Frasers Group Plc v The Official Receiver
| Jurisdiction | England & Wales |
| Judge | Sir Paul Morgan |
| Judgment Date | 29 November 2022 |
| Neutral Citation | [2022] EWHC 3028 (Ch) |
| Docket Number | Appeal Reference No: CH-2022-000116 |
| Court | Chancery Division |
[2022] EWHC 3028 (Ch)
Sir Paul Morgan
(Sitting as a Judge of the Chancery Division)
Appeal Reference No: CH-2022-000116
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
IN THE MATTER OF DEBENHAMS PLC (COMPANY NO. 5448421) (IN COMPULSORY LIQUIDATION)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Adrian Beltrami KC and Lloyd Tamlyn (instructed by Clarion Solicitors Limited) for the Appellant
Tom Smith KC and William Willson (instructed by Kirkland & Ellis International LLP) for Silver Point Capital LP
Charlotte Cooke (instructed by DLA Piper UK LLP) for GLAS Trust Corporation Limited
Hearing date: 16 November 2022
Approved Judgment
This judgment was handed down remotely at 10.30am on [date] by circulation to the parties or their representatives by e-mail and by release to the National Archives.
The appeal
This is an appeal by Frasers Group plc (“Frasers”) against two paragraphs in the order of ICC Judge Jones made on 23 May 2022. By those paragraphs in his order, ICC Judge Jones dismissed an application by Frasers for permission to amend its pleading, described as the Umbrella Points of Claim, and made a consequential order for costs. The appeal is brought with the permission of Falk J granted on 23 June 2022. The Appellant's Notice relied on a single ground of appeal. The Respondents to the appeal are Silver Point Capital LP (“Silver”) and GLAS Trust Corporation Ltd (“GLAS”). Silver and GLAS have served Respondent's Notices stating that they wish the court to uphold the relevant paragraphs in the order on different or additional grounds. Silver's Respondent's Notice identified four such grounds and GLAS's Respondent's Notice adopted those grounds. Silver and GLAS have served skeleton arguments in which they have stated that they do not seek to uphold ICC Judge Jones' decision on the ground which he gave and which was the subject of the Appellant's Notice. At the hearing, Silver and GLAS indicated that they did not wish to proceed with one of the four grounds set out in Silver's Respondent's Notice.
The background
These proceedings arise out of the liquidation of Debenhams plc (“Debenhams”). Frasers is the beneficial owner of some 29.9% of the shares in Debenhams. It is also a creditor of Debenhams. On 9 April 2019, Debenhams entered administration and on the same day there was a pre-pack sale of all of its assets. On 25 January 2021, the court ordered the winding up of Debenhams and the Official Receiver became the liquidator of the company.
Debenhams had two indirect subsidiaries known as Debenhams Retail Ltd (“Retail”) and Debenhams Properties Ltd (“Properties”) which were the principal operating companies in the Debenhams group. Retail and Properties have subsequently changed their names but it is convenient to continue to use their earlier names. Retail and Properties went into administration on 9 April 2020 and Mr Rowley and Mr Massey were appointed Joint Administrators (“the Joint Administrators”) of both of those companies.
The Debenhams group of companies owed substantial sums to creditors and those creditors had taken security over, amongst other things, the assets of Retail and Properties. In particular, certain fixtures and fittings owned by Retail and Properties were the subject of security interests. Legal title to those security interests was vested in GLAS who held that title on trust for various creditors which included Silver. GLAS released its security interests over the fixtures and fittings and Retail and Properties sold the fixtures and fittings to Sportsdirect.com Retail Ltd (“SRL”) which is a wholly owned subsidiary of Frasers. At the same time, various parties entered into a Claims Release Deed with Frasers and SRL pursuant to which, amongst other things, Frasers and SRL agreed to release all claims against certain parties. The Claims Release Deed also contained certain provisions dealing with the appointment of a liquidator in relation to Debenhams.
In the present proceedings, Frasers seeks declarations that the Claims Release Deed, alternatively certain of its provisions, are illegal and unenforceable, alternatively that it is void or voidable (and has been avoided). In the proceedings, Frasers advances three main contentions in support of its claim. First, Frasers contends that the Claims Release Deed tends to abuse, prevent or impede the due course of justice, namely the winding up of Debenhams by the court, and is contrary to public policy, illegal and unenforceable. Secondly, Frasers contends that by entering into the Claims Release Deed, the Joint Administrators of Retail and Properties committed a criminal offence under section 164 of the Insolvency Act 1986 (“the 1986 Act”) with the result that the Deed is illegal and unenforceable. Thirdly, Frasers contends that the Joint Administrators of Retail and Properties exercised their powers for an improper purpose, namely, to stifle an investigation into the affairs of Debenhams whereby the Claims Release Deed is void alternatively voidable (and has been avoided). Linked to this third contention, Frasers says that it understands that the Joint Administrators acted as they did as they were required to do so by GLAS (acting on the instruction of certain creditors, including Silver) and that GLAS exercised its powers for the same improper purpose. The parties to these proceedings include the Joint Administrators of Retail and Properties, GLAS and Silver.
Frasers disagrees with the majority of the creditors (including Silver) as to who should be the liquidator of Debenhams. In January 2022, a liquidator nominated by the majority of the creditors (including Silver) replaced the Official Receiver. Frasers wants that liquidator removed by the court and a new liquidator appointed. Frasers' case is that there ought to be a liquidator who will investigate the affairs of Debenhams and who will bring claims against those who might be responsible for any wrongdoing. The enforceability of the Claims Release Deed against Frasers may be highly relevant to this dispute as to the choice of liquidator for Debenhams.
In their Defence in the present proceedings, the Joint Administrators have pleaded that when GLAS was asked to release its security interests over the fixtures and fittings belonging to Retail and Properties, GLAS required the Joint Administrators to procure Frasers and SRL to enter into a deed in the form of the Claims Release Deed and the Joint Administrators did so. There ensued a composite transaction which involved the release of the security interests over the fixtures and fittings, the sale of the fixtures and fittings and the entry into the Claims Release Deed.
Frasers has sought permission to amend its Umbrella Points of Claim. In relation to the claim that the Joint Administrators committed a criminal offence under section 164 of the 1986 Act, it now wishes to allege that GLAS and Silver also committed an offence under that section. As already stated, ICC Judge Jones refused permission to amend and Frasers now appeals.
The Security Release Deed
As I have explained, Retail and Properties owned various fixtures and fittings in various Debenhams properties. The Joint Administrators wished to sell those fixtures and fittings. The fixtures and fittings were subject to various security agreements which charged the fixtures and fittings as security for repayment of certain sums owed by Retail and Properties. Legal title to the security interests in question was vested in GLAS.
On 24 February 2021, there was a Deed of Release of the security interests in relation to the fixtures and fittings which the Joint Administrators wished to sell. The parties to the Deed of Release were GLAS, as security trustee for the Secured Parties as defined in an Intercreditor Agreement which was itself defined in the Deed of Release, Retail and Properties, acting through their Joint Administrators, acting as agents and without personal liability, and then separately the Joint Administrators.
The Deed of Release of the security interests recited the existence of the security interests and the agreement of Retail and Properties to sell the fixtures and fittings to SRL and the agreement of the parties that the fixtures and fittings should be released from the security interests. By clause 2.1 of the Deed, GLAS released the fixtures and fittings from the security interests. Clause 2.1 stated that GLAS was acting on the instructions of the Majority First Lien Creditors which I assume was a term defined in the Intercreditor Agreement. I was told that Silver was one of these creditors but it was not the only such creditor. Applying a conventional analysis, the consideration in the form of the release of the security interests was given by GLAS to Retail and Properties acting through the Joint Administrators.
The sale and purchase agreement (“the SPA”)
On 24 February 2021, Retail and Properties sold the fixtures and fittings to SRL pursuant to the SPA. The parties to the SPA were...
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Frasers Group Plc v The Official Receiver
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