La Seda De Barcelona SA, Re

A scheme of arrangement may include the release of claims against a non-party where the release forms part of a genuine give and take between the company and its creditors. The court may approve the release where the third-party claims are closely connected with the creditors’ claims against the company, are personal rather than proprietary, and would reduce the creditors’ claims against the company if enforced. The release must be ancillary to the arrangement with the company and affect the substance of the bargain. Once jurisdiction and statutory formalities are established, the court may sanction the scheme if an intelligent and honest member of the relevant class, acting in that member’s interests, might reasonably approve it.

La Seda De Barcelona SA, a Spanish company and parent of an international group, applied for sanction of a scheme under section 899 of the Companies Act 2006. The scheme restructured senior lenders’ rights under an English-law facilities agreement through new equity and unsecured debt.

Newey J had directed the convening of a single creditors’ meeting. The meeting approved the scheme by the requisite majorities, with more than 95 per cent approval by value. The issues before Proudman J were the company’s jurisdictional connection with England, compliance with statutory and informational requirements, and whether the scheme could release liabilities of Artenius UK Ltd, a guarantor and non-party to the scheme.

1. Jurisdiction and formalities. The court accepted the jurisdictional conclusion reached when the meeting was convened and found no reason to reopen it. The meeting had been convened and conducted in accordance with the order, the statutory majorities had been obtained, and the subsequent notices adequately informed creditors of relevant amendments. The amendments did not substantially alter the scheme.
2. Release of a non-party. The court had jurisdiction to sanction a scheme containing the release of Artenius’s liabilities as guarantor. The necessary element of give and take existed because Artenius would release claims against the company and group companies, while scheme creditors would release Artenius from liabilities under the facilities agreement. That arrangement improved the group’s financial position and was part of the bargain embodied in the restructuring.
3. The court relied on the reasoning in T&N Limited (No. 3) [2007] 1 BCLC 563, whose correctness it considered established. The approach was consistent with the explanation in Lehman Brothers International (Europe) (in administration) [2009] EWCA Civ 1161: third-party claims may be released where they are closely connected with claims against the scheme company, are personal rather than proprietary, and concern recovery of the same loss. The Australian controversy was treated as resolved by City of Swan v Lehman Brothers Australia Limited [2009] FCAFC 130.
4. The scheme creditors’ claims against Artenius were personal, closely connected with their claims against the company, and directed to recovery of the same loss. The court therefore had jurisdiction. Exercising its discretion, it was satisfied that an intelligent and honest member of the class, acting in that member’s interests, might reasonably approve the scheme, and sanctioned it.

Newey J directed the convening of the scheme creditors’ meeting. The present court then considered the application for sanction after the meeting approved the scheme. No appellate history is stated.