BTI 2014 LLC v Sequana S.A. & Ors

Relief under Companies Act 2006, section 423 is restorative and protective. The court has a broad discretion to fashion an order suited to the justice of the case, and perfect restoration is unnecessary. Relief should ordinarily be granted unless any possible order would be otiose. The court may make a direct payment order rather than merely restore an asset or debt to the transferor. It need not limit relief to the transferor’s liabilities existing when the remedy is devised, or reconstruct every counterfactual consequence of the transaction. Relevant future liabilities may be included where doing so protects a victim’s interests. A stay pending appeal depends on the risk of injustice, including the risk of stifling the appeal and the risk that the judgment will not be enforceable if a stay is granted.

The judgment determined consequential matters following the Main Judgment, [2016] EWHC 1686 (Ch). BTI’s dividend claim had failed, while BAT’s claim under section 423 of the Companies Act 2006 succeeded in relation to the May Dividend but not the December Dividend.

The court had to determine the appropriate section 423 remedy, the costs of the proceedings, applications for stays of execution and security for costs, and permission to appeal. The central questions were how far the remedy should reflect subsequent changes in the parties’ position and liabilities, and whether enforcement should be stayed pending appeal.

1. The court ordered relief under section 423 in the form proposed by BAT. Sequana was to make available a lump sum representing amounts already paid towards the Lower Fox River remediation, together with an ongoing liability capped by the grossed-up value of the May Dividend. The remedy also covered Kalamazoo River liabilities. The section 423 order was stayed pending Sequana’s appeal, except for the information provision.

2. The statutory purpose is to restore the position, so far as practicable, and protect victims. Following Chohan v Saggar and 4Eng Ltd v Harper, a no-remedy outcome is exceptional and requires the court to be satisfied that every possible order would be otiose. The discretion is broad and must be tailored to the justice of the case. 4Eng Ltd v Harper did not impose a limit confining relief to liabilities owed by the transferor when the remedy is considered.

3. The court rejected restoration of the inter-company debt as the sole remedy. That proposal would frustrate the Funding Agreement’s treatment of recoveries and would not adequately restore or protect the victims. There was no basis for a notional asset cushion, an allowance for alleged post-sale asset depletion, or prior exhaustion of the AWA Floor.

4. The May Dividend was converted into euros using the exchange rate at the date of the first major payment. Future dollar liabilities were to be converted at the rate prevailing when payment was demanded. The court rejected an earlier conversion date as producing a windfall.

5. The victim concept in section 423(5) is not confined to present or actual debts. Applying Hill v Spread Trustee, the court held that the remedy could protect the same victim against an additional potential liability not specifically contemplated when the transaction was entered into.

6. Sequana was ordered to pay 50 per cent of BAT/BTI’s costs to trial, and 70 per cent of the consequential-hearing costs, with interim payments. Applying the discretionary approach under CPR r 44.2, the court assessed the parties’ overall success and the discrete issues on which BAT failed. A stay of the costs orders and security for Sequana’s appeal costs were refused.

7. Applying Hammond Suddards Solicitors v Agrichem International Holdings Ltd, the court granted a stay of the section 423 remedy. Sequana’s appeal raised substantial legal points, its financial position created a real risk that enforcement would stifle the appeal, and BAT was sufficiently substantial to bear the delay.

High Court (Chancery Division): The consequential judgment followed the Main Judgment, [2016] EWHC 1686 (Ch), in which BTI’s dividend claim failed and BAT’s section 423 claim succeeded in relation to the May Dividend.