Court Balances Urgency and Fairness in CB&I UK Ltd Restructuring Case: Key Legal Principles Explored

Citation: [2023] EWHC 2987 (Ch)
Judgment on

Introduction

In the High Court of Justice’s decision regarding CB&I UK Ltd, we encounter a multi-faceted legal dispute where critical issues of insolvency, disclosure, restructuring, and procedural fairness are explored. Mr Justice Miles presides over a case that is emblematic of the challenges in corporate restructuring under the Companies Act 2006, specifically Part 26A, while balancing the urgency of financial distress with the rights and interests of opposing creditors. This article aims to dissect the judgment and highlight the legal principles employed within the context of the case.

Key Facts

The matter concerns restructuring proceedings for CB&I UK Ltd, with applications from a group of creditors/participants known as the LC Ad Hoc Group (“LC AHG”) and from Refineria de Cartagena SA (“Reficar”). The push for the restructuring plan is challenged by opposing creditors on disclosure grounds and the expedition of a sanction hearing. The Plan Company had provided a substantial data room of information, which was made available to opposing creditors to review the financial and future performance projections, yet the opposing parties viewed the information as insufficient or outdated.

The court examines several points relevant to restructuring proceedings:

  1. Disclosure and Information Balance: The principle of fairness in proceedings necessitates that an information balance be maintained. The court scrutinizes whether there has been sufficient disclosure of information by the Plan Company to opposing creditors so that the latter can fairly present their case.

  2. Procedural Timeliness and Urgency: Part 26A of the Companies Act 2006 emphasizes the need for a timely and expeditious process in restructuring plans to aid companies in financial distress. Urgency is a recurring theme, but urgency must be justified and balanced against the right of fair hearing and preparation.

  3. Materiality of Information: The court considers whether the information sought by opposing creditors is materially relevant to the core issues at the sanction hearing, not just broadly relevant.

  4. Burden of Proof: It is for the Plan Company, rather than the opposing creditors, to persuade the court that restructuring will be fair and meet all the jurisdictional requirements of the Act.

  5. Case Management Powers: Mr Justice Miles references Civil Procedure Rule (CPR) 35.9, and the court’s power to order production of documents containing necessary information, while also emphasizing the need for appropriate use of these powers to avoid onerous and disproportionate demands on the parties.

  6. Statutory Policy and Case Management: Restructuring proceedings must be pragmatically managed to avoid excessively demanding trials, taking into account statutory procedures for streamlining and ensuring practicality.

  7. Cross-Class Cramdown: As introduced by Part 26A, this principal allows a restructuring plan to bind all classes of creditors, including dissenting classes, provided certain conditions are met.

Outcomes

The court declined to compel the Plan Company to produce the detailed information requested by the LC AHG, highlighting the extensive information already available and deeming the request for additional documents as likely to be exceedingly onerous and only tangentially relevant. This ruling underscores the principle that demands for information must be reasonable, material, and proportionate in the context of restructuring proceedings.

However, the court allowed the application by Reficar to extend the timetable for the sanction hearing. Though the court acknowledged a degree of urgency, it tilted the balance towards ensuring procedural fairness to allow Reficar to fully explore the Plan Company’s case, granting two days for pre-reading and a six-day hearing, to be accommodated in early February 2024.

Conclusion

The court’s judgment in the CB&I UK Ltd case reaffirms the critical balancing act courts must perform between expedition and fairness in restructuring cases under Part 26A of the Companies Act 2006. Mr Justice Miles has applied legal principles that both support the expedited nature of such proceedings for distressed companies, while also upholding the procedural rights of creditors and reinforcing the importance of case management to facilitate fair and just hearings. The practical underpinnings of the statutory policy are evident as the court emphasizes a pragmatic approach to proceedings with proportionate and targeted demands for disclosure.

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