Port Finance Investment Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Snowden |
| Judgment Date | 01 March 2021 |
| Neutral Citation | [2021] EWHC 454 (Ch) |
| Date | 01 March 2021 |
| Docket Number | Case No: CR-2021-000179 |
| Court | Chancery Division |
[2021] EWHC 454 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND & WALES
INSOLVENCY AND COMPANIES LIST
Rolls Building,
Fetter Lane
London
EC4A 1NL
Mr Justice Snowden
Case No: CR-2021-000179
Application by Reorg Research Inc pursuant to CPR 5.4C
Baker McKenzie LLP for the Company
The application was determined without a hearing
This is my ruling on an application by a Reorg Research Inc (“Reorg”) pursuant to CPR 5.4C(2) to be provided with copies of four witness statements filed on behalf of Port Finance Investment Limited (the “Scheme Company”). The application is opposed by the Scheme Company.
Reorg describes itself as a business intelligence and media organisation that focuses on financial restructurings. It regularly observes and reports on proceedings concerning schemes of arrangement and restructuring plans. It provides a paid-for subscription service to the restructuring community: its subscriber base consists of over 20,000 lawyers, financial advisers and investment professionals around the world.
The witness statements in question were used and referred to at the convening hearing in relation to a scheme of arrangement to be proposed by the Scheme Company. That hearing took place on 4, 11 and 17 February 2021 and was attended by a representative from Reorg together with a number of other media representatives and professional observers. I referred to and paraphrased some parts of the witness statements in my judgment delivered on 23 February 2021 convening the scheme meeting: see [2021] EWHC 378 (Ch). I refer to that convening judgment for the background and shall use the same abbreviations herein as in that judgment.
Reorg's application was originally made by letter dated 24 February 2021. It cited CPR 5.4C(2) and the judgment of the Supreme Court in Cape Intermediate Holdings Ltd v Dring [2019] UKSC 38 (“ Dring”) explaining the applicable principles of open justice. Upon receipt, I requested that Reorg should issue a formal application as required by CPR 5.4D(1) and exercised my power under CPR 5.4D(2) to give notice to the Scheme Company by forwarding a copy of the letter. I received a response by letter dated 26 February 2021 from the solicitors to the Scheme Company which, after making the point that a formal application should be made, opposed the application. Reorg responded briefly by email later that same day.
What has sparked the interest of Reorg is the unusual fee arrangement which the Group intends to enter into with the Financial Adviser to the AHG. As I described in my convening judgment, that will apparently comprise two elements – a fixed monthly retainer and a Success Fee of $1 million payable if the members of the AHG vote in favour of the Scheme and the Scheme is sanctioned. In paragraphs [105]–[106] of my judgment I summarised the evidence and my understanding of the proposed arrangement in this way,
“105. The evidence is less clear as to the basis upon which the Financial Adviser has been acting to date and whether the proposed payment of the Financial Adviser's Fees are designed to relieve the members of the AHG of liabilities (including for the Success Fee) which they would otherwise have. It would appear that the Financial Adviser has been acting on the basis of an informal agreement or understanding with the members of the AHG, but that no final or binding agreement has been reached. In particular, the evidence is that the precise circumstances in which the Success Fee will be payable remain to be finally negotiated and agreed between the Group, the Financial Adviser and the AHG. What I take from that, however, is that the proposal for payment of the Success Fee is not intended to relieve the members of the AHG from any actual liability to pay such a fee to the Financial Adviser contingent upon the Scheme being sanctioned, and it is not designed to provide any element of additional benefit or disguised consideration to the members of the AHG to induce them to vote in favour of the Scheme.
106. The possibility that the Financial Adviser to the AHG will be given a financial incentive by the Group by way of the Success Fee to advise the members of the AHG to vote in favour of the Scheme is an unusual arrangement. In my experience it is certainly not “market standard” as the Scheme Company's evidence sought to suggest. However, I accept Mr. Smith QC's point that since the members of the AHG are fully aware of the proposal and consent to it, it is a matter for them to take into account in their deliberation on the merits of the Scheme, and does not give rise to any class question. The other Noteholders will also be aware of the possibility of payment of such a Success Fee from the Explanatory Statement. They will therefore be able to take that matter into account in deciding what, if any, weight they might choose to place on any support that might be expressed by the members of the AHG in favour of the Scheme (in its current or any amended form).”
The arguments
Reorg's request for access to the underlying evidence cites the substantial amount of the Success Fee and my indication that, contrary to the evidence of the Scheme Company, the arrangement for a scheme company to pay such a fee to an adviser to some scheme creditors is not, so far as I am aware, market standard. Reorg suggests that it will advance the open justice principle for it to have access to the evidence, which it believes is likely to contain more detail than my judgment, not only so that it can make Scheme Creditors aware of the genesis and reasons for the proposal, but also to make other trade creditors and lenders to the Group aware of such matters because the payment of the fee will reduce the funds that the Group has available to service other debt. Reorg also submits that access to greater detail in the evidence about the proposed arrangements will provide guidance to other proponents of schemes (and Part 26A plans) in the future “as to the type of fee arrangement which is now acceptable”.
In opposition, the Scheme Company essentially takes two points. The first is that the witness statements contain little (if any) information concerning the structure of the Success Fee that has not already been captured in the convening judgment and the explanatory statement (which is published on the Group's website and is available to the public). Secondly, it contends that Reorg's purpose in obtaining the witness statements is not to advance the purposes of open justice in the interests of Scheme Creditors or other creditors of the Group, but is to promote Reorg's own commercial activities by which it makes information available to a limited group of clients who pay for its services.
The law
CPR 5.4 provides, so far as material,
“(1) The general rule is that a person who is not a party to proceedings may obtain from the court records a copy of— (a) a statement of case, but not any documents filed with or attached to the statement of case, or intended by the party whose statement it is to be served with it; (b) a judgment or order given or made in public (whether made at a hearing or without a hearing) …
(2) A non-party may, if the court gives permission, obtain from the records of the court a copy of any other document filed by a party, or communication between the court and a party or another person.”
In Dring, at [41], Lady Hale explained that the open justice principle applied to all courts and tribunals, and that except in so far as limited by statute or rules, the court has an inherent jurisdiction to determine what that principle requires in terms of access to documents or other information placed before the court.
Lady Hale then explained, at [42]–[43],
“42. The principal purposes of the open justice principle are two-fold and there may well be others. The first is to enable public scrutiny of the way in which courts decide cases—to hold the judges to account for the decisions they make and to enable the public to have confidence that they are doing their job properly….
43. But the second goes beyond the...
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