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

It is against that backdrop that the Company now seeks approval for a distribution plan. Before I go on to the statutory and discretionary approach of the court to approval, I should just refer briefly to the terms of the distribution plan. It is in fairly short form.

After “Definitions” and “Interpretation” dealt with by clauses 1 and 2, clause 3 makes clear that the plan applies to all the Relevant Funds at the commencement of the special administration and confirms that for the avoidance of doubt no such funds have been received by the Company after commencement of the special administration. Paragraph 4 deals with the effective date which is the time when the sealed court order approving the plan is received by the JSAs.

Paragraph 5 refers to the bar date and sets out the times for distribution. As regards 5.1, as originally drafted, the special administrators as soon as reasonably practicable after what is described as “the bar date” were to make an initial interim distribution and the bar date for these purposes is the date set out in the notice already given pursuant to Rule 110. As originally drafted, the clause then went on to provide that the special administrators anticipate that the initial interim distribution will be made on or shortly after the date that is three weeks from the effective date and then it set out a calendar date. It is proposed that to firm up the interim distribution date the wording would be slightly changed to make clear that the interim distribution will be made I think it is no later than the date which is three weeks from the effective date.

Secondly, there is a provision that further distributions and/or a final distribution will be made following the “Hard Bar Date”, as soon as practicable thereafter and, as regards that, clause 6 defines the Hard Bar Date and provides that the special administrators would be entitled and have the option to send out a Hard Bar Date Notice. A Hard Bar Date Notice as defined under the scheme is a notice in the form required pursuant to Regulation 21(8) specifying the Hard Bar Date and including the required statements in it. The difficulty, as I saw it, was that that in itself, even taken together with the reference to the court order in the clause 6, did not sufficiently define the date by which the distribution had to be made. Rule 112 requires (among other things) that a distribution plan provides a schedule of dates on which a distribution is to be made. I do not consider that a calendar date is necessary but there must, in my judgment, be a date which is sufficiently certain if a mechanism for establishing it is to be adopted.

The draft order originally put before me expanded on the concept by making clear that the Hard Bar Date could be a date falling four weeks from the date of the notice pursuant to Rule 110. However, in discussion with counsel it was agreed that the order I make will contain a recital setting out in more detail how the hard bar date will be effected. The Order as made will contain provisions that the trigger for the Hard Bar Date will be the determination/conclusion by the Special Administrators that all potential recoveries have been made within the special administration estate and that all relevant funds have been finally collected by the Special Administrators (the “Hard Bar Date Trigger”). The hard bar date notice provided pursuant to Rule 110 (the “Hard Bar Date Notice”) is then to be sent not more than one week following the Hard Bar Date Trigger. The Hard Bar Date is to be on a date which is not more than five weeks following the Hard Bar Date Trigger.

Going back then to the scheme, clause 7 deals with the position of shortfall and the “Top-Up” and provides, in effect, that customers who themselves receive a shortfall on their claim will be treated as unsecured creditors within the Company’s affairs.

There is then provision in clause 9 for a costs reserve. That is sums which are held back by the JSAs in effect to meet the costs or their costs and expenses. The clause there is to be slightly amended in amount from the 4.6 million figure in pounds, I think, to a 4.7 figure or just above. I am satisfied that, as explained to me, that reserve is fair and reasonable to meet anticipated costs.

In that regard it has also been shown to me that the JSAs have been submitting figures to customers and the creditors’ committee regarding their incurred costs and disbursements as the case has gone through and that those figures have not been challenged.

I should also add that so far as the relevant costs and expenses are concerned I have been taken to Rule 99 and Regulation 18. Mr Justice Mellor dealt with the relevant law at paragraphs of his judgment in the Rational Foreign Exchange Limited case as follows:

“[191]Rule 99 provides for expenses properly incurred by the JSAs in the pursuit of Objective 1 to be paid out of Relevant Funds. Pursuant to Regulation 18(5), claims to Relevant Funds do not take priority over the costs of distribution. The costs of distribution comprise the expenses set out in Rule 99; Rule 99(5).

[192] The costs of distributing the asset pool include collecting it in and then making it good (insofar as is possible) where relevant funds have not been properly safeguarded, per Asplin LJ at paragraph [92] of her judgment in Ipagoo:

‘I should add that given the proper interpretation of ‘asset pool’ includes relevant funds which have not been properly safeguarded, in order to achieve conformity with the purposes of the EMD, in my judgment, it is also necessary, as a consequence, to interpret ‘costs of distributing the asset pool’ in regulation 24(2) so as to include the costs of making good the asset pool in circumstances where relevant funds, or some of them, have not been safeguarded. These are administrative costs associated with the asset pool itself. Such an interpretation falls within the breadth of the approach to interpretation approved by Lord Dyson JSC in Lehman [2012] Bus LR 667, para 131.’”

The comments of Mellor J in paragraph 193 of his judgment apply equally here and I accept a similar submission by Mr Willson to that made by Ms Rogers in the Rational Foreign Exchange Limited case:

I also accept that the relevant costs go wider than that, though I do not need for these purposes to draw the precise line. In Re Allied Wallet Limited (in liquidation) [2022] EWHC 1877 (Ch) the court, ICC Judge Burton, dealt in the context of the Electronic Money Regulations with a submission that the costs of distributing the asset pool went wider as follows and fell within the following “scenario 2” (see paragraph [14(2)]) and said that:

“(2)

The “costs of distributing the asset pool” includes the costs of administering and distributing the asset pools and the fees and expenses of the Joint Liquidators in undertaking work which, while not directly related to the asset pools, is necessary for the proper administration of the liquidation. That is to say, certain liquidation costs are necessary in order for there to be an asset pool scenario and for the liquidation to function. These costs are a pre-requisite for a scenario in which the asset pool can be made good and should therefore fall within the notion of “the costs of distributing the asset pool”.

Her conclusion was as follows:

“[27] Consequently, in my judgment, Scenario 2 above applies, save that my interpretation of the categories of work that falls on the payment side of the line, may be slightly narrower than contemplated by Mr Crooks. He includes in Scenario 2, the cost of the Joint Liquidators’ compliance with all statutory and regulatory requirements in relation to the liquidation. I consider that only those costs that relate to effecting the appointments, reporting to the court, and all other tasks that were performed in order to identify and then take such steps as the Joint Liquidators now know must be taken to make good the deficiencies in the asset pools, as well as reporting to creditors on the fruits of their labours and liaising with the FCA, should fall within the provision of regulation 24(2) of the EMR and 23(15) of the PSR as “the costs of distributing the asset pool”.

Under the Distribution Plan, on a monthly basis, the need for the full reserve is to be assessed by the special administrators. If appropriate releases from the reserve are to be made and in due course, if released back to the special reserve, then in due course they will be distributed by way of the final distribution.

So far as the amendments to the scheme are concerned that I have referred to, that is as regards the bar date at clause 5, the change in the amount of the costs reserve, and, in effect, the further explanation of the setting of the hard bar date and the hard bar trigger date by reference to a recital in the order, although those matters may not have been expressly approved by the creditors’ committee, I am satisfied that they are of a minor nature, that there is jurisdiction for me to approve them and that it is appropriate to do so. They are entirely consistent with the way in which matters have been explained both to the FCA and to the relevant creditors’ committee.

That therefore deals with the main provisions. There are then detailed mechanical provisions about how distribution is to take place under clause 10. As regards potential claimants, clause 11 effectively provides that they will be shut out after the hard bar date if not claim has been raised before then. Dealing with what is to happen if there are rejected claims, though it seems unlikely that is to arise, and also dealing with late claimants is clause 13. There are then standard or near standard provisions on non-assignment or transfer, releases of claims arising as a result of distribution, notice provisions modification and, indeed, I note that in clause 17 there is provision for the special administrators to amend the distribution plan before the effective date which are of a minor technical or administrative nature without the need for the court to approve or the creditors’ committee to approve. Leaving aside the court for the moment, it seems to me again the amendments that I have referred to fit happily within clause 17. There is an illegality and severance clause in clause 18 and then governing law and jurisdiction in clause 19.