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

First, and although the case was not mentioned in his skeleton argument, he relied in his oral argument on In re Tea Corporation Limited [1904] 1 Ch 12 (in the Court of Appeal, upholding the decision of Buckley J. at first instance) and a line of cases following it for the proposition that persons having no real financial interest in the assets of the company (whether because of its financial distress or, as in re Tea, because of the transfer of all a company’s assets to a new company under a scheme of arrangement providing for such transfer made between the company and its preference shareholders, leaving the ordinary shareholders behind interested only in what had become a shell) need not be paid more than a nominal amount or small ‘douceur’.

Secondly, Mr Bayfield submitted that (quoting from his skeleton argument):

“the Thames Water / Petrofac approach leads to absurd results. The Plan does not involve the Bondholders appropriating to themselves an inequitable share of the benefits of the Restructuring (in fact, they are estimated to suffer material losses and their returns in the Relevant Alternative are far less in percentage terms than the returns being offered to the Unsecured Plan Creditors, in both the low and high cases); rather, the Plan gives the Unsecured Plan Creditors an upfront return more than 33 times greater than their return in the Relevant Alternative prior to any additional value that they might receive under the upside sharing payments arrangements. That is now deemed to be unfair, without there being a need to justify why a more than 5% return (plus the upside sharing arrangements) to the Unsecured Plan Creditors would constitute a fair allocation of the benefits of the Restructuring (noting, for example, that a 15% return would be approximately 100 times the return the Unsecured Plan Creditors would recover in the Relevant Alternative, in even further impairment to the Bondholders);”

Thirdly, he suggested that (again quoting from his skeleton argument) that:

“the Thames Water / Petrofac approach entails obvious scope for gaming the system. For example, in the present case it would seem that the Plan Company would have been in a better position in terms of obtaining sanction of the Plan if it had initially, cynically, made an offer of, say, 1%, before moving to 5%, because in that scenario the Plan Company would demonstrate to the Court that it had negotiated upwards to a higher payment;”

Fourthly, he submitted (quoting his skeleton argument) that:

“the Thames Water / Petrofac approach is unworkable in that it lacks sufficient certainty to enable companies to present a restructuring plan with any confidence as to whether it will be sanctioned, in particular, given the emphasis now placed on negotiations to establish fairness, which cannot have been intended when the jurisdiction was introduced. In contrast, the Virgin Active approach, where the focus is on the relevant alternative, does provide a framework whereby there is sufficient certainty.”

The issue is not a question of statutory construction and the Plan Company cannot rely on section 12(3)(a). The Plan Company cannot rely on section 12(3)(b) either, because it cannot show that I was bound by a decision of the Court of Appeal in concluding that I should not sanction the Plan. The Capricorn Companies submits in that regard that

In any event, there is no point of general public importance, because:

“The question of precisely how much of the benefits should be shared with the ‘out of the money’ creditors is likely to affect only a small number of restructuring plans under Part 26A…”

Furthermore, the point which the Plan Company seeks to argue in the Supreme Court is:

“patently a bad one…The whole argument was/is built on Snowden J’s (as he then was) analysis in Re Virgin Active - an argument now described by the Court of Appeal in Re Petrofac (including Snowden LJ) as fallacious. This is not a case in which there is a groundswell of academic and practitioner support – far from it.”

Lastly, the Court should not exercise its discretion to grant a leapfrog certificate, because (a) given the developments since the Main Judgment was handed down, the appeal would be academic: after the formal hand down of the Main Judgment the Plan Company has found more money to support a revised offer to the Unsecured Plan Creditors of 7.5% (in place of the existing 5% offer), and since that revised offer must be taken now to be the relevant alternative the Unsecured Plan Creditors would be “worse off” under the Plan than under the revised offer; and (b) there is no need or warrant for a leapfrog appeal where the same arguments are to be advanced in the Petrofac appeal and neither the Supreme Court nor the public interest generally will be well served by “a largely duplicative application for permission from a different plan company.”

I had determined the matter, not on the basis of a point of law as to the applicability of Part 26A, nor as to the satisfaction of its conditions, but at the ‘fairness stage’ as a matter of discretion. Mr Ramel, on behalf of HMRC, submitted in his skeleton argument that the “very fact that what is involved is the exercise of a discretion is not fertile ground for finding a point of law of general public importance; there are very few absolutes when it comes to the exercise of a discretion.”

Given that the cases in the Court of Appeal trilogy are:

“ultimately decisions on “separate (and different) proposed restructuring plans which analyse how the discretion whether to exercise a cross-class cram down power should be exercised in each of those individual cases, it is difficult to see how it can be argued that a High Court judge hearing another restructuring plan case is “bound” by those decisions, which are highly fact-sensitive.”

Further, in order to obtain a certificate, Mr Ramel submitted that:

“the Plan Company must establish that s. 15(3) of the AJA (Footnote: ⁴) is met (proper case for granting leave to appeal to the Court of Appeal). That would require the Plan Company to satisfy r. 52.6(1) of the CPR (appeal having a real prospect of success), which in turn would require the Plan Company to establish that the decision in this case was wrong within the meaning of r. 52.21(3)(a) of the CPR. There is presently no material before the court to establish that any appeal would have a real prospect of success. To the contrary, the judgment contains a lengthy, careful and complete analysis of the claim, the parties’ rival submissions, the law, and its application to this case.”