The plan company obtained sanction for its restructuring plan notwithstanding opposition from a creditor. The plan company sought payment of nearly 50% of its costs of the sanction proceedings from that creditor.
The creditor raised a threshold issue as to whether it could be liable for any costs given that the sanctioned plan provided in one of its clauses that the plan company should pay all costs in connection with the plan and be responsible for its own costs.
The court rejected that argument holding that the clause in question concerned the plan company’s liability to pay the costs it incurred in connection with the plan, including obtaining court sanction; it did not seek to limit or remove the plan company’s ability to recover costs from plan creditors arising by reason of section 51 of the Senior Courts Act 1981 and/or CPR Part 44. Clear language would be required for a plan to have that effect which was not present in the instant case.
After dealing with that threshold issue the judge noted that it was not completely settled whether the approach to costs in a plan case (Part 26A) was the same as for a scheme case (Part 26) but that both sides in the instant case had drawn on the Part 26 principles, and that he considered that that was the appropriate approach, albeit he emphasised the need to take into account the different types of relief under the different regimes.
These principles included the principle that the court does not generally make adverse costs orders against objecting creditors when their objections (though unsuccessful) are not frivolous and have been of assistance to the court in its scrutiny of the scheme. The arguments between the parties principally centred around whether the opposing creditor’s opposition had been frivolous.
In the specific circumstances of the case, the judge considered the various elements of costs being sought by the plan company ultimately determining that an adverse costs award should be made against the opposing creditor for part of those costs.
In re Madagascar Oil, Mr Justice Richard Smith, 7 November 2025
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