The Great Annual Savings Company Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Adam Johnson |
| Judgment Date | 16 May 2023 |
| Neutral Citation | [2023] EWHC 1141 (Ch) |
| Docket Number | Case No: CR-2022-004557 |
| Court | Chancery Division |
[2023] EWHC 1141 (Ch)
Mr Justice Adam Johnson
Case No: CR-2022-004557
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES COURT (ChD)
Royal Courts of Justice, Rolls Building Fetter Lane, London, EC4A 1NL
Matthew Weaver KC (instructed by Shoosmiths LLP) for the Applicant Company
William Willson (instructed by His Majesty's Revenue and Customs) for His Majesty's Revenue and Customs
Matthew Gillett (instructed by Judge & Priestley LLP) for TotalEnergies Gas & Power Limited
Ted Loveday (instructed by Wedlake Bell LLP) for Orsted Sales (UK) Limited, Corona Energy Retail 4 Limited and Corona Energy Retail 2 Limited
Hearing dates: 19, 20 and 25 April 2023
Approved Judgment
This judgment was handed down at 10am by circulation to the parties or their representatives by e-mail and by release to the National Archives.
Introduction
This is an application for sanction of a restructuring plan (“ the Plan”) under Part 26A of the Companies Act 2006 (“ CA 2006”).
The Plan is put forward by The Great Annual Savings Company Limited (“ the Company”). As I will shortly explain, however, the proposed terms of the Plan also affect the Company's sole shareholder, Project Byron Newco Limited (“ the Parent Company”), and indeed the shareholders in the Parent Company, principally Mr Bradley Groves and his spouse, Lesley Groves.
Pursuant to Orders made in February 2023 by Trower J, meetings were held of some 15 classes of creditor (“ the Plan Creditors”) on 13 and 14 March 2023. The results are shown in the Table below. The headline point is that at 12 of the 15 meetings, the Plan achieved 100% support; but in 3 of the 15 meetings, the result was different. At one meeting, there was no attendance at all. At two of the meetings, the vote was positively against the Plan. One such meeting was the meeting of so-called “ Category 3 Energy Suppliers” (the terminology will become clear below), where the majority vote was against the Plan (66% by value versus 34%). The other meeting was the meeting of a single-creditor class, that creditor being HMRC – in the terminology of the Plan, the “ Second Preferential Creditor”. HMRC voted against the Plan.
The full picture on voting at the Plan meetings is as follows:
| Plan Creditor Class | Voting Result | Percentage by value FOR | Percentage by value AGAINST |
| Category 1 Energy Suppliers | For the Plan | 100% | - |
| Category 2 Energy Suppliers | No votes submitted | - | - |
| Category 3 Energy Suppliers | Against the Plan | 34% | 66% |
| Category 1 Plan Creditors | For the Plan | 100% | - |
| Category 2 Plan Creditors | For the Plan | 100% | - |
| Category 3 Plan Creditors | For the Plan | 100% | - |
| Contingent Plan Creditors | For the Plan | 100% | - |
| Secured Creditor | For the Plan | 100% | - |
| Secondary Preferential Creditor | Against the Plan | - | 100% |
| Head Office Plan Creditor | For the Plan | 100% | - |
| Rating Authority Plan Creditor | For the Plan | 100% | - |
| Vacant Premises Plan Creditor | For the Plan | 100% | - |
| Guarantee Creditor | For the Plan | 100% | - |
| Parent Company Creditor | For the Plan | 100% | - |
| Connected Party Plan Creditors | For the Plan | 100% | - |
In the present application, HMRC and four Category 3 Energy Suppliers oppose sanction of the Plan. The Category 3 Energy Suppliers are TotalEnergies Gas and Power Limited (“ TGP”), Orsted Sales (UK) Limited (“ Orsted”), Corona Energy Retail 2 Limited and Corona Energy Retail 4 Limited (together, “ Corona”). Orsted and Corona made joint submissions and have been referred to together as “ the WB Creditors”.
The main issues are as follows.
On the face of it, in light of the outcome of the three meetings I have mentioned, which either gave no support to the Plan or were positively against it, there is no power to sanction the Plan under CA 2006 s.901F, because s.901F requires support of all creditor classes, in each case by a 75% majority (by value) of those voting. But that requirement is displaced if the conditions in s.901G are met. In such a case, the sanction power is exercisable, even though the relevant majorities were not achieved. That is the cross-class cram down. As is now well-known, the two conditions in s.901 G are (A) that the Court is satisfied that none of the dissenting creditors would be any worse off under the proposed plan than they would otherwise be in the “ relevant alternative” (i.e., the most likely scenario in the event the plan is not sanctioned), and (B) that at least one class of creditor who would receive a payment or have a genuine economic interest in the company in the relevant alternative has approved the plan by a 75% majority.
In this case, it is accepted that Condition B is satisfied (see [32] below). But there is a substantial issue about whether Condition A is satisfied, and a substantial dispute about whether, even if it is, the Court should exercise its discretion in favour of sanction.
The principal challenge on Condition A comes from HMRC, which argues that in its case, the Company has not discharged the burden of showing that it would not be any worse off under the Plan. A number of points are made, but they come down to this. On the projections put forward by the Company, the return to HMRC under the Plan is only marginally better than the return expected in the relevant alternative. That being so, any viable challenge to the assumptions underlying those projections is likely to give rise to a different outcome, i.e. one in which HMRC is better off in the relevant alternative than under the Plan. On the facts, there are such viable challenges, in particular because the assumptions take too pessimistic a view of likely recoveries in respect of certain book debts in the relevant alternative, and ignore completely the possibility of claims which might be made by insolvency officeholders against third parties.
The Category 3 Energy Suppliers also take points on Condition A, and say that they, too, may well be worse off under the Plan than in the relevant alternative. I will come back to their arguments below at [87]–[93].
All four objectors also then submit that the Court should exercise any discretion it has against sanctioning the Plan. All say that the Plan operates unfairly. Their positions are different, but involve the same basic complaint, which is that other classes of creditor who in the relevant alternative would receive equal or even less favourable treatment to them, are given better treatment under the Plan. That is said to be unfair because the better treatment has no proper justification. The point is particularly acute in the case of HMRC, because in the relevant alternative it would have special status as secondary preferential creditor (see now Insolvency Act 1986, Schedule 6, para. 15D). Thus, it would be entitled to recover payment of its debt in priority to payments to other, unsecured creditors, including any of the energy supply companies or other trade creditors of the Company. But under the Plan, this order of priorities is modified, and indeed some of the unsecured creditors not only receive a dividend (when they would recover nothing in the relevant alternative), but also receive more favourable treatment than HMRC.
Some Necessary Background
General Background and History
The Company's main business is as a broker of energy supply contracts between energy suppliers and business users. It makes money through the payment of commissions.
I have already mentioned above Project Byron Newco Limited — the Parent Company – and explained that the majority shareholders in the Parent Company are Mr Bradley Groves and his spouse, Lesley Groves. The overall shareholdings are as follows: Bradley Groves (47,858,000 A Ordinary Shares), Lesley Groves (6,445,000 C Ordinary Shares), GF Portfolio Ltd (20,635,000 B Ordinary Shares), Judith Bennison (3,580,000 Ordinary Shares) and Mr Kalliroy Neocleous (1,790,000 Ordinary Shares).
Bradley Groves and Judith Bennison are also directors of both the Parent Company and the Company.
Historically, the operations of the Company and the Parent Company have been successful, on paper at any rate. In fact, in August 2019, the Parent Company returned a dividend to shareholders of roughly £19m. There is an issue as to how that was achieved, and whether it involved an inappropriately aggressive policy for the recognition of revenue in the form of commissions earned, but resolution of that question is beyond the scope of the present hearing and Judgment.
As to funding, there is substantial secured borrowing under an overarching “ Facilities Agreement” between the Parent Company and a third party lender, Tosca Debt Capital (Luxembourg) S.a.r.l. The Parent Company has been granted (i) two term loans of £9,400,000 each (“ the Term Loans”) and (ii) a £5,000,000 revolving credit facility, of which £4,500,000 has been drawn down (“ the RCF”). The Parent Company has granted security for the sums due under the Facilities Agreement in the form of an “ all assets” debenture dated 2 August 2019 (“ the Debenture”). The Company has acceded both to the Facilities Agreement and the Debenture.
Tosca Debt Capital (Luxembourg) S.a.r.l. has appointed Toscafund GP Limited as “ Security Trustee”. In the Plan and in the proceedings before me, Toscafund GP Limited has been referred to as the “ Secured Creditor.”
The overall indebtedness to the Secured Creditor presently stands at approximately £28m, and there is an inter-company debt presently owed by the Company to the Parent totalling some £9.1m.
In addition there are a number of directors' loans. These include both loans to the Parent...
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