Re People's Energy (Supply) Limited in administration

This is an application under section 899 of the Companies Act 2006 for the court to sanction a proposed scheme of arrangement promoted by the Joint Administrators of People’s Energy (Supply) Limited (the Company). The court found that the statutory majorities required at the convened meeting were obtained, that the convening order and notice processes had been complied with, and that a single class of unsecured creditors remained appropriate despite the late emergence of potential misrepresentation claims.

The court held that the scheme is one which an intelligent and honest person might reasonably approve: it provides a cut-off date for claims, a streamlined inquisitorial adjudication process for disputed claims, and a confidential compromise with the insurer Hiscox under the Third Parties (Rights Against Insurers) Act 2010 that, if the scheme is sanctioned, will bring data-breach claims within the scheme. The judge concluded there was no blot or defect sufficient to justify refusal, and that releases of related companies (including the Scottish parent PEC) were necessary for the scheme to have practical effect and were likely to be recognised in Scotland.

The judge addressed and rejected the objections advanced by a litigant in person (Mr Basak) about independence, access, the burden of proof and loss of court recourse, ordered modest refinements (including obligations to provide documents to adjudicators) and suggested consideration of a short extension of the Claims Submission Deadline to cover the summer holiday period.

This was a first instance sanction hearing under section 899 of the Companies Act 2006 concerning a proposed "cut-off" scheme of arrangement promoted by the Joint Administrators of People’s Energy (Supply) Limited, a retail energy supplier which entered administration in September 2021.

Background and parties:

• The Company and its Scottish parent, The People’s Energy Company Limited (PEC), are in administration. A December 2020 data breach affecting approximately 300,000 customers gave rise to potential claims under the UK GDPR (Articles 82(4) and (5)).
• The Company has received substantial close-out payments under hedging contracts and appears solvent in administration. PEC purchased a corporate liability insurance policy with Hiscox which covered data-breach liability but the cover had been partly exhausted by defence costs.
• The Joint Administrators negotiated a confidential settlement with Hiscox that, subject to sanction of the scheme, would release Hiscox in return for a lump sum to the Company, thereby centralising recovery within the scheme.

Nature of application: The Joint Administrators sought the court’s sanction of a scheme of arrangement under section 899 designed to (i) set a claims submission deadline, (ii) cut off claims against the Company and, where necessary, PEC, and (iii) provide a streamlined, inquisitorial adjudication process (Scheme Adjudicators and Scheme Supervisors) for disputed claims without ordinary court process.

Issues before the court:

• Whether statutory requirements for sanction were met (statutory majorities, compliance with the convening order and class constitution).
• Whether the creditor class was fairly represented and the voting majority acted bona fide for proper purposes.
• Whether the scheme was one that an intelligent and honest person might reasonably approve (fairness), and whether there was any other "blot" or defect.
• Whether releases of PEC and the insurer would be effective in Scotland such that the English court would not be acting in vain.
• Specific objections raised by an individual creditor (Mr Basak) about independence, accessibility, evidential burden and loss of court recourse.

Reasoning and conclusions:

• The requisite statutory majorities were obtained at the adjourned virtual meeting (over 99% by number and value of votes cast in favour).
• The convening order and communications, including additional communications and newspaper advertisements after the emergence of potential misrepresentation claims, complied with directions and enabled effective participation; class composition as a single class remained appropriate because all claims were unsecured and creditors shared common post-scheme rights.
• On fairness, the scheme offered early, proportionate resolution and a streamlined adjudication process which the court accepted as a permissible use of the administrators' scheme powers (with authority from cases such as Re Telewest and KCA Deutag cited).
• The judge was satisfied that releases of PEC and the insurer were necessary to prevent "ricochet" liability and, on Scottish law opinion adduced, there was a reasonable prospect Scottish courts would recognise the releases.
• Objections by the litigant in person did not reveal a fatal defect; the court required modest amendments to ensure Scheme Supervisors must provide documentation to adjudicators and suggested the Administrators consider a short extension of the Claims Submission Deadline to mitigate summer-holiday risk.

Outcome: The court concluded there was no sufficient reason to refuse sanction and proceeded to approve the scheme subject to the refinements identified and the court’s usual formal orders.

The application under section 899 of the Companies Act 2006 to sanction the proposed scheme of arrangement is allowed. The court reasoned that statutory majorities were properly obtained, the convening order and notice requirements were complied with, a single class was appropriate, the scheme was fair and one which an intelligent and honest person might reasonably approve, there was no disqualifying blot, the releases (including in respect of PEC and the insurer) were necessary for practical effect and were likely to be recognised in Scotland, and the objections raised by a litigant in person did not justify refusal. The court required modest amendments to ensure provision of documents to adjudicators and invited consideration of a short extension of the claims submission deadline.