In the matter of Morses Club Scheme Limited
[2023] EWHC 1365 (Ch)
People's Energy (Supply) Limited (in Administration), Re
9 May 2024
[2024] EWHC 1367 (Ch)
High Court
A bankrupt energy company proposed a plan to settle customer lawsuits quickly and cheaply through a special court process. Most customers agreed, but one customer and a government regulator raised some issues. The judge approved the plan because it was fair to most people and offered a fast solution to the problems, although he acknowledged lingering concerns about potential unfairness to some customers and the potential for excessive payouts to the company's shareholders.
Key Facts
- •People's Energy (Supply) Limited (in administration) applied for court sanction of a scheme of arrangement under section 899 of the Companies Act 2006.
- •The company was a retail energy supplier that collapsed due to volatile energy prices and a data breach affecting nearly 376,000 accounts.
- •Substantial close-out payments from BP Gas Marketing Limited improved the company's financial position.
- •The company had a £1 million data breach insurance policy with Hiscox, reduced to £680,000 due to claim handling costs.
- •After the convening hearing, new misrepresentation claims emerged.
- •The scheme aimed to set a claims deadline, release claims against the company and its parent, and establish a streamlined adjudication process.
- •A significant majority of creditors (99.54% by number and 99.99% by value) voted in favor of the scheme.
- •Mr. Basak, a former customer, opposed the scheme due to concerns about the administration process and his own circumstances.
- •The scheme included releases of claims against both People's Energy (Supply) Limited and its parent company, The People’s Energy Company Limited.
Legal Principles
Principles for sanctioning a scheme of arrangement: compliance with statutory requirements; fair representation of the class; reasonable approval by an intelligent and honest man; absence of any 'blot' or defect.
Re Telewest Communications (No. 2) Ltd [2005] 1 BCLC 772; Re KCA Deutag UK Finance plc [2020] EWHC 2977 (Ch)
Consideration of whether the court would be acting in vain if the scheme is not recognized in Scotland.
Not explicitly cited but implied.
The court generally defers to the majority of Scheme Creditors' judgement of their own interests.
Re KCA Deutag UK Finance plc [2020] EWHC 2977 (Ch)
Appropriateness of a single class of creditors in schemes of arrangement.
Re UDL Holdings Ltd (2001) 4 EIKCFAR 358
Validity of releasing claims against related entities in a scheme of arrangement
Noble Group Ltd [2018] EWHC 3092; Re Lehman Bros [2010] Bus LR 489 1012
Outcomes
The court sanctioned the scheme of arrangement.
The statutory majorities were obtained; the class was fairly represented; the scheme was reasonably approvable; and no significant 'blot' or defect was found, despite some concerns raised by Mr. Basak and Ofgem. The court considered the potential for the scheme's recognition in Scotland, and the potential for a surplus to benefit shareholders.