CR-2025-001323 - [2025] EWHC 2297 (Ch)

For the reasons stated at some length in my judgment on the Plan Company’s restructuring plan (“my Main Judgment” which can be found at [2025] EWHC 2181 (Ch)) I concluded, in summary, that in the particular circumstances there described, the Plan Company had not discharged the burden on it (Footnote: ²) of showing that the Plan is fair and such that it would be appropriate, just and equitable to exercise the Court’s discretion to sanction it: see especially paragraph [195].

In reaching that conclusion, I referred to what I called a trilogy of recent cases in the Court of Appeal, namely, In re AGPS Bondco plc [2024] EWCA Civ 24 (“AGPS Bondco”) [2024] Bus LR 745, Re Thames Water Utilities Holdings Ltd [2025] EWCA Civ 475 (“Thames Water”), and Re Petrofac Limited [2025] EWCA Civ 821 (“Petrofac”). It seemed and seems to me plain that those cases mark an incremental departure from the approach derived from Re Virgin Active [2021] EWHC 1246 (Ch) (“Virgin Active”) in which de minimis payments to ‘out of the money’ creditors were justified and became the norm on the ground that, in the context of cross-class cramdown, the litmus test of fairness so far as such creditors were concerned was a comparison with what they would otherwise receive in the relevant alternative (and see paragraph [167] of my Main Judgment). By reference especially to Petrofac (since, of the trilogy, that case was most analogous to this case) I stated (at paragraph [173] of my Main Judgment) that:

“…it is clear from Re Petrofac that what falls to be assessed in determining the fairness of the Plan at the discretion stage is whether what the Plan would achieve is a fair and reasonable allocation of the benefits of the Restructuring having regard to the amounts contributed by each creditor class, including the class proposed to be crammed down.”

The Plan Company’s position is that the approach in that trilogy of Court of Appeal cases, and especially in Thames Water and Petrofac, is wrong and that my approach in the exercise of my discretion in this case, which was informed by those cases, was likewise wrong also. In its skeleton argument for the hearing of its application for a leapfrog certificate, the Plan Company elaborated its position as follows:

“(1)

The correct approach is that out of the money creditors can fairly have their rights released through a restructuring plan for nominal consideration where they would be no worse off under the restructuring plan than in the relevant alternative and (in a case where the relevant alternative is an administration or a liquidation) where the restructuring plan involves no unjustified departure from the insolvency waterfall. In the present case: (i) the Unsecured Plan Creditors were, save for the prescribed part, out of the money in the Relevant Alternative; (ii) the Bondholders (being the Plan Company’s secured creditors) would, in no circumstances, recover more than par in the Relevant Alternative; and (iii) the upside sharing payment arrangements prescribed under the Plan were designed to ensure that the shareholders would make no recovery unless and until the Unsecured Plan Creditors had themselves recovered in full.

(2)

A discretionary test to determine what is perceived to be a fair allocation of the benefits preserved or generated by a restructuring plan is wholly uncertain and unworkable. Further, the idea that the Court will be able to assess fairness with reference to failed negotiations between a plan company and certain of its plan creditors is misconceived and lends itself to gaming.”

The basis of its application for a leapfrog certificate is the Plan Company’s contention that its argument:

“is not capable of being made at Court of Appeal level because the recent judgments of the Court of Appeal in Thames Water / Petrofac render that argument bound to fail. Any appeal must therefore be to the Supreme Court.

Moreover, the case is wholly suitable for consideration by the Supreme Court as it raises a point of law of general public importance, namely, the appropriate test for assessing fairness and the exercise of the Court’s discretion in the context of a cross-class cramdown.”

The Plan Company has also drawn to my attention the fact that an application for permission to appeal to the Supreme Court has been made by the plan company concerned in Petrofac, and has expressed the hope that the Supreme Court would consider the two applications together.