[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] | ||
England and Wales High Court (Chancery Division) Decisions |
||
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Counsel General for Wales & Ors v Allen & Ors [2022] EWHC 647 (Ch) (21 March 2022) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2022/647.html Cite as: [2022] EWHC 647 (Ch) |
[New search] [Context] [View without highlighting] [Printable PDF version] [Help]
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTER OF BAGLAN OPERATIONS LIMITED (in compulsory liquidation)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
The Rolls Building Fetter Lane London EC4A 1NL |
||
B e f o r e :
____________________
COUNSEL GENERAL FOR WALES THE WELSH MINISTERS DW^R CYMRU CYFYNGEDIG NEATH PORT TALBOT COUNCIL SOFIDEL UK LIMITED |
Applicants |
|
-and- |
||
(1) GARETH ALLEN (as Official Receiver) (in his capacity as the liquidator of Baglan Operations Limited (in compulsory liquidation)) (2) DAVID PIKE (in his capacity as a special manager of Baglan Operations Limited (in compulsory liquidation)) (3) MIKE PINK (in his capacity as a special manager of Baglan Operations Limited (in compulsory liquidation)) |
Respondents |
Ian Rogers QC, Thomas Robinson, Francesca Mitchell and Daniel Petrides (instructed by Foot Anstey LLP) for the Third and Fourth Applicants
Ian Rogers QC and Daniel Scott (instructed by Dorsey & Whitney LLP) for the Fifth Applicant
Jessica Simor QC, Daniel Bayfield QC and Roseanna Darcy (instructed by Clifford Chance LLP) for the Respondents
Hearing dates: 21 and 22 February 2022
____________________
Crown Copyright ©
Sir Alastair Norris:
(a) Electricity was supplied (either via the PWN or via the Connection) to four pumping stations belonging to the Third Applicant ("Welsh Water").
(b) Electricity was supplied to the Fourth Applicant ("the Council") for the purpose of street lighting in Baglan Park and operating a pumping station adjacent to the M4.
(c) Electricity and water were supplied to the Fifth Applicant ("Sofidel").
I must explain more about these customers.
"This letter is intended to provide you with assurances on your appointment as liquidator of the Baglan Group Companies…("the Companies") and ensure that the Companies' sites and operations can be secured and that health and safety concerns associated with the site can be addressed. Provided you have acted honestly and in good faith, and subject to you having used all reasonable endeavours to obtain value for money in relation to costs incurred in carrying out the liquidation, the Secretary of State for BEIS agrees to indemnify you and keep you indemnified against all costs arising from any claims incurred in connection with your appointment as Official Receiver and the liquidator of the Companies to the extent that such liabilities arise as a consequence of… carrying out the proper performance of your duties as liquidator of the Companies…. My obligation to provide you with cover under the indemnities referred to in this letter may be terminated by my giving you not less than 14 days' notice."
I will refer to this as "the BEIS Indemnity".
"It is not currently possible for the Baglan Plant to be decommissioned into a safe and dormant preservation state without disrupting the supply of electricity and water to the Energy Park Tenants. Whilst the power station itself is mothballed, certain control systems must be operated to manage the supply of power and water to the Energy Park. I understand that it would be likely to take over two years to design and deliver a long-term solution for the provision of alternative supply to the Energy Park. Consequently, it is important that the provision of supplies to the Energy Tenants are maintained until a full assessment has been made of whether maintaining such supply would be in the interests of the creditors of the Companies… A further important issue is that the Baglan Plant is also currently burdened with various health and safety and security hazards. These include: the presence on site of a large volume of dangerous and/or flammable chemical and turbine lubricant oil; the gas pipeline that supplies the Baglan Plant, which contains high-pressure gas; and the need to maintain "manned" security to ensure the valuable materials contained at the Baglan Plant are not at risk of theft…. It is clear that, due to the nature of the Company's operations, the requirements of the Energy Part Tenants and the health and safety and environmental issues arising from the Baglan Plant, the liquidation of the Companies will require a high level of specialisation… Therefore, having regard to the facts set out above, it is my opinion that in consequence of the nature of the Company's businesses and properties and in the interests and for the benefit of their creditors and contributories, a Special Manager to be appointed."
"sets out the terms and conditions on which [the Company] agrees to supply and [Sofidel] agrees to purchase electricity on a provisional basis while the Official Receiver and Special Managers carry on the business of [the Company] as long as may be necessary for its beneficial winding up."
Subject to clause 9 of the Agreement, it was for a defined term: clause 9.3 of the Agreement provided that the Official Receiver could terminate it on 14 days' notice. The original agreement was entered into on 10 May 2021 and was restated in June 2021, August 2021 and in October 2021. The term in the October restatement expired on 30 November 2021. When in November the agreement was further extended until 14 January 2022 Sofidel was informed that this would be a final extension because the Official Receiver no longer needed a supply of electricity to the Baglan Plant for decommissioning purposes. Under the agreement Sofidel pays substantially more for its supply (because the pricing model takes into account a wider cost base than did the original agreements and because it adds a 5% margin to those fees). But the price charged cannot reflect all costs incurred in running the site of the Baglan Plant.
(a) pursuant to section 143(1) of the 1986 Act the primary role of the Official Receiver was to secure that the assets of the Company were got in and realised and (subject to the payment of liquidation expenses) distributed to those entitled;
(b) pursuant to section 178 of the 1986 Act the Official Receiver could disclaim onerous property;
(c) pursuant to section 167(1) and paragraph 5 of schedule 4 to the 1986 Act the Official Receiver could continue to operate the business of the Company so far as may be necessary for its beneficial winding up;
(d) closure activities at the Baglan Plant would be necessary as part of the beneficial winding up so as to mitigate the risks of liability whilst the Official Receiver was in office and after dissolution;
(e) the provision of power to the Company's existing customers could continue whilst the Official Receiver developed and implemented his closure plan, because although the supply of electricity was not itself necessary for the beneficial winding up of the Company, a connection to the National Grid was necessary for closure purposes and that connection could be utilised by existing customers provided that they bore the full costs of so doing;
(f) once the implementation of the closure plan reached a stage such that a supply of electricity from the National Grid network was no longer required at the Baglan Plant for closure purposes then there was no longer any justification for the Company continuing to trade (because the supply of electricity was ancillary to the closure activities);
(g) that was particularly so where the maintenance of the Connection and its associated supply of high voltage electricity to much of the infrastructure on the Baglan Plant itself posed risks;
(h) once the winding up had been completed in an orderly way the Official Receiver could disclaim the Baglan Plant.
"If any person is aggrieved by an act or decision of the liquidator, that person may apply to the court; and the court may confirm, reverse or modify the actual decision complained of and make such order in the case as it thinks just."
There was no challenge to the standing of any of the Applicants to bring the Applications. It was accepted for the purpose of the Applications that each Applicant fell within the narrow class of persons directly affected by the exercise of a power given to the Official Receiver who would not otherwise have the right to challenge that exercise: see Mahomed v Morris (No.2) [2001] BCC 233 at [26]. The issues were thus: -
(a) whether all or any could establish that they were "aggrieved":
(b) if so, what order was "just".
"When liquidators are exercising their administrative powers to realise assets, the court will be very slow to substitute its judgment for the liquidators on what is essentially a businessman's decision…. In this case, by contrast, when the provisional liquidators launched their [Florida proceedings] they did so for the same purpose as they might… have sought an anti-suit (or anti-execution) injunction from the English court. That is eminently a matter for the Companies Court. It is not a matter for the liquidators to decide at their own discretion in the way which they might make decisions as to the disposal of their company's assets."
The case thus establishes that the "perversity test" does not apply to all decisions made by a liquidator and that there are non-commercial, probably legal, questions (such as whether the pari passu distribution principle should be upheld) which may be reviewed by the court without applying the filter of "perversity".
"The basic approach is that the court should be very slow to second-guess commercial decisions made by a trustee in bankruptcy in exercise of the statutory discretion conferred on him… In my view, however, the test in Re Edennote Limited does not exhaustively state the grounds for intervention by the court. As is clear from the provisions of the Insolvency Act 1986, the court retains a general supervisory jurisdiction in respect of trustees in bankruptcy to ensure they behave properly and fairly as between persons affected by their decision. That wider jurisdiction is in issue on the facts of this case."
This case confirms that the "perversity test" does not necessarily have to be applied in relation to decisions that are not commercial judgments or businessmen's decisions.
"Power to carry on the business of the company so far as may be necessary for its beneficial winding up."
There are three points to note about that.
"There is considerable public interest in the maintenance of a healthy environment, and in the principle pithily expressed as "the polluter must pay". It is the view which prevails both in the popular perception and in the legislative system in this country and, indeed, in most of the developed world….while I accept that the provisions of the 1986 Act relating to winding up and disclaimer are not merely for the benefit of individual shareholders, creditors, debtors and liquidators of companies, but also for the good administration of business and commerce, it appears to me that those interests are of a less wide-ranging and important nature …. than the concerns embodied in the 1990 Act."
The case is directed to the exercise of powers, not the scope of powers. But it would be surprising if in the exercise of powers environmental impacts were recognised as a significant consideration but in ascertaining the scope of such powers in a case such as this they were not.
(a) The Official Receiver is in office to wind up the Company in a safe manner;
(b) There is a public interest in having the Company wound up, and in having that process conducted expeditiously;
(c) Whilst the Connection remains in place there is a fire risk and a health and safety risk arising from the presence of high voltage electricity on the site (a risk which is mitigated by the retention of a skeleton staff who are trained and familiar with the site);
(d) The Official Receiver has with the benefit of expert advice formulated a closure plan and scheduled the works necessary for its implementation;
(e) Key disconnection and remedial works have been scheduled for some time in April and if that slot is lost the work may have to be postponed until November, though actual disconnection may take place over a shorter period (albeit leaving the remaining infrastructure in a potentially dangerous state);
(f) A severance of the Connection and a cessation of supply to pumping stations in the ownership or control of Welsh Water or the Council would increase the risk of severe flooding and the consequential discharge of untreated waste into the locality at times of excess rainfall, particularly where such coincides with high tides;
(g) The Welsh Government, Welsh Water and the Council have known of this risk since at the latest March 2021 and have had the opportunity to put in place mitigation measures;
(h) Diesel generators can be substituted at these sites, but their operation will contribute to an overall decline in local air quality, though to an extent far less than the Welsh Government, Welsh Water and the Council originally contended;
(i) If supply ceased then the period for which the generators would have to be available (not necessarily in continuous operation) is dependent upon the speed at which WPD can install an alternative distribution network, and that is in turn dependent upon obtaining requisite consents;
(j) A "worst case scenario" assessment suggests installation by mid-August, but WPD is confident of earlier delivery (having originally thought that the new supply would be in place by March 2022);
(k) The direct and indirect financial costs of continuing that supply are very substantial and until 20 January 2022 were entirely unprovided for, but since that date the Welsh Government Indemnity offers a state-backed indemnity which (subject to appropriate drafting) is intended to cover all direct or indirect costs, expenses and liabilities incurred by the Official Receiver or to which he is exposed by reason of the temporary maintenance of the Connection;
(l) As well as the financial costs there is a whole range of physical and resourcing risks arising from the maintenance of the Connection which no indemnity can satisfactorily address.