Although in Re Amicus Finance plc  EWHC 2255 (Ch) the company succeeded in persuading Snowden J that the threshold conditions provided for by s 901A Companies Act 2006 had been satisfied so that an order should be made to convene meetings of creditors for the purpose of considering and, if thought fit, approving a restructuring plan under Part 26A Companies Act 2006, the company and its administrators did not have an easy time of it.
The company’s business was the provision of short-term property and development finance. In 2018 it began to experience financial difficulties, and administrators were appointed in December. The administrators now considered that it was no longer financially viable or in the interests of creditors for the company to continue in administration, mainly because the company’s loan portfolio had turned out to be more difficult and more expensive to service and realise than had been anticipated. They formed the view that a restructuring plan was the only alternative to liquidation (which was said to be the relevant alternative to the proposed restructuring plan). The purpose of the restructuring plan was to compromise the company’s liabilities with a view to returning it to solvency and providing creditors with more than they would get if the company went into liquidation. That outcome was to be achieved by an injection of funding of £3.1 million, making lump sum payments to creditors and a “waterfall” of payments from the proceeds of legacy loans to which the company was entitled.
The administrators had proposed to divide creditors into four classes for the purposes of the plan meetings and hold a single meeting in respect of each of them. The proposal for a single class of secured creditors was, however, opposed by a creditor, Crowdstacker Corporate Services Ltd. Snowden J upheld in part their objection to the proposed constitution of the class, holding that differences in existing creditor rights and their treatment under the restructuring plan meant that there was “little or no commonality of commercial interest as regards the holders of those different rights in their capacity as such.” He directed that Crowdstacker and another creditor should form a single class in respect of their respective secured claims up to the value of Crowdstacker’s senior debt, and that the other creditor should form a separate class in respect of the balance of its claim.
Snowden J also referred to difficulties that had arisen in relation to the explanatory statement. At an earlier hearing Trower J had made observations as a result of which a revised explanatory statement had been prepared. However, even then a number of further points had emerged, some based on submissions made to Snowden J by counsel for the objecting creditor, others that Snowden J himself had identified. Those had necessitated further changes to the explanatory statement and in some cases changes to the terms of the restructuring plan itself.
These matters gave rise to an application for costs by Crowdstacker. Referring to his judgment in Re Virgin Active Holdings Limited, Snowden J summarised the principles as follows:
“i) In all cases the issue of costs is in the discretion of the court.
- ii) The general rule in relation to costs under CPR 44.2 will ordinarily have no application to an application under Part 8 seeking an order convening scheme meetings or sanctioning a scheme, because the company seeks the approval of the court, not a remedy or relief against another party.
iii) That is not necessarily the case (and hence the general rule under the CPR may apply) in respect of individual applications made within scheme proceedings.
- iv) In determining the appropriate order to make in relation to costs in scheme proceedings, relevant considerations may include,
- a) that members or creditors should not be deterred from raising genuine issues relating to a scheme in a timely and appropriate manner by concerns over exposure to adverse costs orders;
- b) that ordering the company to pay the reasonable costs of members or creditors who appear may enable matters of proper concern to be fully ventilated before the court, thereby assisting the court in its scrutiny of the proposals; and
- c) that the court should not encourage members or creditors to object in the belief that the costs of objecting will be defrayed by someone else.
- v) The court does not generally make adverse costs orders against objecting members or creditors when their objections (though unsuccessful) are not frivolous and have been of assistance to the court in its scrutiny of the scheme. But the court may make such an adverse costs order if the circumstances justify that order.
- vi) There is no principle or presumption that the court will order the scheme company to pay the costs of an opposing member or creditor whose objections to a scheme have been unsuccessful. It may do so if the objections have not been frivolous and have assisted the court; or it may make no order as to costs. The decision in each case will depend on all the circumstances.”
Having regard to Crowdstacker’s partial success on the class composition issue and what the judge described as its contribution to the task that the court performed at the convening hearing, he decided to make a partial costs order in favour of Crowdstacker and to make it immediately rather than put the decision off until after sanction, given that for the most part the issues raised and resolved at the convening hearing were discrete and would not be affected by decisions made at the sanction stage.