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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Consort Healthcare (Tameside) Plc v Tameside And Glossop Integrated Care NHS Foundation Trust [2024] EWHC 1702 (Ch) (03 July 2024) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2024/1702.html Cite as: [2024] EWHC 1702 (Ch) |
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTER OF CONSORT
HEALTHCARE
(TAMESIDE) PLC
AND IN THE MATTER OF THE COMPANIES ACT 2006
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
____________________
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Claimant |
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- and – |
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TAMESIDE AND GLOSSOP INTEGRATED CARE NHS FOUNDATION TRUST |
Defendant |
____________________
Daniel Bayfield KC and Ryan Perkins (instructed by Addleshaw Goddard LLP) for the Defendant
Hearing date: 20 June 2024
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Crown Copyright ©
Mr Justice Richards:
PRINCIPLES
i) An application for security for costs may be made by a "defendant to any claim" (CPR 25.12(1)). It is common ground that this condition is satisfied. The proceedings before me are brought by way of a Part 8 Claim Form. In my order of 20 May 2024 (the "Convening Order"), I joined the Trust as party to the claim as a defendant.
ii) The court may make an order for security for costs only if one of the "gateways" set out in CPR 25.13 is present. The Trust relies on the gateway set out in CPR 25.13(2)(c) namely that there is "reason to believe that [the Company] will be unable to pay [the Trust's] costs if ordered to do so".
iii) Even if a gateway is present, the Court must still be satisfied that it is just to make an order for security for costs having regard to all the circumstances of the case. That requires the application of a judicial discretion.
i) The nature of proceedings under Part 26A is fundamentally different from ordinary adversarial litigation.
ii) If the Application were allowed, there would be a risk that the proceedings under Part 26A would be "stifled" with that risk being particularly unpalatable having regard to the nature of the Part 26A regime; and
iii) The Set-Off Argument means that the Trust is not subject to any real risk of being unable to recover costs against the Company.
The difference between Part 26A proceedings and "ordinary" adversarial litigation
i) In ordinary litigation, a claimant seeks a remedy to protect its own enforceable rights. The court's role in such a case is to decide between the competing interests of a claimant and a defendant. By contrast, Part 26A permits a company to invoke a statutory procedure which, if sanctioned, will involve a change in the legal rights of members or creditors of the company involved. One aspect of the court's role in such a case is to consider the position of all creditors or members affected by the Part 26A plan (see [20] of Virgin Active (Costs)).
ii) A defendant to ordinary civil litigation has no real choice but to put in an appearance to resist a claim. Shareholders and creditors who consider that there are features of a Part 26A plan of which the court should be aware are, by contrast, not obliged to put in an appearance. Yet the observations of a shareholder and creditor in opposition to a Part 26A plan may well be helpful to the court when considering whether to sanction the plan (see [54] of Smile (Sanction)).
54. It is also worth repeating, in case there be any doubt about it, that creditors or members who follow such a course [i.e. by making a considered and focused case supported by evidence in opposition to a Part 26A plan] and advance reasonable arguments on genuine issues which assist the court in its scrutiny of the proposals are unlikely to be ordered to pay the company's costs of the exercise. Depending on the facts, they may also be able to recover their costs from the company, even if their opposition is unsuccessful.
i) Ambac, the guarantor and "representative creditor" of the Senior Debt. Even before my Convening Order, Ambac was prepared to indicate that it supported the Plan by reference to the details of it that it had then received and the Practice Statement Letter;
ii) "IntermediateCo", which is a company in the same group as the Company, holds Subordinated Debt issued by the Company and has also indicated that it supports the Plan; and
iii) the Trust which opposes the Plan.
STIFLING
… the burden is on an impecunious corporate claimant to show that there are no third parties who could reasonably be expected to put up security for the defendant's costs
24…In cases, therefore, in which the respondent to the appeal suggests that the necessary funds would be made available to the company by, say, its owner, the court can expect to receive an emphatic refutation of the suggestion both by the company and, perhaps in particular, by the owner. The court should therefore not take the refutation at face value. It should judge the probable availability of the funds by reference to the underlying realities of the company's financial position; and by reference to all aspects of its relationship with its owner, including, obviously, the extent to which he is directing (and has directed) its affairs and is supporting (and has supported) it in financial terms.
THE SET-OFF RIGHT
The provisions dealing with early termination of the Project Agreement
i) If there is a Liquid Market then it is assumed that the relevant bidders will be basing their bids on the net present value of rights and obligations under the Project Agreement and the highest bid is, accordingly, taken to be the Fair Value. In that case, the Trust is obliged to pay over that highest bid less permissible deductions. An obvious benefit of there being a Liquid Market is that the Trust can retender the right to be the supplier pursuant to the Project Agreement and so does not need to finance the COT Payment out of its own resources.
ii) If there is no Liquid Market, then an "Estimated Fair Value" is prepared by means of the application of various assumptions in an essentially arithmetic process. The Trust is obliged to pay that Estimated Fair Value less permissible deductions to the Company by way of COT Payment and would have to fund that payment out of its own resources.
i) If the Plan is not sanctioned, the Company will go into administration (that being common ground). The Trust would then exercise "step-in rights" under the existing Project Agreement for a period of 30 months under which it would require the Company's own sub-contractors to perform the necessary services under the Project Agreement. It would use those 30 months to set up an orderly re-tendering process pursuant to the Project Agreement which would ensure the presence of a Liquid Market. That re-tendering process would complete in a further 18 months.
ii) If the Plan is sanctioned, the Trust will not accept the proposed new Project Agreement. Instead, it will exercise its "Initial Termination Right" under the existing Project Agreement within 30 days. Where the Trust exercises the "Initial Termination Right", it is not able to exercise "step in rights". Accordingly, while there would still be a Liquid Market, the Project Agreement would require the re-tendering process to be completed in two years.
The likely incidence of costs
Costs risk if Plan not sanctioned
Costs Risk if the Plan is sanctioned
CONCLUSION ON EXERCISE OF DISCRETION
In principle, security should be tailored so as to provide protection against the relevant risk.
64. In my judgment, once it has been established that there are "substantial obstacles" sufficient to create a real risk of non-enforcement, the starting point is that the defendant should have security for the entirety of the costs and there is no room for discounting the security figure by grading the risk using a sliding scale approach.
65. That is the starting point but it by no means follows that security for all or indeed any of those costs will be ordered. The quantum of security is a matter of discretion and discretionary factors such as, for example, delay or stifling, may affect the amount of security to be ordered, if any.
COSTS OF THE APPLICATION