Re Telewest Communications Plc

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLORD JUSTICE MUMMERY,LORD JUSTICE SEDLEY
Judgment Date02 June 2004
Neutral Citation[2004] EWCA Civ 728
Docket NumberA2/2004/1020
Date02 June 2004

[2004] EWCA Civ 728

IN THE SUPREME COURT OF JUDICATURE

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

COMPANIES COURT

(MR JUSTICE DAVID RICHARDS)

Royal Courts of Justice

Strand

London, WC2

Before:

Lord Justice Mummery

Lord Justice Sedley

A2/2004/1020

In the Matter of Telewest Communications Plc
and
In The Matter of the Companies Act 1985

MR M MOORE QC and SIR THOMAS STOCKDALE (instructed by Messrs Shearman & Sterling (London) LLP, London EC2A 2AP) appeared on behalf of the Applicants (Opposing Bondholders)

MR R SNOWDEN QC (instructed by Messrs Freshfields Bruckhaus Deringer, London EC4Y 1HS) appeared on behalf of the First Respondents (Telewest Communications Plc and Telewest Finance (Jersey) Ltd)

MR R SHELDON QC (instructed by Messrs Fried, Frank, Harris, Shriver & Jacobson LLP, London EC1Y 1AX) appeared on behalf of the Second Respondents (Bondholder Committee)

LORD JUSTICE MUMMERY
1

On 15th April 2004 a claim form was issued in the Companies Court by Telewest Communications Plc asking for an order of the court that it might be at liberty to convene a meeting of Telewest scheme creditors (as defined in the scheme of arrangement mentioned in the claim form) to be held on 1st June 2004 at a place specified, for the purpose of considering and, if thought fit, approving with or without modification a scheme of arrangement proposed to be made between the claimant and the Telewest scheme creditors pursuant to and in accordance with the terms of section 425 of the Companies Act 1985.

2

David Richards J heard the application in relation to the meeting and he gave judgment on it on 26th April 2004. In the order he directed that the company should convene a single meeting as requested at a time and place specified for the purposes of considering the scheme of arrangement. As I shall mention in a moment, the judge rejected the submission of one group of objectors that there should in fact be two meetings, rather than one single meeting of the scheme creditors.

3

The scheme meeting was convened on 30th April. On 10th May 2004 the group of objectors, who are called "the Sterling Committee", lodged a notice of appeal objecting to the order for a single meeting. That application was considered on the papers by Neuberger LJ. On 24th May he refused permission to appeal.

4

On 28th May an application was made to the Civil Appeals Office for an oral hearing at which the Sterling Committee bondholders wished to renew their permission to appeal application. I gave directions that that matter should be heard urgently, as there was to be a scheme meeting on 1st June. It was not practicable to hold the hearing before today, so that meeting has gone ahead. I gave directions that the respondents to the proposed appeal should lodge skeleton arguments by 4.00 o'clock yesterday, which was duly complied with. A date has already been fixed for the court to hear the application to sanction the scheme. That has been fixed for 17th June. The scheme, if approved, will become effective on 15th July 2004.

5

It is unnecessary for the purposes of this application for permission to appeal to go into any great detail about the scheme. I would simply note the following points. First, there is to be a new holding company to be called Telewest Global Inc. The claims of the bondholders of Telewest Communications will be exchanged for shares in the new holding company. As some of the bondholders are in US dollars and others are in pounds sterling, a proper exchange rate has to be fixed for valuing the claims of the scheme creditors for the purposes of determining the distribution of shares in the new holding company to the scheme creditors. The draft scheme proposes an average exchange rate. But the Sterling Committee object that this would reduce the value of what is to be distributed to them. They favour instead a conversion provision, which they identify as a spot rate on the valuation date.

6

In support of their position they rely on the rights that they would have if Telewest were put into liquidation and there were a pari passu distribution. If the average exchange rate provision is not changed, they say that it is necessary to have two separate meetings of the scheme creditors, one for the sterling bondholders and the other for the remaining scheme creditors. Their position, they say, is so different from that of the US dollar bondholders that they form a separate class for the purposes of deciding what kind of meeting should be held in accordance with section 425.

7

David Richards J gave a very careful judgment on this dispute. In paragraph 7 of his judgment he set out the general background to the scheme. He said this:

"Telewest is at present heavily insolvent and these proposals, in particular the proposed scheme of arrangement, are put forward as an alternative to a liquidation or administration. The directors of Telewest and all those represented before the Court on these applications are agreed that the scheme represents a substantially better alternative."

8

In paragraph 11 of the judgment he referred to the procedural position (or perhaps, more correctly, the jurisdictional position) in relation to the matter that was before him. He said this:

"The companies proposing the schemes and their advisors rightly took the view that this was an appropriate case in which to use the full procedure set out in the Practice Statement [2002] 1 WLR 1345. That procedure, put in place following the decision of the Court of Appeal in re Hawk Insurance Co Ltd [2001] 2 BCLC 480 and taking account in particular of the observations of Chadwick LJ in that case, is designed to enable so far as possible the determination of all issues in relation to the composition of the class or classes of creditors or members for the purposes of a scheme to take place at the hearing of the application for leave to convene meetings. These issues go to the court's jurisdiction to sanction a scheme, rather than the exercise of its discretion to grant or withhold its sanction. The hearing of these applications was advertised in a number of appropriate newspapers and creditors were invited to make representations to the court if they objected to the class or classes proposed by the companies. The bondholders represented by the informal committee of sterling bondholders ('the Opposing Bondholders') have appeared on these applications by counsel."

That counsel is Mr Martin Moore QC leading Sir Thomas Stockdale, and the representation of them is the same on this application for permission.

9

At paragraph 14 of his judgment, the judge gave an important statement of what he saw as the function of the court at the stage of the matter with which he was then dealing. He said:

"In considering the primary position of the Opposing Bondholders, it is important to keep in mind the function of the court at this stage. This is an application by the companies for leave to convene meetings to consider the schemes. It is emphatically not a hearing to consider the merits and fairness of the schemes. Those aspects are among the principal matters for decision at the later hearing to sanction the schemes, if they are approved by the statutory majorities of creditors. The matters for consideration at this stage concern the jurisdiction of the court to sanction the scheme if it proceeds. There is no point in the court convening meetings to consider the scheme if it can be seen now that it will lack the jurisdiction to sanction it later. This is...

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