Card Protection Plan Litd, Re

On an application to sanction a scheme of arrangement, the court must consider compliance with statutory and procedural requirements, the fairness of the scheme, the adequacy of representation at the creditors’ meeting, and whether the statutory majority acted bona fide without coercing the minority.

A scheme may be sanctioned notwithstanding objections, a bar date, differential treatment between creditors, or the release of liabilities owed by associated parties, provided the scheme is fair, affords an overall benefit to creditors, and is one which an intelligent and honest creditor acting in his own interests might reasonably approve.

Card Protection Plan Limited applied under Part 26 of the Companies Act 2006 for sanction of a scheme of arrangement under section 899. The company, an insurance intermediary, faced potentially extensive redress claims arising from the mis-selling of card-protection and identity-fraud products.

The scheme provided a mechanism for quantifying and limiting liabilities, including liabilities connected with Business Partners. It was approved at a creditors’ meeting by more than the statutory majority. Objections concerned the bar date, excluded earlier claims, the methodology for calculating redress, interest, and the release of Business Partners’ liabilities. The central issue was whether the scheme was procedurally valid, fairly represented creditors, and was fair and reasonable to sanction.

1. The scheme was sanctioned under section 899 of the Companies Act 2006. The court was satisfied that the statutory and procedural requirements had been complied with, subject only to minor deviations which were waived.
2. The court was satisfied that the creditors’ class was fairly represented at the meeting, notwithstanding the relatively low turnout. The statutory majority had acted bona fide, without coercing the minority and without advancing interests adverse to those of the other creditors.
3. The court was entitled to take account of the scheme’s practical and commercial advantages, including a single and accessible redress process, a reduced risk of insolvency, and greater certainty as to the company’s liabilities. The fact that creditors might receive different benefits did not prevent approval where the scheme provided a similar overall benefit to creditors as a class.
4. The bar date, the treatment of claims arising before 14 January 2005, and the provision for 8 per cent interest did not make the scheme unfair. Individual objections, including the possibility of a creditor having to pursue separate pre-scheme claims, were insufficient to outweigh the scheme’s overall benefits.
5. Following Re La Seda de Barcelona SA, the release of Business Partners’ liabilities was not necessarily a bar to sanction. In the circumstances, the scheme was fair both procedurally and substantively, contained no blot, and was one which an intelligent and honest creditor acting in his own interests might reasonably approve. It was therefore expedient and proper to approve the draft order.