Re Inmarsat plc

The judgment concerns the exercise of the court's discretion as to costs in Part 8 proceedings for sanction of a scheme of arrangement under the Companies Act 2006. The court reviewed the applicable principles under CPR 44.2 and the special practice that has developed in scheme cases (including the authorities in Re Royal & Sun Alliance, Re Stronghold and Re Ophir) and emphasised that the usual costs rule is often displaced in scheme proceedings. The court examined the conduct and substance of the objections raised by two groups of shareholders (Oaktree and Kite Lake/Rubric): the objections were held to be arguable but thin and largely directed at obtaining a better commercial result from the bidder (Bidco) rather than challenging the jurisdiction to sanction the scheme. Taking account of those matters and of the company’s and Bidco’s roles, the judge concluded it would be unjust to order the objectors to pay the company's or Bidco's costs, but also that the company should not be ordered to pay the objectors' costs. Accordingly the court made no order as to costs.

This judgment determines the costs consequences of opposition to the sanction hearing of the scheme by Inmarsat plc's shareholders. The sanction of the scheme had already been granted on 3 December 2019 (reported at [2019] EWHC 3470 (Ch)). The primary parties in the costs dispute were the company (Inmarsat plc), the bidder (Connect Bidco Ltd) and two groups of objectors who had opposed or threatened to oppose sanction: Oaktree Value Opportunities LP and Oaktree Capital Management LP, and Kite Lake Capital Management LLP together with Rubric Capital Management LP. The objectors had advanced, in correspondence and in skeleton argument, complaints about alleged inadequate disclosure concerning the Ligado contract and press speculation about a material change in circumstances; they sought either an adjournment to allow a further shareholder vote or a contingent value right from the bidder. On the morning of the sanction hearing those objections were withdrawn following an announcement by the bidder that it would not extend the long-stop date nor offer a contingent value right.

The issues for the court were (i) whether the objectors should be ordered to pay the additional costs of the company and of the bidder incurred in responding to opposition that was abandoned, and (ii) whether the company should pay the objectors' costs of having raised their complaints.

The judge reviewed first principles under CPR 44.2 and the particular practice in scheme sanctions, referring to authorities which encourage genuine objections but caution against encouraging speculative or opportunistic opposition that raises costs without improving scrutiny. Applying those principles to the facts, the court found that the objectors had advanced arguable but weak points, that their principal purpose was to extract a better commercial deal, and that their opposition had been withdrawn once that prospect disappeared. The court also observed that Inmarsat might have removed some grounds of complaint by earlier market disclosure. Balancing these considerations the judge concluded that it would be unjust to make an adverse order against the objectors or to require the company to pay their costs, and that Bidco should bear its own costs of appearing. The final order was no order as to costs.

At first instance the court made no order as to costs. The judge exercised the wide discretion in CPR 44.2 in light of the special practice in scheme sanction proceedings, the nature of the objections (arguable but thin and directed to improving the commercial terms), the objectors' withdrawal once the prospect of a better offer disappeared, and the fact that Inmarsat could have removed a ground of complaint by earlier disclosure. For these reasons neither the company nor the objectors were awarded costs and Bidco was to bear its own costs of appearing.