Minor Hotel Group Mea DMCC (a company incorporated under the laws of Dubai) v Benjamin Dymant and Robert Harding (Joint Monitors of the above-mentioned Companies)
| Jurisdiction | England & Wales |
| Judge | Sir Alastair Norris |
| Judgment Date | 17 February 2022 |
| Neutral Citation | [2022] EWHC 340 (Ch) |
| Docket Number | Case Nos: CR-2022-000129, CR-2022-000136, CR-2022-000138, CR-2022-000132, CR-2022-000137, CR-2022-000140, CR-2022-000141, CR-2022-000142, CR-2022-000133, CR-2022-000134 and CR-2022-000139 |
| Court | Chancery Division |
In the Matter of Corbin & King Holdings Limited
And in the Matter of Corbin & King Restaurant Group Limited
And in the Matter of the Wolseley Restaurant Limited
And in the Matter of the Wolseley Restaurant Property Limited
And in the Matter of the Delaunay Restaurant Limited
And in the Matter of the Delaunay Property Limited
And in the Matter of the Colbert Restaurant Limited
And in the Matter of Brasserie Zedel Property Limited
And in the Matter of Brasserie Zedel Limited
And in the Matter of Fischer's Restaurant Limited
And in the Matter of Bellanger Restaurant Limited
And in the Matter of the Insolvency Act 1986
[2022] EWHC 340 (Ch)
Sir Alastair Norris
(Sitting as a judge of the High Court)
Case Nos: CR-2022-000129, CR-2022-000136, CR-2022-000138, CR-2022-000132, CR-2022-000137, CR-2022-000140, CR-2022-000141, CR-2022-000142, CR-2022-000133, CR-2022-000134 and CR-2022-000139
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES COURT (ChD)
Royal Courts of Justice
The Rolls Building
Fetter Lane
London EC4A 1NL
Tom Smith QC and Paul Fradley (instructed by Mishcon de Reya LLP) for the Applicant
Stephen Robins (instructed by Macfarlanes LLP) for the Respondents
Hearing date: 4 February 2021
APPROVED JUDGMENT
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The facts out of which the questions for determination arise lie within a small compass. The Corbin & King group (“the Group”) operates eight restaurants in London and one in Bicester Village. The ultimate parent company of the Group is Corbin & King Ltd (“Topco”). Beneath TopCo in the group structure are two intermediate holding companies: and beneath them are eight operating or asset owning restaurant businesses. I will refer to the intermediate holding, operating and asset owning companies together as “the OpCos”.
The majority shareholder in TopCo is MI Squared Ltd, a company incorporated in Thailand (“MI Squared”). The minority shareholders include Christopher Corbin and Jeremy King, from whom the Group itself takes its name.
Topco's working capital is provided by Minor Hotel Group MEA DMCC (“MHG”) through (i) a £14.25 million facility due for repayment in May 2020 and (ii) a £20 million loan due for repayment in 2024 but with provisions for acceleration (together, “the Loan”). MHG is an associate company of MI Squared. (Both are subsidiaries of Minor International plc (“Minor International”)). The Loan is secured by a debenture granted by TopCo over its assets (including its interests in the OpCos). The Loan is also guaranteed by each of the OpCos (those guarantees also being secured by a debenture).
TopCo failed to repay the £14.25m facility when due, which itself constituted an event of default under the associated £20m loan. Topco thereby became obliged to pay some £34 million to MHG forthwith. But MHG did not serve a notice of demand on Topco until about 19 months later, on the 19 January 2022.
As soon as MHG served its notice of demand on Topco in January 2022, Minor International received an offer from Knighthead Opportunities Capital Management LLC and Certares Opportunities LLC (“Knighthead”) to acquire Minor International's direct and indirect interests in TopCo and the OpCos for a sum equal to the total amount of the Loan. (This was not the first such offer: but earlier offers are not relevant). This offer was therefore a proposal to MHG's parent to purchase debt and equity in TopCo for a consideration equal to the Loan (leaving out of account any other indebtedness of Topco). Minor International rejected this approach. On 25 January 2022 MHG appointed Mr Rowley and Mr Corfield of FRP Advisory to be the administrators of TopCo under Schedule B1 of the Insolvency Act 1986 (“the 1986 Act”).
Meanwhile the directors of the OpCos were exploring whether it was appropriate to seek a moratorium under Part A1 of the 1986 Act in view of the exposure of the OpCos under their guarantees of the Loan to TopCo. Part A1 of the 1986 Act was introduced by section 1 of the Corporate Insolvency and Governance Act 2020 with effect from June 2020. According to the Explanatory Note to the legislation its enactment was intended to introduce greater flexibility into the insolvency regime by allowing the company in financial distress a breathing space in which to explore its rescue and restructuring options free from creditor action. The institution of such a moratorium requires a statement from the directors that in their view the company is, or is likely to become, unable to pay debts; and a statement from the proposed monitor that, in the proposed monitor's view, it is likely that a moratorium for the company would result in the rescue of the company as a going concern.
The directors of the OpCos discussed the position with Mr Dymant and Mr Harding of Teneo Financial Advisory Ltd (as proposed monitors) and provided them with details of the Knighthead offer and with cash flow forecasts which showed that the Opcos were able to pay their ordinary trading debts when due. Mr Dymant and Mr Harding formed the view that the Opcos could be rescued as going concerns. On 20 January 2022 the directors appointed them as joint monitors of the Opcos under Part A1 of the 1986 Act. The following day MHG made demand of each of the OpCos under their guarantees, thereby making each of them immediately liable to pay £34 million to MHG (subject to the moratorium).
To pick up the narrative again from the appointment of the joint administrators of TopCo on the 25 January 2022, the next step was that on 26 January 2022 solicitors for Knighthead made a further offer. This time the offer was to the joint administrators of TopCo and was to purchase TopCo's direct and indirect interests in the OpCos from the joint administrators for
“[a] consideration at least equal to the outstanding group debt (which we understand to be £33.3m due to [MHG], plus accrued and unpaid interest, £3.7m due to HSBC, £0.6m Value Retail debt facility and £0.3m Grosvenor debt facility.”
The terms of the offer made clear that Knighthead was prepared to work very quickly in order to produce a binding and unconditional offer capable of immediate acceptance by the joint administrators. The willingness of Knighthead to proceed rapidly could not, of course, relieve the joint administrators of TopCo of their obligation to achieve the best price reasonably obtainable in the circumstances for TopCo's direct and indirect interest in the OpCos, possibly by conducting a full marketing process open to other parties known to be interested. The joint administrators have said in evidence that an orderly sale process would take “[a] few weeks” and in another place “weeks if not months”. The solicitors for the Opcos also sent a letter to MHG pointing out that the same commercial result could be achieved through a restructuring plan under Part 26A of the Companies Act 2006. When Minor International, MI Squared and the directors of MHG learned of this offer they put the joint administrators of Topco on notice that if the joint administrators implemented this second Knighthead proposal, then they would face personal claims from those parties.
On 28 January 2022 MHG applied to the Court pursuant to sections A38 and A42 of the 1986 Act for orders terminating the moratoria on the ground that the failure of the joint monitors to terminate the moratoria had unfairly harmed MHG's interests.
Upon appointment and for the duration of the appointment a monitor must (under section A35 of the 1986 Act)
“monitor the company's affairs for the purpose of forming a view as to whether it remains likely that a moratorium will result in the rescue of the company as a going concern.”
Under section A38 the 1986 Act
“(1) The monitor must bring a moratorium to an end by filing a notice with the court if …(d) the monitor thinks that the company is unable to pay any of the following that have fallen due … (ii) pre-moratorium debts for which the company does not have a payment holiday during the moratorium…”
A “pre-moratorium debt” is defined in section A53 of the 1986 Act to include any debt to which the company has become or may become subject during the moratorium by reason of any obligation incurred before the moratorium came into force. The debt created by MHG's demand on 21 January 2022 under the OpCo guarantees following the moratoria which commenced on 20 January 2022 is (it is agreed) therefore a “pre-moratorium debt”.
The question then arises whether the MHG debt is one in respect of which the OpCos have a “payment holiday” under the moratoria. In general, a company which has invoked a moratorium is entitled to a “payment holiday” in respect of its pre-moratorium debts. But section A18(3) of the 1986 Act excludes from the category of debts in respect of which there is a “payment holiday”
“(f) debts or other liabilities arising under a contract or other instrument involving financial services”.
Such contracts “involving financial services” are defined in paragraph 2 of Schedule ZA2 to the 1986 Act as including a contract for the provision of financial services consisting of lending. It is common ground before me that the contracts of guarantee between the OpCos and MHG are contracts involving financial services.
The exclusion of finance debts from the “payment holiday” effects of a moratorium is somewhat surprising: but is the clear meaning of the amended Act.
A noted commentator in this field, Professor Jennifer Payne, summarised the position thus in her...
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Insolvency Insight - Issue 9 | March 2022
...by referring to the alternative for the company if the restructuring plan is not sanctioned. In Minor Hotel Group MEA DMCC v Dymant [2022] EWHC 340 (Ch), Sir Alistair Norris returned to the Division to deal with a relatively novel point on a monitor's duty where the company is unable to pay......