Thames Water Utilities Holdings Limited (Consequentials hearing), Re

MR JUSTICE LEECH: RULING 1

1. This is the consequential hearing to follow my judgment which I handed down this morning at 9.30 in relation to the restructuring plan for Thames Water Utilities Holdings Limited. I left open two questions on the form of the order. The first relates to information rights and the second to the release issues. I found in principle that the scope of the information rights and the releases should not prevent the court from sanctioning the scheme, but I have raised two further points in the judgment in relation to each of those particular issues.

2. In relation to the information rights I considered that the Common Terms Agreement, Schedule 4 did not provide full information for the Subordinated Creditor and the Class B AHG if they were not participating in the equity raise in the recapitalisation transaction: see paragraph

59.

3. The Plan Company has put forward a form of words to meet that which involves an insertion of a new paragraph 59(d) in part 3 schedule 3, which will provide as follows and I quote: "TWUL shall provide periodic updates on a monthly basis to the advisers to the secured creditors and the subordinated creditors, subject to confidentiality arrangements which are satisfactory to TWL acting reasonably being in place as to the progress of such recapitalisation transaction, provided that nothing in this subparagraph (d) shall require TWL to disclose commercially sensitive information that in TWL's opinion acting reasonably could prejudice the equity raise process and/or be in breach of its obligations under the UK Market Abuse Regulation.

4. Mr Thornton has confirmed this morning on behalf of TWL that this amendment to the plan is acceptable. Mr Phillips on behalf of the Class B AHG has only just had an opportunity to consider it and he asks for time to take instructions and if possible put forward an amendment. He initially suggested that it should be by way of some sort of bilateral agreement between the parties.

5. In my judgment, it is appropriate to give the Class B AHG a little time to consider this form of words. I bear in mind that the form of words has been accepted by TWL, and also that the Class B AHG are all Secured Creditors and have existing rights under the relevant Finance Documents. Nevertheless I will give the Class B AHG 48 hours to respond in writing and then I will give 24 hours to the Plan Company and the Class A AHG to respond to their proposals. I will then decide either at the end of this week — I will require that they be sent to me by 4.00 pm on Friday and I will decide immediately what the form of the order will be with a view to it being sealed immediately.

6. In relation to the releases, the argument advanced by Mr Day on behalf of Mr Maynard was that if I permitted the plan to take effect subject to the releases in clause 16.2, the Court would be allowing the Plan Company to give up a substantial asset. As Mr Day put it this morning, I cannot be confident that there would be nothing for a special administrator to investigate if at the end of the day the Recapitalisation Plan fails, RP2 does not take effect and the Plan Company finally goes into a SAR either in September 2025 or towards the end of this year.

7. Mr de Mestre KC for the Plan Company points out that there are temporal and subject matter limits to the releases and that in their current form the releases do not exclude officeholders' claims. He submits that if I permit an officeholder to retain the right to bring claims it would be used either in terrorem against the directors and advisers of the company and it will be inconsistent with the rationale for including the releases in the first place. He refers me again to the decision of Mr Justice Miles in Matalan, which I have quoted in the judgment.

8. With some hesitation I prefer to leave the releases in their present form. It seems to me that the argument this morning has demonstrated the difficulty for the directors in continuing to carry through RP2 if they are subject to a potential claim being made against it by a special administrator down the line. The same is also true for their advisers and for Creditors more widely.

9. Further, this point was raised at the outset by the Class B AHG in the Class B Grounds of Opposition, it is a point which they fully argued and it is a point which I have decided that it should not prevent the scheme taking effect. In my judgment, it would be inconsistent with the rationale for granting the releases in the first place to now include a form of words which allows a special administrator to reopen the question of the directors' conduct later, possibly much later, and after the Plan Company has either gone into or even come out of a SAR. Mr Day made the very good point that I cannot be satisfied that no breaches duty have been committed and I have had to take a fair amount on trust in relation to the conduct by the Plan Company's officers and their advisers (and not without some criticism in the judgment). But it seems to me that having taken a decision in principle to sanction the plan, and to give the market an opportunity to restore Thames Water to health, it would be inappropriate to tie one hand of the directors and their advisers behind their back while trying to give effect to that purpose. Having heard full argument this morning, it seems to me I will approve the plan in its existing form and without any modification. RULING 2

10. I have to decide next whether to grant permission to appeal and if so in what terms. I indicated to the parties that I would be prepared to grant permission to appeal but I wanted to test the Grounds and the extent to which they had a real prospect of success with each of the potential Appellants. Mr Al Attar KC submitted, and I accept in general terms, that if possible it is the duty of the first instance judge to try and case manage an appeal and focus the minds of the parties on the issues which the Court of Appeal will have to decide. In the present case that particular duty is magnified, given the urgency of the potential appeal and the limited time which the Court of Appeal will have both to hear and decide the issues and also to produce a judgment.

11. With that in mind I turn to each of the parties who presented applications for permission to appeal. In relation to TWL three targeted grounds are advanced, and although Mr Al Attar advanced a strong argument for suggesting that the appeal has no real prospect of success, I am satisfied that I should grant permission to appeal on those three grounds both because they are targeted and because it seems to me they do raise a legal issue which the Court of Appeal should determine, even if, as he submitted, it may have no effect on the outcome. I cannot decide that issue at this hearing.

12. I also give permission to appeal to Mr Day on behalf of Mr Maynard in relation to the four grounds that he advanced. I have considered whether I should limit him to Grounds 1 and

2. But, as Mr Day submitted, Grounds 3 and 4 may give rise to issues of principle which the Court of Appeal should be asked to consider. In my judgment, those Grounds are also limited and are capable of being dealt with by the Court of Appeal on the basis of the judgment and limited references to the evidence and the submissions.

13. The more difficult question is how to deal with the five Grounds which the Class B AHG advance. Mr de Mestre KC for the Plan Company submitted that Mr Phillips was in effect applying for permission to appeal against [1] to [306] and there is an element of truth in that. I refuse permission in relation to the competition point. Although Ms Thomas put up a valiant display, demonstrating the lack of knowledge on the part of this particular tribunal of competition law, I am not satisfied that there is any real independent competition law argument which has a real prospect of success in the Court of Appeal. Moreover, the determination of the competition law will detract from the critical issues which the Court of Appeal will have to decide in this case. In my judgment, therefore, Ms Thomas will have to persuade the Court of Appeal to grant permission in relation to the competition law point.

14. In relation to the procedural fairness point, although Mr Phillips made some good points, I am not satisfied that there was any fundamental lack of fairness in the way that the Class B AHG was treated either at the trial or in my case management decision on the 31 January 2025. One has to bear in mind consistently that these cases are not started by Part 7 Claim Forms with full pleadings, disclosure, expert evidence and a full trial timetable. These are, after all, applications in which the court is exercising a very different kind of jurisdiction. It will be letting that jurisdiction get out of control if the parties were able to complain to the Court of Appeal that they did not have time to advance their case in relation to the sanction of a plan under Part 26A after four and a half days (very long days, I may say) of evidence and argument with the benefit of numerous counsel and solicitor teams to demonstrate that there could be some substantial procedural fairness in the way in which the Court dealt with the trial. I therefore dismiss the procedural fairness ground.

15. I will, however, permit the Class A AHG to appeal on Grounds 1, 2 and 4 which go to the heart of the decision that I made. Ground 2 raises the same or substantially the same ground as the TWL grounds of appeal and Ground 4 raises a discrete point on releases which it seems to me is the point of law for the Court of Appeal. The one Ground which gives me some concern is Ground 1, which deals with the valuation evidence. I am not satisfied that there is any real prospect of success in relation to the valuation evidence but nevertheless I will give permission to appeal on the basis that there is some other compelling reason for doing so.

16. There are two compelling reasons. The first is that my judgment was largely built on the conclusions on valuation which I reached and the Class B AHG ought to be given an opportunity to challenge that at the same time as challenging the legal reasoning in the judgment. But secondly, and more importantly, the press and public interest in this case makes it important that the Court of Appeal should at least have an opportunity to scrutinise the decision and the exercise of my discretion. For that reason, if none other, it should be important that the Class B AHG have an opportunity to run a considered appeal against the valuation findings and the conclusions which flow from them. For those reasons I will permit the Class B AHG to appeal on grounds 1, 2 and

4.

17. I make it clear that I am not limiting any of the parties to the draft Grounds which are in their Skeleton Arguments and that they will have until 4.00 pm on Thursday to file Grounds of Appeal and that in doing so I do not treat their Skeleton Arguments as a statute which limits the extent to which they can appeal but more an indication of the areas to which the Grounds of Appeal must be focused. Epiq Europe Ltd hereby certify that the above is an accurate and complete record of the proceedings or part thereof. Lower Ground, 18-22 Furnival Street, London EC4A 1JS Tel No: 020 7404 1400 Email: [email protected]