People's Energy (Supply) Limited (in Administration), Re

A scheme of arrangement may establish a cut-off date and an adjudication process replacing ordinary court proceedings, including in an administration, provided the statutory and procedural requirements are met and the scheme is fair.

The court asks whether an intelligent and honest creditor, acting in his own interests, might reasonably approve the scheme. It does not decide whether the scheme is the fairest or best available arrangement. A single class is appropriate where creditors’ rights are sufficiently similar to enable them to consult together in a common interest. Releases of connected-party claims may be sanctioned where they are necessary to give the scheme practical effect.

People’s Energy (Supply) Limited, an energy supplier in administration, applied under section 899 of the Companies Act 2006 for sanction of a scheme of arrangement.

The scheme addressed potential data-breach and misrepresentation claims. It imposed a claims submission deadline, released claims against the company and its Scottish parent, and provided for disputed claims to be determined through an inquisitorial adjudication process. The scheme had been approved at a single creditors’ meeting by substantial statutory majorities.

The court considered statutory compliance, class composition, the conduct and representation of the meeting, fairness, alleged defects, the releases, the scheme’s effectiveness in Scotland, and objections by a former customer.

1. The scheme was sanctioned. The statutory majorities had been obtained by a substantial margin, the Convening Order had been complied with, and the meeting had been validly convened and conducted. The subsequent addition of possible misrepresentation claims had been addressed by adjourning the meeting, notifying additional potential creditors, amending the explanatory materials and making further arrangements for participation.

2. A single class remained appropriate. All scheme creditors held unsecured claims ranking pari passu under the comparator. They would receive the same post-scheme rights, including the opportunity to submit claims and use the streamlined adjudication process. Their rights were therefore sufficiently similar to permit consultation in a common interest, applying Re UDL Holdings Ltd.

3. The class had been fairly represented and the majority had voted bona fide and for proper purposes. The court applied the fairness approach explained in Re KCA Deutag UK Finance plc: the question was whether an intelligent and honest person, acting in respect of his own interests, might reasonably approve the scheme. The court was not required to determine whether it was the fairest or best scheme.

4. The scheme’s cut-off date and adjudication process did not constitute a blot. The scheme offered creditors earlier and cheaper resolution, while replacing adversarial court proceedings with an adjudication process funded by the company. The court accepted that the insolvency rules’ ordinary claims regime did not prohibit such a process, applying the reasoning implicit in Kempe v Ambassador Insurance Company.

5. Releases of claims against the parent were proper and necessary because, without them, claims could return against the scheme company on a ricochet basis. The court was persuaded by Noble Group Ltd and Re Lehman Bros that such releases could be included where they were required to give the scheme practical effect.

6. The court concluded that there was a reasonable prospect that the scheme, including the releases, would be recognised and given effect in Scotland. The objections concerning independence, creditor involvement, the burden of proof, lack of court recourse, complexity and administration costs did not justify refusing sanction. The scheme was sanctioned subject to agreed refinements concerning the provision of documents to adjudicators.

First-instance application for sanction of a scheme of arrangement. The judgment records an earlier convening decision by Richard Smith J on 16 October 2023, directing a single class meeting, but this was not an appeal.