People’s Energy (Supply) Limited (in administration), Re

At the convening stage of a scheme, the court ordinarily considers class composition and jurisdictional or other issues which would unquestionably prevent sanction. It does not determine the scheme’s fairness or merits.

Creditors form one class where their rights are sufficiently similar to consult together, having regard to both their existing rights and the rights conferred by the scheme. Differences in claim certainty or potential recoveries do not necessarily fracture a class. The question is whether there is more to unite than to divide.

A scheme may have jurisdiction to release claims against third parties, including joint obligors and insurers, although the propriety of such releases may remain for the sanction hearing.

People’s Energy (Supply) Limited, acting by its administrators, applied under Part 26 of the Companies Act 2006 for an order convening a single meeting of scheme creditors. The proposed scheme imposed a claims deadline, released certain claims against the company, its parent and an insurer, and created a streamlined adjudication process.

The principal issues were whether trade creditors and potential data-breach creditors formed one class, whether the court had jurisdiction to sanction the proposed third-party releases, and whether any other issue was an obvious obstacle to sanction.

1. Convening-stage function. The court was not required to assess the fairness or merits of the proposed scheme at this stage. Its principal tasks were to consider class composition and any jurisdictional or other issue which would unquestionably lead to refusal of sanction: Re Telewest Communicators plc (No. 1) [2004] BCC 342, Re Indah Kiat International Finance Co BV [2016] BCC 418 and Re Noble Group Limited [2019] BCC 349.
2. Class composition. The relevant comparison was the creditors’ rights in a distributing administration or liquidation and their rights under the proposed scheme. All creditors had unsecured claims ranking pari passu in the comparator and would receive the same claims-submission and adjudication rights under the scheme. The uncertainty surrounding data-breach claims did not create a material difference in rights. Nor did the potential loss of claims against Hiscox or the parent company, since the company was likely to pay creditors in full, the insurance cover was limited and substantially eroded, and data-breach creditors retained a residual claim against the parent for any shortfall.
3. The court therefore concluded that there was more to unite than to divide the creditors and that a single meeting was appropriate.
4. Jurisdiction and third-party releases. The company was a company for Part 26 purposes. The proposed replacement of the administration process with the scheme involved sufficient give and take to constitute an arrangement under section 895(1)(a) of the Companies Act 2006. A scheme seeking to release claims against third parties, including a joint obligor or an insurer, was not thereby outside the court’s jurisdiction. The discretionary question whether such releases should be sanctioned was left to any later sanction hearing.
5. Potential issues concerning international effectiveness and the adequacy of the explanatory statement disclosed no present obstacle. The proposed communications and notice arrangements were adequate. The confidential Hiscox settlement was properly protected under CPR 5.4C(4)(d), subject to a non-party’s ability to apply on notice for access.
6. The order convening a single scheme meeting was made, subject to deletion of paragraph 5(b) of the draft order.