Txu Europe Group Plc ((in Administration) and subject to a company voluntary arrangement) & Others
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE NEWEY |
| Judgment Date | 12 July 2011 |
| Neutral Citation | [2011] EWHC 2072 (Ch) |
| Docket Number | Case No. 7611 OF 2002 |
| Court | Chancery Division |
| Date | 12 July 2011 |
[2011] EWHC 2072 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Newey
Case No. 7611 OF 2002
In the matter of:
And in the matter of: The Insolvency Act 1986
MR WILLIAM TROWER QC and MR DANIEL BUYFIELD (instructed by Herbert Smith LLP) appeared on behalf of the Claimant
MR DAVID ALLISON (instructed by Allen & Overy LLP) appeared on behalf of the Defendant
Approved Judgment
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I have before me an application for a direction sanctioning a payment by the Supervisors of a Company Voluntary Arrangement ("CVA") entered into between TXU Europe Group plc ("TXUEG") and its creditors to TXUEG's parent company, The Energy Group Limited ("TEG").
The matter arises in this way. TXUEG went into administration on 19 November 2002. Various of its subsidiaries have also been placed in administration and/or liquidation. TEG too is in administration.
With a view to resolving a number of complex and substantial disputes between Group companies in a timely and cost effective way, TXUEG and a number of its subsidiaries entered into CVAs. The CVAs were all approved on 28 January 2005 with more than 99 per cent of creditors by value voting in favour. Some £2 billion has since been distributed to creditors.
The position now is that TXUEG has paid 100p in the pound on the principal amounts of the claims made against it under its CVA and allowed by the Supervisors. Having regard to the terms of the CVA there is no prospect of TXUEG being obliged to make any further payments to its creditors.
The present application concerns the very large sums amounting to approximately £186m, which will remain held for TXUEG. Under the terms of the TXUEG CVA that money falls to be paid to TEG. TXUEG's Administrators and Supervisors seek confirmation that it is proper for the money to be paid to TEG. The reason for seeking such confirmation is a concern that such a payment could represent an unlawful return of capital or distribution.
The various CVAs, including that relating to TXUEG, provided for money to be distributed in accordance with a Model contained I gather on a CD. Mr Alan Bloom, a partner in Ernst & Young who is one of TXUEG's Administrators and Supervisors, has said the following about the Model in a witness statement:
"Although the settlement is simple to describe, the actual calculations required to be made on each Distribution Date in order to calculate the amounts due to each individual creditor are incredibly complicated. To overcome this, the Model was created. Pursuant to the terms of CVAs, the Model is used to calculate the distribution amounts payable to all CVA Creditors of all CVA Companies."
It was recognised that under the Model, money could potentially fall to be paid to TEG. Clause 21.7 of the CVA stated in terms that:
"TXUEG may, in certain circumstances determined by reference to the Model, be obliged to make a payment to TEG in respect of its shareholding in TXUEG."
The clause further provided for certain payments to "include the amount payable to TEG in respect of its shareholding in TXUEG". Further, clause 21.1.7 stated that "the amount if any to be paid to TEG as described in clause 21.7" was to be "determined by reference to the Model". It is also noteworthy that the Model referred to the amount, if any, payable to TEG as an "equity payment".
TEG was not only TXUEG's parent, but a creditor. Under clause 32.2 of the CVA creditors described as the "conduit companies" (which included TEG) agreed that their claims should be treated as allowed to the extent set out in Part D of Annexe 4 to the CVA. Part D of Annexe 4 specified the amount due to TEG from TXUEG as £82,383,456. That sum has already been paid in full.
Mr William Trower QC who appears with Mr Daniel Buyfield for the applicants and Mr David Allison, who appears for TEG's Administrators and Supervisors, were each concerned to stress that the CVAs created complex and interdependent bundles of rights and obligations. It was pointed out to me, for example, that it was a condition of each CVA that every other CVA was approved and became unconditional. The CVAs also depended on certain deeds, to two of which TEG was a party, becoming effective.
As I have already indicated, the question raised by the present application is whether payments to TEG would represent unlawful returns of capital or distributions. Mr Bloom explained the position as follows in his witness statement:
"In light of the fact that the unsecured creditors have been paid in full and that clause 21.7 of the CVA provides (with reference to the Model) for payments to be made to TEG, the Supervisors have considered...
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