Re MAB Leasing Ltd

The court was asked to sanction a scheme of arrangement under Part 26 of the Companies Act 2006 to implement a restructuring of MAB Leasing Limited's obligations under 52 English‑law governed aircraft operating leases. The established Part 26 sanctioning principles were applied: compliance with statutory requirements, fair representation of the class, an honest and intelligent creditor might reasonably approve the scheme, and absence of any defect or "blot". The scheme provided Scheme Creditors with a menu of options (including lease continuation on revised terms or termination with a specified termination payment) and was supported by an overwhelming majority and lock‑up agreements.

The court considered the international dimension and the potential impact of the Cape Town Convention and its Aircraft Protocol, in particular the question whether the scheme constituted an "insolvency‑related event" that could not modify obligations without each creditor's consent under Article XI (Alternative A) and Regulation 37 of the 2015 Regulations. Because the final non‑consenting creditor subsequently consented, the court did not decide that legal point. The court sanctioned the scheme, finding it met the statutory and discretionary requirements and would not be acting in vain given the unanimous creditor support and the pressing commercial need.

This was a first instance application by MAB Leasing Limited (a Malaysian incorporated company and subsidiary of Malaysia Aviation Group Berhad) for an order sanctioning a scheme of arrangement under Part 26 of the Companies Act 2006 to compromise rights of 52 lessors under English‑law operating lease agreements in respect of aircraft. The company sought sanction so that a broader Group Restructuring could proceed and to avoid imminent insolvency. The Scheme offered creditors a choice between revised lease terms, a power‑by‑the‑hour rent structure for 2021, market‑reset rents from 2022, or termination with a one‑off Termination Payment calculated with reference to expected liquidation recoveries.

Procedural posture and support:

• The convening hearing was earlier granted by Zacaroli J ([2021] EWHC 152 (Ch)).
• The Scheme Meeting was held on 10 February 2021 and approved unanimously by those voting, representing approximately 95.9% by value; one initially non‑voting creditor later consented and signed a lock‑up agreement so that all Scheme Creditors ultimately supported the Scheme.

Issues before the court:

• Whether statutory requirements for a Part 26 scheme had been met and the class was fairly represented.
• Whether the Scheme was one an intelligent and honest creditor might reasonably approve and whether there was any "blot" or defect.
• Whether there was a sufficient connection with England and the likely international effectiveness of the Scheme.
• Whether the Scheme might be an "insolvency‑related event" under the Aircraft Protocol to the Cape Town Convention and the International Interests in Aircraft Equipment (Cape Town Convention) Regulations 2015, with the consequence that obligations could not be modified without each creditor's consent.
• Whether the court should exercise its discretion to sanction a scheme which by events had obtained unanimous creditor consent.

Court's reasoning:

• The court found statutory requirements satisfied, the meeting fairly representative, and that an honest, intelligent creditor could reasonably approve the Scheme given the commercial evidence (including expert analysis of liquidation returns showing materially worse outcomes absent the Scheme).
• The English governing law of the leases and the extensive creditor support (lock‑ups and votes) supported the court's exercise of jurisdiction and the likely international effectiveness of the Scheme.
• The potential conflict with the Cape Town Convention/2015 Regulations was identified: Regulation 37(9) (implementing Article XI(10)) provides that obligations of the debtor may not be modified without creditor consent upon an "insolvency‑related event". The court declined to resolve whether a Part 26 scheme constitutes such an event because all Scheme Creditors had consented by the time of the sanction hearing, rendering that question unnecessary to determine in this case.
• On the question of sanction where unanimous consent exists, the court followed authorities permitting sanction where there remained a practical purpose to the scheme and where delaying to obtain bilateral signatures would cause further delay, expense and risk; accordingly the court exercised its discretion to sanction the Scheme.

Relief sought: sanction of the Scheme and the attendant order giving effect to the Override Agreement and Restructuring inter‑conditionality.

The court sanctioned the scheme of arrangement. The judge concluded that the statutory Part 26 requirements were met, the Scheme was one which an intelligent and honest creditor might reasonably approve, there was no material blot, and there was a sufficient connection with England and a realistic prospect of international effectiveness. Because the sole potential objection under the Cape Town Convention became academic after the final creditor consented, the court did not decide whether a Part 26 scheme is an "insolvency‑related event" under the Aircraft Protocol or the 2015 Regulations. The sanction was granted to enable the wider Restructuring and to avoid imminent liquidation.