Welcome Financial Services Ltd, Re Companies Act 2006, Court of Appeal - Chancery Division, March 27, 2015, [2015] EWHC 815 (Ch)

Resolution Date:March 27, 2015
Issuing Organization:Chancery Division
Actores:Welcome Financial Services Ltd, Re Companies Act 2006

Case No. 10072 of 2010

Neutral Citation Number: [2015] EWHC 815 (Ch)




Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 27/03/2015

Before :


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David Allison QC and Julia Smith (instructed by Freshfields Bruckhaus Deringer LLP) for the Applicants

Andrew Clark (instructed by Miller Gardner solicitors) for those affected by the Application

Hearing dates: 15, 16, 19 and 20 January and 23 March 2015

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JudgmentMrs Justice Rose :

  1. The Applicants are Welcome Financial Services Limited (`Welcome') and three people appointed to implement the scheme of arrangement (`the Scheme') which is the subject of this dispute. They seek declarations concerning the proper construction of the Scheme that has been entered into for the purpose of restructuring, amongst other things, Welcome's business. The business of Welcome was that of making loans to individuals, in particular individuals whose poor credit records meant that they could not obtain loans on ordinary terms from banks. It operated under the Welcome Finance brand and also under the Shopacheck brand. Since the Scheme came into effect a large number of customers and former customers of Welcome have come forward asserting claims against Welcome arising out of their credit agreements. The question arises whether all or some of these claims are now barred because they were claims covered by the Scheme and the customer did not submit a claim in accordance with the terms of the Scheme. Mr Allison QC and Ms Smith contend on behalf of the Applicants that all the claims which are the subject of this application are covered by the wording of the Scheme and have therefore been compromised. If that is right, then there are only limited circumstances in which the customers will be able to assert any of the statutory or contractual rights they may have. The contrary arguments have been put before the court by Mr Clark. He was initially instructed by the solicitors Miller Gardner who were acting for some of the customers who want to bring claims now against Welcome. By an order of Norris J on 7 July 2014, Mr Clark was appointed to represent in addition all Welcome's customers who would be affected by the declarations that the Applicants are seeking.

  2. After the main hearing in January, I circulated a draft judgment to the parties on 2 February 2015 and invited them to draw up a declaration to reflect the terms of the judgment. That exercise revealed some issues that had not been fully debated at the first hearing but which needed to be resolved so that the declarations could provide as much clarity to those implementing the Scheme as possible. A further short hearing was therefore held on 23 March 2015 to consider those issues.


  3. The background to the Scheme was set out in the witness statement of Christine Laverty who is an insolvency practitioner and one of the three people appointed as Scheme Supervisors under section 8 of the Scheme to administer the arrangement. The Scheme forms part of the restructuring of a larger group of companies known as the Cattles group. The group was balance sheet insolvent at the end of 2010 and, absent a scheme of arrangement, would have had to enter into administration. The group's audited results for the year ending 31 December 2009 showed a loss before tax of over £745 million. In November 2010 the directors of the parent company announced the proposed restructuring with the aim of enabling all group companies to return to solvency. Ms Laverty says that the intention was to maximise cash collections from the Welcome Finance business and other businesses of the group and as a result to improve the expected return for creditors. There were four schemes in all but this application concerns only the scheme for compromising the claims of creditors of Welcome.

  4. The Scheme is made under Part 26 of Companies Act 2006 (`CA 2006'). An order convening the scheme meetings was made by Henderson J on 16 December 2010. Three meetings were convened but only one is relevant to the Application Claims; that for the Welcome Scheme Creditors. The order directed that notice of the Welcome Scheme Creditors' meeting was to be given by sending a notice by post or email at least 40 days in advance of the meeting to each person who Welcome believes is or might be a Welcome Scheme Creditor where Welcome has a postal or email address for that person. Further, the relevant documents had to be made available on the Cattles website and be available for inspection at the offices of Freshfields Bruckhaus Deringer. The order also provided that advertisements giving notice of the Welcome Scheme Meeting and stating how the documents can be obtained must be published once in each of the Financial Times (International Edition), The Daily Telegraph, the Daily Mail and the Yorkshire Post. The Yorkshire Post was chosen because many of Cattles' shareholders were in Yorkshire.

  5. Welcome did not send individual notices to any of the customers affected by this application but it did place the advertisements as required by the order. The meetings were held on 1 February 2011 and the Scheme was approved by an overwhelming majority. The Scheme was sanctioned by order of Newey J on 28 February 2011, the necessary documents were filed with the Companies Registrar and the Scheme became effective on 2 March 2011.

  6. Ms Laverty states in her witness statement that Welcome did not have the customers who are now asserting claims in mind when Welcome and its advisers were considering the categories of creditors and potential creditors who might be affected by the Scheme. The two main groups of people who they thought might have claims (in addition to bank lenders) were those who had lost money investing in shares in Cattles because there had been a shortfall in the group's impairment provisions and customers who had been mis-sold payment protection insurance (PPI).

  7. The effect of the Scheme very broadly is that Scheme Creditors are, save in limited circumstances, prohibited from commencing or continuing proceedings against Welcome. Scheme Creditors can submit a claim form to the Scheme Supervisors on or before the Bar Date fixed by the Scheme in order to be entitled to receive a distribution in respect of their Scheme Claims. The Bar Date was 2 June 2011. 852 claims were submitted by the Bar Date and those amounted to claims in excess of £4 billion. 693 of those claims have been accepted by the Scheme Supervisors in whole or in part. By the end of April 2014, the Scheme Supervisors had made distributions of around £427 million to the Scheme Creditors.


  8. Norris J ordered on 7 July 2014 that a Joint Memorandum be drawn up describing the claims. The claims raised by customers fall into five categories: (a) CCA Claims (b) Non-PPI Liabilities; (c) Overpayment Claims; (d) Uncashed Cheques Claims; and (e) Charges Claims. I refer to these claims together as the Application Claims.

    (a) CCA Claims

  9. There are three kinds of claims that might be brought under the Consumer Credit Act 1974 (`CCA 1974'). All references to section numbers in the rest of this judgment are to sections of the CCA 1974 as amended unless otherwise stated. For ease of exposition I have simplified the content of the sections, for example in section 140A referring only to the credit agreement rather than to the credit agreement or any related agreement and not referring to the associate or former associate of the creditor as well as the creditor. I do not intend by that simplification to limit my conclusions about the application of statutory provisions to the Application Claims.

    (i) CCA: improper execution claims under s 65(1) or s 142.

  10. Section 65(1) provides that a regulated credit agreement which is improperly executed is not enforceable against the debtor without an order of the court. The requirements for the proper execution of an agreement are set out in section 61(1) and they include a requirement that there must be a document in the prescribed form containing all the prescribed terms and conforming to regulations made under section 60(1). It must also have been signed by the debtor and creditor. The form and content requirements for the proper execution of a consumer credit agreement have been prescribed in regulations such as the Consumer Credit (Agreements) Regulations 1983 (SI 1983/1553) (`the 1983 Regulations'). It is alleged by some of Welcome's customers that their agreements were improperly executed in a number of ways, for example that the amount of credit and/or the APR (annual percentage rate of interest charge) were stated incorrectly or the form of consent to the purchase of PPI was completed incorrectly.

  11. A lender can apply to the court under section 65(1) for an order that he can enforce the agreement against the customer. The exercise of the court's discretion is governed by section 127(1) which provides that the court shall dismiss the lender's application if it considers it just to do so having regard to the prejudice caused by the contravention in question, the degree of culpability for it and the other powers available to the court. Those other powers include (a) the power in section 127(2) to reduce or discharge any sum payable by the debtor or by any surety so as to compensate him for prejudice suffered as a result of the contravention in question; (b) the power to impose conditions on the enforcement of the agreement; and (c) the power to amend the agreement consequential on the making of an enforcement order.

  12. Where an agreement has been improperly...

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