distribution plan is required to address (detailed below). The 2021 Rules are modelled on the Investment Bank Special Administration Rules 2011.

[42] As to costs, Regulation 18(5) and Rule 99 detail how a client’s share of the expenses of the special administration will be discharged, insofar as they relate to the achievement of Objective 1. The costs and expenses of Objective 1 are to be paid out of Relevant Funds.

[43] On an application to Court pursuant to Rule 114 for approval of a distribution plan, the court has a discretion as to whether to grant the relief sought, but it must be satisfied that (i) where Rule 111 applies (as it does here) that the JSAs have made the necessary notifications in accordance with that rule; and (ii) the creditors committee has approved the distribution plan under Rule 113, or that it has been given an opportunity to explain why not. It must also be satisfied that certain prescribed notifications have been given, pursuant to Rule 114(3) and (5).”

As regards jurisdictional requirements, the first jurisdictional requirement relates to notifications. Where Rule 111 applies the relevant necessary notifications have been made pursuant to that rule. That is in relation to setting of what has been described for convenience as a soft bar date. As regards that, I am satisfied that that condition is met. Secondly, there must be approval by the creditors’ committee or if they have not approved it, then there must be an opportunity given to them by the court or the court must have heard from them. In this particular case, as I have said, I am satisfied that the distribution plan has been approved by the creditors’ committee and that there is jurisdiction of the court to approve it, including the slight amendments that have been made to it. Finally, I am satisfied that the notifications about the distribution plan and the court hearing set out by Rule 114(3) have been met.

I am satisfied that the Distribution Plan contains the elements required by or is consistent with e.g. Rule 112 and Regulation 18(5)) and Rule 99.

The approach to dealing with approval, that is the court’s discretionary power to approve, is dealt with in passages from Mellor J’s judgment which I gratefully adopt. They are set out below:

“The Approach to approving a distribution plan

[44] The Rules do not provide any guidance as to the Court’s exercise of discretion pursuant to Rule 114. Ms Rogers submitted that guidance can be taken from the authorities decided under the Investment Bank Special Administration Rules 2011, in which ‘Objective 1’ is very similar to the 2021 Rules (being the timely return of client money - this being the overall purpose of CASS 7A). I agree. Ms Rogers drew my attention to the following points from those authorities, all of which I accept and propose to apply.

[45] Re Strand Capital [2019] EWHC 1449 (Ch) cited with approval the (unreported) decision of David Richards J in Re MF Global UK Ltd [2012] EWHC 3789 (Ch) at [24] (also cited with approval by Arnold J (as he then was) in Re Beaufort Asset Clearing Services Limited [2018] EWHC 2287 (Ch), adding only that Objective 1 concerned not only returning client assets but returning them as quickly as reasonably practicable):

‘In my judgment, account must be taken of the purpose of the Distribution Plan under the rules, which is to assist in the achievement of the first objective of returning client assets, as it seems to me the court must be satisfied that the plan provides a fair and reasonable means of effecting the distribution of clients assets to which the plan relates.’

[46] In Hume Capital Securities Plc [2015] EWHC 25 (Ch) HHJ Keyser QC, sitting as a judge of the High Court, added at [11] (with which Arnold J (as he then was) agreed in Re Beaufort Asset Clearing Services Limited [2018] EWHC 2287 (Ch) at [11]):

‘None of those factors can be conclusive—if they were, the rules would say so or the approval of the court would not be required—but all are to be given proper weight. In particular, as it seems to me, if the court is satisfied that all relevant interests and persons have been given the proper opportunity to make representations on the proposals and have either specifically agreed to them or at least not objected to them and that the plan proposed by the administrators has been approved by the creditors’ committee, the court is very likely to be slow to withhold approval or to substitute its own assessment of what is just and reasonable for that of the persons whose interests are affected.’

[47] In Re SVS Securities Plc [2020] EWHC 1501 (Ch), Miles J summarised the principles that have been developed by the Court at [32] - [34]:

‘[32] I have mentioned the court’s discretion. Counsel for the applicant, Mr Bayfield QC, took me to a number of decisions which illustrate the approach of the court in applications for approval of a distribution plan, namely: Re MF Global UK Ltd [2012] EWHC 3789 (Ch); Re Hume Capital Securities [2015] EWHC B25 (Ch); and Re Beaufort Asset Clearing Services Limited [2018] EWHC 2287 (Ch). The cases establish the following points. First, account must be taken of the purpose of the distribution plan under the Rules, which is to assist in the achievement of Objective 1 of returning client assets as early as possible. The court must be satisfied that the plan provides a fair and reasonable means of effecting the distribution of the client assets to which the plan relates.

[33] Secondly, the context in which the application is brought before the court is itself material. The distribution plan can only be approved if the creditors’ committee has approved it or has had an opportunity to explain why it has not approved it and its role in relation to the distribution plan will be a particularly material factor in the court’s decision. Individual clients will have been notified both of the plan before the hearing and are able to make representations against it so that their input, or the lack of it, will again be material. The FCA has to be notified of a hearing and its objections, or lack of them will be relevant. Finally, the making of the application will itself indicate the exercise of professional judgment on the part of the administrators as officers of the court and weight is to be given to their judgment. While none of those factors can be conclusive, and the court must exercise its own judgment, they are to be given particular weight.

[34] Third, if the court is satisfied that all relevant persons have been given a proper opportunity to make representations and have either specifically agreed to them or at least not objected to them, the court is very likely to be slow to withhold approval or substitute its own assessment of what is fair and reasonable as a means of effecting the distribution of client assets for the purposes of Objective 1.’

[48] This summary was approved and applied by Trower J in Re Reyker Securities plc [2020] EWHC 3286 (Ch) at [22]-[23] and by Rajah J in Re Blankstone Sington Limited [2024] EWHC 1111 (Ch) at [9].

[49] The court has to be satisfied that the proposed plan is fair and reasonable; Re WealthTek LLP (first judgment) [2024] EWHC 2520 (Ch) at [9].”

Subject to the question of approval of the hard bar date which I will have to come back to because the court has to approve that separately in any event, I am satisfied that, in the particular circumstances here, it is appropriate to approve the Distribution Plan in the amended form put before me.

The plan follows similar schemes in the recent past in which the JSAs in this case have been involved, including Xpress Money Services Limited [2023] EWHC 1120 (Ch) and the Silverbird case. Put shortly, the purpose of the distribution plan is the achievement of the statutory objective one. It seems to me that the distribution plan is a fair and reasonable means of making distribution of the Relevant Funds to the appropriate customers. It has been approved by the Creditors Committee. The customers have had notice of the application and there has been no objection. The FCA has had notice of the application and has no objection. It is clear that the JSAs consider in the exercise of their professional judgment that the Distribution Plan is an efficient way of returning Relevant Funds to customers in accordance with the first statutory objective.

In my judgment, the Distribution Plan is one that it is appropriate and desirable to be approved so that the first objective can be achieved. For those reasons, I accordingly approve it.