CR-2018-009110 - [2025] EWHC 2115 (Ch)

The position of the company and the creditors is unusual, and requires a word of explanation. The Company (formerly Arjo Wiggins Appleton Ltd) was established to act as a holding company for paper making facilities of BAT, which it acquired in 1978 from the US firm NCR. Importantly, upon this acquisition, BAT indemnified NCR against certain environmental liabilities. BAT subsequently discovered that these facilities had (prior to their acquisition by BAT) been seriously polluting the Fox River in the United States for many years, and substantial litigation ensued.

The Company and its subsidiaries were demerged from the BAT group in 1990. On the demerger, the benefit of various insurance policies covering environmental liabilities was transferred to the Company, and the Company in turn provided indemnities to its subsidiary Appleton Papers Inc (“API”) and to BAT. API also indemnified BAT under the demerger arrangements. When the Company sold API in 2001, as part of that transaction, the Company provided indirect indemnities to API going forward in respect of API’s liabilities for the Fox River and the Kalamazoo River. The net effect (and the important point for the purposes of this Application) was that if any claims in respect of environmental liabilities were asserted against API or BAT, the Company was liable to meet these claims through the chain of indemnities.

Very substantial claims were brought by the US authorities from 2008 onwards against NCR, which sought to claim on the indemnities given by BAT in the acquisition agreement, and these liabilities flowed through the chain of counterindemnities to API and to the Company. However, in December 2008 and May 2009 the Company paid away the bulk of its assets by way of dividends (the “Dividends”) to its then holding company (Sequana SA (“Sequana”)). These payments were made on the authority of the then Directors, who had been appointed by Sequana (the “Sequana Directors”). The payment of these dividends was challenged in the UK courts, but was upheld by the Supreme Court in BTI 2014 LLC v Sequana SA and Others [2022] UKSC 25. However, the payment of the second dividend was found by Rose J in Sequana to be in breach of s 423 IA 1986. Sequana did not pay the judgment debt; it went into sauvegarde (French administration), followed by liquidation. The Company was therefore entirely unable to meet its obligations under the indemnities which it had given (which could have been as much as $600m).

The payment of the dividends gave rise to multiple claims between the potentially liable parties, resulting in both litigation and arbitration. These proceedings were settled by the entry of all parties into the “Funding Agreement” in September 2014.

The effect of the Funding Agreement was that (a) the various proceedings were discontinued, (b) the first Applicant, BTI, was established as a Delaware LLC, (c) the Company’s claims against the Sequana Directors and any other third party advisors were assigned to BTI, and BAT undertook to fund these actions, (d) BAT paid amounts to the LLC (totalling $230m) for shares in the LLC (and promised to contribute more in certain circumstances), (e) this amount was paid on by BTI to NCR, (f) THowever, the payment of the second dividend was found by Rose J in Sequana to be in breach of s 423 IA 1986. That decision was against Sequana. Sequana did not pay the judgment debt; it went into sauvegarde (French administration), followed by liquidation.he Company promised to pay to BTI 50% of the cost of funding of the amounts paid to NCR (net of any recoveries from the assigned causes of action), payable annually (the “Section 6 Payments”). It is notable that the agreement did not extinguish BAT’s claim against the Company – indeed the Company explicitly indemnified BAT in the Funding Agreement for the costs that it incurred under it (net of recoveries). However, it was provided that the Company’s liability to BAT in this regard was “limited to an amount which shall not cause Windward’s net assets to be reduced below $25 million (the “Windward Floor”)”. The Funding Agreement is governed by New York law, but nothing turns on this, and the parties (and I) construe it simply in accordance with its terms.

In May 2009 the Company was demerged from Sequana, and transferred to TMW Investments (Luxembourg) SARL. This meant that the Sequana Directors resigned, and new directors were appointed (together with a third director appointed subsequently, the “New Directors”).

The Company did not make the payments specified in Section 6, and in 2018 BTI issued a demand for all outstanding amounts. The New Directors appointed Mr O’Connell of Smith and Williamson (“S&W”) to advise them on their options, and on 26 October 2018 they resolved to place the Company into Administration. This was done using the ‘out-of-court’ procedure pursuant to para 22(2), Schedule B1 to the Insolvency Act 1986 (“IA86”). Mr O’Connell and Mr Hardman were appointed as Administrators by the New Directors.

The statutory objective of the Administration was para 3(1)(b), Schedule B1 i.e. achieving a better result for the Company’s creditors as a whole than would be likely if it were wound up. Under para 3(2), the Administrators were (and remain) under a duty to act in the interests of the Company’s creditors as a whole.

The term of the Administration was originally due to end on 2 October 2019, but was extended by consent to 25 October 2020 and subsequently by order on three occasions. Following the Extension Application, it was most recently extended until 31 July 2025.

According to the original statement of affairs, the assets of the company amounted to around £12m. However, since these assets comprised mainly equity investments in smaller companies, their realisable value was unknown. The bulk of this value seems to have been represented by a 5.4% investment in a company called DeepGreen. These shares were subsequently sold for £10.57m.

Meanwhile BTI had been pursuing the actions assigned to it under the Funding Agreement, and in June 2024 it settled an action against PwC. Under the terms of the Funding Agreement, £7.6m of the amount received was payable to the Company.

The Company is currently suing the New Directors over transfers out of the Company of shares in DeepGreen to them personally prior to the commencement of the Administration. The nominal value of this claim is put by Mr O’Connell in his witness statement at £150m. The conflict to which Mr O’Connell is said to be subject arises out of his involvement in these transfers. These proceedings were commenced on 5 April 2024.