AES Barry Ltd. v TXU Europe Energy Trading [2004] EWHC 1757 (Ch)
[1]"... the purpose of the prohibition is to enable or assist the company to achieve the object for which the administration order was made. The purpose of the power to give leave is to enable the court to relax the prohibition where it would be inequitable for the prohibition to apply." 17 Although, as I have already indicated, the most common and obvious purpose of the embargo placed by s.11 on the taking of proceedings is to preserve the property of the company, the statute nonetheless does also have the effect, as in this case, of preventing a creditor from taking any form of proceedings relative to its claim during the course of the administration. This means that unless the court intervenes by making an order under s.11(3) the statute prevents a creditor seeking to pre-empt, for example, adjudication of its claims in the context of a s.45 scheme by going to the court in advance and asking for a judicial determination of those matters.[2]On the evidence before me it is suggested that the difference between the parties may be as much as £30 million.[3]His case is that if I give permission it will be possible to go to the Commercial Court during the course of this year and to obtain a crisp determination of the issues of construction which concern the parties, thereby enabling them to resolve, by agreement, their differences. If that can be done by the time the scheme is approved and implemented it will enable AES, he says, to seek payment of a dividend as a fully recognised creditor in the sense of a creditor whose claim is not in dispute, thereby avoiding any delay in the payment of a dividend. It will also have the additional bonus that when the scheme comes to be voted on AES will be recognised in terms of its voting rights as a creditor in the full sum to which is entitled and not simply in relation to the provisional sum assessed by the administrator for voting purposes.[4]It is also, and I should mention this for completeness, said that AES has what Mr. Collings described as a legitimate interest in establishing its position as a creditor, but[5]I think that it is difficult to attribute to that any particular weight beyond what is contained in the other two points that I have mentioned. 21 That therefore is one side of the balancing exercise. The other side is essentially the administrator's concern that if permission is given by the court to this particular creditor to determine the disputes about the quantum of its claim in advance of the scheme it is likely to act as a green light to other creditors in a similar position. I should mention that there are at least eight other creditors with PPAs, not identical but similar in substance to the one under consideration, and possibly other creditors, who wish to seek an adjudication by the court of their claims rather than to await the implementation of the scheme. That will lead to a disorderly set of arrangements under which the administrator will be concerned to deal in parallel proceedings with claims that he says ought properly to be dealt with centrally as part of a scheme acquiesced in by all creditors and sanctioned by the court as the correct means of resolving claims and bringing the administration to an end.[6]I suppose, ultimately to a liquidation of the Company.[7]Mr. Collings proposes is essentially two-fold: first of all, that it will run contrary to the arrangements set out in the administration order and reinforced by the provisions of s.11, which are that the administrator should be free to run the Company free of claims of creditors with a view to disposing of the Company's assets in order to realise a sum for distribution at the end of the administration to creditors; and then to process the claims of creditors either through a scheme or voluntary arrangement or, alternatively, if there is no possibility of that, by seeking an order for the liquidation of the Company. 24 It seems to me that it will only be in exceptional cases, and I do not rule out that there may be such cases, but it will be in exceptional cases that the court gives a creditor, whose claim is simply a monetary one, a right by the taking of proceedings to override and pre-empt that statutory machinery. That is the first objection, and it is of course an objection in principle. But the second answer to the application put forward by the administrator in this case is that there is in fact no real prejudice to this particular creditor in allowing the administration to run its course and in requiring AES to prove for its claim through the ordinary machinery of the scheme. The reason for that is that the scheme, I am told in the evidence and on instructions, which will be put forward for the approval of the creditors and ultimately the court, will contain a right for any creditor whose claim is disputed either to have that adjudicated upon by some form of expert determination or to submit the dispute to the court. Therefore there is no intention, and I think in reality no possibility, as Mr. Collings accepts, of AES, or indeed any of the other creditors, being deprived of access to the court if I allow the administration to run its course unimpeded by any interim court proceedings. 25 The second point in relation to the alleged prejudice to AES is that it is also, I am told, the administrator's intention to include as a term of the scheme provision whereby AES and other creditors in a similar position, part of whose claim is in dispute, will receive an interim dividend in relation to the undisputed part, and will then have a sum set aside globally to meet the balance of their claim, if established, to which will be added interest. The result of this would be that if AES is able, through the machinery provided under the scheme, to make out a claim for any sum over and above what the administrator is prepared to agree it will receive in due course a final dividend based on that sum with the proportionate amount of interest attributable to it. 26 In those circumstances, I am not satisfied that there are any good reasons in this case why I should relax the prohibition imposed by s.11 so as to allow the Commercial Court proceedings to go ahead. If it is necessary to go that far, for the same reasons I am not satisfied that it would be inequitable for the prohibition to apply. 27 I should also mention that, so far as the voting point which Mr. Collings relies upon is concerned, it is accepted by him, very properly, that his clients are more likely than not to vote in favour of the scheme regardless of what voting rights they are given by the administrators. 28 In those circumstances, and for those reasons, it seems to me that that head of prejudice really is of very little weight in determining whether or not to lift the prohibition. 29 For those reasons, the right order is for me to dismiss the application. MR. TROWER: In those circumstances, as your Lordship has dismissed the application, the next matter which arises relates to costs. It was actually listed for more than a day but, notwithstanding that, the parties have exchanged costs schedules, and can I first of all ask your Lordship, as a matter of principle, to say that I should have my costs of the application, and on the assumption that that is the order your Lordship will make, could I hand up the costs schedule that we have served. (Document handed) MR. JUSTICE PATTEN: Have you got a copy of this, Mr. Collings? MR. COLLINGS: Yes, thank you, my Lord. MR. TROWER: My Lord, this costs schedule discloses total costs, as your Lordship sees of £144,000. I think, just for comparative purposes, the other side's were £99,000 on theirs. This is clearly an application which has given rise to fairly substantial costs. MR. JUSTICE PATTEN: How does an application of this kind generate costs of £144,000?[8]There was a great deal of review of work required for the purposes of assessing how the application in this insolvency -- well, what it required was a large amount of[9]co-ordination, information-gathering and drafting at the end of the day to ensure that what the court was told on this application accurately reflected the position in relation to the insolvency as a whole. My Lord, in my submission, at the end of the day although it does seem like a rather large sum of money, reflecting the importance of the matter to the general body of creditors and the size of the administration, it is a figure that is not completely out of order, if indeed not out of order at all. It is the kind of thing that one might expect to see given the very large sums of money at stake. My Lord, it is difficult I think to ----[10]Mr. Trower? I am certainly not -- well, I will hear what[11]Mr. Collings is going to say, but, given the very large sums involved, I am certainly not going to try and assess the costs myself. MR. TROWER: If that is your Lordship's view, and I am not going to urge that if that is your Lordship's reaction, but the other alternative is for it to be sent off for detailed assessment with your Lordship making an interim order ----[12]I may think. I do not know, you may be able to agree it,[13]but ---- MR. TROWER: Yes. I think all one can say about it is that although it is obviously a lot of money Norton Rose's bill of costs was a lot of money as well. MR. JUSTICE PATTEN: I have not looked at those. MR. TROWER: It is £99,000, so it is less, and I accept that, it is plainly less, but it is still a very large sum of money for a ---- MR. JUSTICE PATTEN: You are asking for your costs. MR. TROWER: I am asking for my costs. MR. JUSTICE PATTEN: And the ordinary order would be that those should be assessed, if not agreed, on the standard basis in the usual way.[14]I quite appreciate your Lordship does not want to summarily assess them. MR. JUSTICE PATTEN: No. But before I call on Mr. Collings, what are you saying the interim payment should be? MR. TROWER: Fifty per cent. MR. JUSTICE PATTEN: Right, Mr. Collings, what do you say about that? MR. COLLINGS (Who was not situated near a microphone): So far as my own bill of costs is concerned, because my learned friend draws some comfort from the fact that we managed to achieve two-thirds of the size of his bill, our bill also included the proceedings in the Commercial Court and leading counsel's advice in relation to that. I am not sure it actually probably should have done, but my learned friend's is simply in relation to this one day application. MR. JUSTICE PATTEN: First of all, are you opposing paying their costs?[15]I cannot say whether it would make all the difference to this application or not so far as we are concerned, and nor can[16]I say that it would have made all the difference to your Lordship because there were other important aspects of your Lordship's judgment; for example, the really statutory machinery points, which was your Lordship's first point, and also the ability to go to court. But that was a very real difference. I cannot say of course as to the ---- MR. JUSTICE PATTEN: No, all right. Anyway, that is helpful. MR. COLLINGS: That is as much as I can say in relation to that. MR. JUSTICE PATTEN: Yes. Now, what about the money? MR. COLLINGS: It is a very large sum. In a case ---- MR. JUSTICE PATTEN: I am going to send it off for detailed assessment. I am not going to assess it. It is normal, as you know, for an interim payment ---- MR. COLLINGS: Absolutely, that would be very appropriate. MR. JUSTICE PATTEN: So it is really a question of how much. MR. COLLINGS: We would say if our bill is £99,000, on an interim payment on account you could normally start there, and I think in cases like Miles Technology you would normally for about 40 per cent. So we were thinking in the region of about £40,000, and certainly not half of 144, which as an interim payment on account of what is said to have been expended on the application is a fantastic amount. MR. JUSTICE PATTEN: Yes. MR. COLLINGS: I remember a case in the Court of Appeal, Magnus v. Home Office, where Lord Wilson talked about proportionality in relation to the assessment of costs, and there some costs of a one-day hearing were £65,000, and he put an exclamation mark after that in his judgment, and I think to get an interim payment on account of one-day costs in excess of £60,000 would be sort of a fortiori. MR. JUSTICE PATTEN: All right. MR. COLLINGS: That is a fair sort of area, and I could not resist an order for payment on account of costs unless your Lordship thought that I had some point in ---- MR. JUSTICE PATTEN: Yes. MR. COLLINGS: ---- or a percentage reduction. MR. JUSTICE PATTEN: Yes, all right, thank you. Do you want to say anything else, Mr. Trower?[17]I cannot say that, but ---- MR. JUSTICE PATTEN: I need not trouble you on the incidence of costs, Mr. Trower.[18]So far as quantum is concerned, 50 per cent. of ours is less than 75 per cent. of theirs, so I would think moderate, in my submission, to say 50 per cent.[19]Is there anything else that I need to deal with? MR. TROWER: Detailed assessment forthwith?
Cited in 8 later judgments