C-Retail Limited, Re

The court considered an application for disclosure made informally by a creditor (Prudential) in proceedings to convene meetings under Part 26A of the Companies Act 2006 to consider a restructuring plan. The judge analysed the applicable Civil Procedure Rules, in particular the role of CPR Part 8 in Part 26A proceedings and the court's powers under CPR Part 31 (including CPR 31.14 and CPR 31.12), and the interaction with Practice Direction 57AD.

The court held that documents mentioned in witness statements are prima facie inspectable under CPR 31.14 and that the onus lies on the applicant company to explain why inspection should not be permitted. The judge identified scheme/plan-specific factors to be weighed when ordering disclosure, including the need to enable creditors to make informed decisions, economy and avoidance of disproportionate burdens, even-handed treatment and protection of confidential commercial material by a confidentiality ring.

Applying those principles, the judge ordered production of group cash flow forecasts (accepting that separate forecasts for the Plan Company and the parent did not exist), ordered disclosure in full of the Newmark HDH report relied on to calculate estimated recoveries, and required production of the target operating model document if any exists but declined to order disclosure of its underlying calculations and assumptions unless shown to be relevant. The judge encouraged the parties to agree an order dealing with the handling of confidential material at the sanction hearing.

Background and parties: The Plan Company, C-Retail Limited, proposed a restructuring plan under Part 26A of the Companies Act 2006 affecting multiple creditor classes. Prudential Assurance Company Limited is landlord of the Plan Company’s flagship Oxford Street premises. The proposed plan would reduce rent payable to nil, release the Superdry guarantee, introduce rolling break clauses, and compromise arrears and dilapidations in return for a composite payment including (a) four weeks contractual rent, (b) 150% of the estimated return in an administration of the Plan Company and (c) 150% of the estimated return in an administration of Superdry under its guarantee, with a mechanism to avoid double counting.

Procedural posture: The Plan Company had earlier been given an ex tempore order convening 13 creditor meetings. Prudential made an informal application for disclosure by witness statement shortly before the convening hearing. The judge heard oral argument and reserved reasons, delivering this reasoned judgment dealing with the disclosure application.

Issues framed: (i) the proper procedure and jurisdiction for disclosure in Part 8 proceedings relating to schemes and plans (interaction of CPR Part 8, CPR Part 31 and Practice Direction 57AD); (ii) the standards for specific disclosure where documents are referred to in witness statements or otherwise believed to exist; (iii) the extent to which commercially confidential material should be disclosed to creditors and inspected given a confidentiality ring; and (iv) particular disputes as to production of (a) cash flow forecasts for the Plan Company and parent, (b) the Newmark HDH report relied on to calculate estimated recoveries, and (c) the Turnaround/Target Operating Model (TOM) and its underlying assumptions/calculations.

Court’s reasoning and disposition: The judge observed that CPR 8.5(1) requires evidence to be filed with a Part 8 claim and that PD57AD’s List of Issues procedure need not be followed where specific documents are sought. Documents mentioned in witness statements are subject to inspection under CPR 31.14 and the claimant must explain why inspection should be refused. An application for specific disclosure under CPR 31.12 requires evidence of the source of belief that documents exist and of their relevance to an identified issue. The judge set out additional plan-specific factors to balance the need for creditor information, even-handedness, the limited remit of the sanction hearing and the need to avoid disproportionate burdens on parties in financial distress.

• The court accepted the Plan Company’s evidence that separate cash flow forecasts for the Plan Company and the parent did not exist and ordered production of group forecasts only.
• The court ordered disclosure in full of the Newmark HDH report relied on to compute estimated recoveries, noting its significance to the calculation used to determine compromise payments and to potential points about class composition; confidentiality could be managed by the existing confidentiality ring.
• As to the TOM, the court ordered production of any TOM document if it exists but declined to order disclosure of underlying calculations and assumptions absent a clear demonstration of relevance; the parties should address any genuine issues, and the court accepted the parties' proposal to manage confidential material at the sanction hearing.

The judge invited the parties to agree terms for handling confidential exhibits, hearing bundles and supplementary confidential material.

The court granted the disclosure application in part. It held that CPR Part 31 gives power to order inspection of documents referred to in witness statements and that scheme/plan cases require a balanced approach recognising creditors’ need for information, confidentiality protections and proportionality. The court ordered production of group cash flow forecasts (accepting no separate entity forecasts existed), ordered disclosure of the Newmark HDH report in full, and ordered production of any Target Operating Model document if it exists but declined to compel production of its underlying calculations and assumptions without a clearer link to issues in the proceedings. Confidentiality protections should be managed by the existing confidentiality ring and by appropriate orders for the sanction hearing.