On Friday 11 April 2025, Mr Justice Adam Johnson handed down his written reasons for having sanctioned a restructuring plan advanced by OutsideClinic Limited, a leading provider of in-home audiology and optometry services. The plan had been sanctioned at a hearing on 28 March 2025.
The judgment addresses two important points for those considering using Part 26A restructuring plans. The first is a practical one, and concerns the way in which companies may consider dealing with HMRC when proposing restructuring plans. The second is a technical one, and pertains to the rules surrounding whether or not meetings have taken place, specifically where only one creditor in a class of more than one creditor votes.
As to the first issue, as Adam Johnson J explains at [14] and [15], HMRC had indicated at the convening hearing that they were not supportive of OutsideClinic’s plan. They considered that the 5p in the £ dividend proposed to be paid to them – the same dividend as all other classes of unsecured creditor – was too low, given their status as a secondary preferential creditor, and in view of reservations they had about the valuation evidence.
The judgment sets out at [31] that “OutsideClinic and HMRC took advantage of the time between the convening hearing and the sanction hearing to discuss matters further. OutsideClinic has been realistic enough to acknowledge the likelihood of HMRC being shown to be an in the money creditor on a contested application, and on that basis the parties have negotiated an improved outcome for HMRC”. HMRC agreed to support the plan on the basis of payment of an additional 10p in the £ dividend to them, voted in favour of it, and attended the sanction hearing to support the plan. This is the second occasion on which it has done so in recent weeks, pursuant to its new policy of not merely voting in favour of plans, but attending court to confirm and explain that support.
As the above- quoted passage from the judgment makes clear, the courts are alive to the commercial realities of restructuring plans, and in particular the fact that negotiations take place between companies proposing plans and certain of their creditors, which may change the shape of the plan from that originally proposed. While there must be some justification for a particular class of creditor being treated differently from others – in this case, because while the relevant alternative analysis showed HMRC as being out of the money, that analysis might have been capable of being challenged, such that HMRC could establish itself as being in the money in the relevant alternative – where there is such a justification, it appears that the courts will accept, and indeed encourage, a commercial approach being taken.
As to the second issue, the question for the court was whether it needed to cram down a particular class of creditor – the “Shop Landlords” – where only one creditor in a class of four had voted at the relevant plan meeting (and had voted in favour of the plan), but where that one creditor had 83% in value of the debt in that class. The question arises in circumstances where in a scheme of arrangement case, Re Altitude Scaffolding [2006] BCC 904, David Richards J expressed the view that a meeting logically requires the attendance of more than one person, save where a class comprises only one member. Adam Johnson J was therefore invited to treat the Shop Landlords as a dissenting class, even though 100% of those voting and 83% by value of the class had voted in favour.
At [49], the Judge expresses the view that it is “somewhat odd to treat the Shop Landlords as a dissenting class” in those circumstances, and that it “seems counterintuitive to speak in terms of cramming down a plan on a group of creditors, the majority of whom by value positively want it to happen; and looking at things in this way seems anomalous when it comes to exercising discretion”. In the event, the Judge agreed with counsel’s submissions that the point had not been fully explored before the court and it did not, in any event, matter in this case because, as the Judge goes on to conclude at [51], “whether the Shop Landlords are considered an assenting or dissenting class…one ends up in the same place”, and the Judge agreed to cram down the Shop Landlords. We therefore await a case where the point does, indeed, matter, and where clarification of the position in these rather unusual and, adopting the wording in the judgment, counterintuitive circumstances arise.
Matthew Weaver KC and Lauren Kreamer acted for the plan company, instructed by Shoosmiths LLP. The plan administrators are Will Wright and Natasha Harbinson, both of Interpath Limited.
Read the full judgment here.
