Virgin Active Holdings Ltd & Ors, Re (Part 26A of the Companies Act 2006)

Costs in restructuring-plan proceedings under Part 26A are a matter for the court’s discretion. There is no established principle or presumption that an unsuccessful opposing creditor will recover its costs, even where its objections were genuine and assisted the court. The court must assess all the circumstances, including whether the creditor raised genuine issues in a timely and appropriate manner, assisted scrutiny of the proposal, or pursued objections whose costs should not fairly be imposed on other stakeholders. The ordinary costs rule in CPR 44.2 will ordinarily not apply to Part 8 applications to convene or sanction a scheme, although it may apply to individual applications within scheme proceedings. The approach under Part 26 provides a starting point for Part 26A, but the ultimate approach may differ.

The three applicant companies sought approval of restructuring plans under Part 26A of the Companies Act 2006. The court had already convened creditor meetings in a previous judgment, [2021] EWHC 814 (Ch). Following that hearing, an ad hoc group of landlords and Riverside Crem 3 Ltd sought payment of their substantial costs. The Plan Companies disputed any immediate liability and argued that costs should be reserved until the sanction hearing.

The central issues were whether there was an established practice governing the payment of opposing creditors’ costs in scheme proceedings, whether that approach applied to Part 26A restructuring plans, and whether the costs applications should be determined before sanction.

1. The court held that costs in scheme proceedings are discretionary. The authorities did not establish a rule or presumption that an unsuccessful opposing creditor should receive its costs merely because its objections were genuine, non-frivolous or assisted the court. The court must decide what justice requires in all the circumstances.

2. The general rule under CPR 44.2 ordinarily has no application to a Part 8 application to convene scheme meetings or sanction a scheme, because the applicant seeks the court’s approval rather than a remedy against another party. That does not necessarily apply to individual applications made within scheme proceedings.

3. Relevant considerations may include whether creditors or members should be encouraged to raise genuine issues in a timely and appropriate manner; whether their participation enabled proper concerns to be ventilated and assisted the court’s scrutiny; and whether an order would improperly encourage objections on the basis that another party would pay the costs. The court will generally avoid adverse costs orders against non-frivolous and helpful objectors, but may make one where the circumstances justify it.

4. The principles developed under Part 26 were a relevant starting point for Part 26A, but the court had not decided that the result must necessarily be the same. The costs applications were highly fact-sensitive. The court therefore reserved the AHG’s and Riverside’s costs until the sanction hearing, when their contribution, the relevance of the information sought, and the overall justice of ordering payment could be assessed.

5. The more limited costs claims of Pure Gym and Mr Unsdorfer were treated separately because their contributions concerned discrete issues of plan scope and drafting. The AHG and Riverside could renew their applications after the sanction decision if they did not take an active role at that hearing.

This was a first-instance decision concerning costs following the convening hearing. The court had previously convened creditor meetings in [2021] EWHC 814 (Ch). The costs applications of the AHG and Riverside were reserved until the sanction hearing.