Nortel Networks UK Ltd & Ors, Re Insolvency Act 1986

This is my extemporary judgment in the matter of Nortel Networks UK Limited (and 18 other entities), number 536 of 2009. This is the hearing of an application by the Joint Administrators of Nortel Networks UK Limited and 18 other corporate entities pursuant to paragraph 63 of Schedule B1 to the Insolvency Act 1986 (as amended) for the court to direct that the Joint Administrators should be at liberty to perform, and procure the companies to perform, an agreement settling what are described as EMEA (or European, Middle Eastern and African) Canadian Claim and Related Claims dated 9^th July 2014.

By paragraph 63 of Schedule B1:

“The administrator of a company may apply to the court for directions in connection with his functions.”

Entry into the Settlement Agreement is within the powers of the Joint Administrators pursuant to section 42 and paragraph 18 of Schedule 1 of and to the Insolvency Act 1986. However, court approval or endorsement of the Settlement Agreement is sought because of the significant nature of the Settlement Agreement in the context of the administrations of the 19 corporate entities concerned.

On this application, the Joint Administrators are represented by Mr. Tom Smith QC leading Mr. Matthew Abraham (of counsel). Before the court there is also Ms. Felicity Toube QC, who represents the Nortel Networks UK Pension Trust Limited and also the Board of the Pension Protection Fund. Together with the UK Pensions Regulator, those entities have been referred to as the “UK Pensions Interests” (or “UKPI”). Those Interests are said by Ms. Toube to represent 93% of the creditors of Nortel Networks UK Limited.

By the Settlement Agreement, the Joint Administrators and the companies propose to settle various claims brought by the companies against certain Canadian companies within the Nortel Group in exchange for admitted claims in the insolvencies of those companies for between a little under US$100 million, potentially rising to a little under US$123 million, and for the withdrawal of various claims made against the funds by the Canadian companies. The view of the Joint Administrators is that the proposed settlement is in the best interests of each of the 19 entities and their respective creditors.

Although the Settlement Agreement was entered into by the Joint Administrators on 9^th July 2014, it only becomes effective upon the satisfaction of various conditions. One such condition is that if the Joint Administrators choose to seek directions from the court in relation to entering into, and performing, under the Settlement Agreement - as they have elected to do - then the Joint Administrators were required to file the application seeking such directions within three days of execution of the Settlement Agreement and to use their commercially reasonable best efforts to procure such approval by no later than this Friday, 18^th July 2014. As a result, this application was issued on 11^th July and has been brought on for hearing on an urgent basis.

Due to what is said to be the commercial sensitivity surrounding the companies, and the confidential nature of the Settlement Agreement, the Joint Administrators also seek an order from the court that the relevant witness statement of one of the Joint Administrators, Mr. Alan Robert Bloom, dated 14^th July 2014, and its extensive exhibits shall not be open to inspection without leave of the court pursuant to Insolvency Rule 7.31(5). The application is supported, as I have mentioned, by Mr. Bloom’s tenth witness statement of 14^th July 2014. Mr. Bloom, who is one of the Joint Administrators, is a Licensed Insolvency Practitioner and a Partner in Ernst & Young LLP. The exhibit to his witness statement, Exhibit ARB10, runs to three lever-arch files, containing some 1,040 pages.

Notice of the application has been given to UKPI. Notice has also been given to the Monitor in the Companies Creditors’ Arrangement Act proceedings in the Commercial List of the Ontario Superior Court of Justice. Those proceedings, of course, relate to the Canadian debtors. Most of the companies in administration have creditors’ committees. Those committees have been informed of the settlement and of the present application for directions; but, in the limited time available, it has not been possible to convene formal meetings of the various committees, and those committees have not been served with the present application.

The background to the Nortel Group and its constituent companies is summarised at paragraphs 11 through to 23 of Mr. Bloom’s witness statement. In summary, the Nortel Group is a global supplier of what are described as “networking solutions”, that is to say, telecommunications, computer networks and software. It served customers in Canada, the United States, Europe, the Middle East and Africa, the Caribbean, Latin America and Asia. The ultimate holding company for Nortel Group is Nortel Networks Corporation (or NNC), which is a Canadian company. The primary Canadian operating company, and the holding company for most of the Nortel Group’s subsidiaries, is Nortel Networks Limited (or NNL).

The company is in administration. The subjects of the present application formed part of the Nortel Group operating in Europe, the Middle East and Africa. I shall refer to them as the “EMEA Debtors”. The Nortel Group also had significant operations in the United States, the primary US Nortel operating company being Nortel Networks Inc (or “NNI”), a private company incorporated in the United States.

The Nortel Group ran into serious financial difficulties in the latter part of 2008; and, on 14^th January 2009, first NNC and NNL, together with certain of their Canadian subsidiaries (to which I shall refer as the “Canadian Debtors”) sought protection under the Canadian Companies Creditors’ Arrangement Act to facilitate the reorganisation of the Nortel Group for the benefit of its creditors. Ernst & Young Inc. was appointed as “Monitor” in the CCAA proceedings. The Canadian Debtors continue to manage their assets under the supervision of the Ontario Superior Court of Justice.

Secondly, NNI and Nortel Networks Capital Construction, together with certain of their direct and indirect US subsidiaries (to which I shall refer as the “US Debtors”) filed voluntary petitions in the Bankruptcy Court for the District of Delaware pursuant to Chapter 11 of the US Bankruptcy Code.

Thirdly, the companies, the subject matter of the present application, were placed into administration by orders of Blackburne J, and the Joint Administrators were appointed to the companies. Each of those administrations is a main insolvency proceeding under the EC Regulation on Insolvency Proceedings. The administration of NNUK and of the remaining companies has been recognised in the United States.

In respect of a French subsidiary, Nortel Networks SA, secondary proceedings have been commenced in France, and the French court has appointed a Mandataire Liquidateur (or French Liquidator).

Mr. Bloom summarises the purpose and progress of the administrations at paragraphs 24 to 36 of his witness statement. In summary, it became clear that the sale of all the Nortel businesses would be necessary and that a rescue of the companies as a going concern would not be possible. As a result, the disposal of all core businesses, and of the principal assets of the Nortel Group, was completed in 2011. In light of the way the Nortel Group had been organised, those assets were sold on a business line basis, comprising all the assets of a particular line located across all jurisdictions, rather than on a company-by-company basis.

To date there have been global realisations totalling approximately US$7.5 billion. Because the sale proceeds arose from assets sold on a business line basis, with the benefit of cross-border co-operation, rather than on a company-by-company basis, there remain significant issues as to how the sale proceeds are to be divided up between the various Nortel entities and, in particular, as between the US, Canadian and EMEA Debtors. The sale proceeds have been, and remain, held in escrow pending the purchase price allocation.

During the administrations, the companies, the subject of this application, have filed significant claims against the Canadian and also the US Debtors. Those claims broadly relate to the alleged improper transfer of value from the companies to NNL, NNC and NNI during the period preceding the collapse of the Nortel Group. The US claims were settled in December 2013. The UKPI, as the largest creditor of NNUK in respect of the deficit on the Nortel Networks UK Pension Plan, was a party to those settlements.

In the light of the participation of the UKPI in the US settlement, the Joint Administrators considered that there was no need to seek the directions of this court to approve the companies fulfilling the US settlement. In addition to those Canadian and US claims, separate claims were also made by the UKPI, and by the French Liquidator, against the Canadian Debtors. Those claims were all to be the subject of a claims trial.

Apart from the conclusion of that trial, the remaining tasks in the administration involve finishing the realisation of assets, including resolving the Purchase Price Allocation, and then making distributions to creditors. The Purchase Price Allocation is one of the main remaining issues in the administrations. It is addressed at paragraphs 37 to 40 of Mr. Bloom’s witness statement.

In short, there was filed a joint motion in the US and the Canadian courts requesting a joint order of those two courts imposing a protocol on the parties for resolving any disputes concerning the Purchase Price Allocation, and also the claims issues. The Allocation trial was heard between the 12^th May and 24^th June this year. Closing oral arguments will be heard in a joint hearing on 23^rd and 24^th September 2014. The Allocation trial will continue, and it remains unaffected by the settlement which is the subject of the present application for directions.

The claims, and the claims trial, are addressed at paragraphs 41 to 49 of Mr. Bloom’s witness statement. Because of a potential time bar date, it had been necessary for the Joint Administrators to submit claims in Canada in order to protect the companies’ position in circumstances where the Joint Administrators did not, at the time, have access to all the relevant underlying documents and evidence. The Joint Administrators have subsequently identified the relevant evidence, and have investigated the claims.

As a result of the US settlement, the claims trial has involved only the companies, the UKPI, the French Liquidator and the Canadian Debtors. The nature of the claims is described at paragraph 56 of Mr. Bloom’s witness statement. The claims relate to the period 2001 onwards. They fall into the following broad categories: first, intercompany trading debt claims; secondly, transfer pricing claims; thirdly, NNUK loan claims; fourthly, director and officer claims; and, fifthly, French claims. The nature of those claims is more fully described in paragraph 56 of Mr. Bloom’s witness statement.

The Canadian Debtors contest the factual basis of all of the claims (apart from certain of the intercompany trading debt claims). The Canadian Debtors also assert legal defences and set-offs to all of the claims, in addition to defences on the merits. The nature of those legal defences and cross-claims is set out at paragraph 58 of Mr. Bloom’s witness statement. Essentially, they comprise what are described as “snap back claims”, “trade debts” claimed by the Canadian Debtors and, thirdly, there are “limitation defences”, asserting that some of the claims are time-barred, including some of the larger transfer pricing claims.

On 8^th July 2014 the companies and the French Liquidator reached an agreement in principle with the Canadian Debtor to settle the claims (including those not being pursued in the claims trial). The terms of the Canadian settlement are recorded in the Settlement Agreement. The parties are the Joint Administrators, the companies under their control, together with an additional EMEA entity, Nortel Networks Optical Components Limited (and its liquidator), the French Liquidator (including the companies under his control), and what have been described as the EMEA Non-Filed Entities (as explained by Mr. Bloom at paragraph 64 of his witness statement). Other parties to the Settlement Agreement are the Canadian Debtors, the Monitor, and all current and former directors and officers of the Canadian Debtors.

Mr. Bloom summarises the terms of the Canadian Settlement (as recorded in the Settlement Agreement) at paragraphs 50 to 54 of his witness statement. The key points can be summarised as follows:

The Settlement Agreement, although it has been executed, only becomes effective upon the satisfaction of various conditions. In particular, first, there must be approval of the Canadian Debtors’ and the Monitor’s entry into and performance under the Settlement Agreement by an order in the Companies Creditors’ Arrangement Act proceedings. That order has been obtained from the Honourable Justice Newbould yesterday (Wednesday, 16^th July 2014). Secondly, if the Joint Administrators choose to seek directions from this court in relation to the companies entering into, and performing, the Settlement Agreement, such directions are to be given by no later than 18^th July.

That forms the background to the present application. Mr. Smith, for the Joint Administrators, has taken me to the relevant authorities. He has referred me to a number of cases, starting with reference by Hart J in The Public Trustee v. Cooper (decided on 20^th December 1999 and reported at [2001] WTLR 901 at page 922H) to an unreported decision of Robert Walker J (delivered in chambers) which sets out an analysis of the various categories of case in which the court may be called upon to give directions in relation to a proposed course of action, or a course of action already taken, by a trustee. It is unnecessary to refer to that analysis in full. It is sufficient for me to go to a much more recent decision of David Richards J in the case of MF Global UK Ltd. [2014] EWHC 2222 (Ch), handed down on 4^th July 2014. At paragraph 28 David Richards J expressed himself satisfied that the applicant in that case had the power to compromise the claims between itself, in its capacity as the trustee of the client money pool, and the general estate of the company in administration on the terms which had been negotiated. In making the present application, it was not surrendering the exercise of its discretion, when entering into the compromise agreement, to the court. Rather, the application was said to fall into that category secondly described in the unreported judgment of Robert Walker J in 1995, and cited by Hart J in The Public Trustee v Cooper. David Richards J proceeded to identify the relevant citation in these terms:

“The second category is where the issue is whether the proposed course of action is a proper exercise of the trustees' powers where there is no real doubt as to the nature of the trustees' powers and the trustees have decided how they want to exercise them but, because the decision is particularly momentous, the trustees wish to obtain the blessing of the court for the action on which they have resolved and which is within their powers. Obvious examples of that, which are very familiar in the Chancery Division, are a decision by trustees to sell a family estate or to sell a controlling holding in a family company. In such circumstances there is no doubt at all as to the extent of the trustees' powers nor is there any doubt as to what the trustees want to do but they think it is prudent and the court will give them their costs of doing so to obtain the court's blessing on a momentous decision. In a case like that, there is no question of surrender of discretion and indeed it is most unlikely that the court will be persuaded in the absence of special circumstances to accept the surrender of discretion on a question of that sort, where the trustees are prima facie in a much better position than the court to know what is in the best interests of the beneficiaries.”

In paragraph 29 David Richards J readily accepted

“that experienced professional trustees and insolvency practitioners, with the benefit of expert legal advice, are well-place to negotiate and decide on a compromise.”

At paragraph 32 David Richards J stated that:

“The approach to be adopted by the court on such an application is … accurately set out in Lewin on Trusts (18^th edition 2008) at para 29-299:

“The court's function where there is no surrender of discretion is a limited one. It is concerned to see that the proposed exercise of the trustees' powers is lawful and within the power and that it does not infringe the trustees' duty to act as ordinary, reasonable and prudent trustees might act, ignoring irrelevant, improper or irrational factors; but it requires only to be satisfied that the trustees can properly form the view that the proposed transaction is for the benefit of beneficiaries or the trust estate and that they have in fact formed that view. In other words, once it appears that the proposed exercise is within the terms of the power, the court is concerned with limits of rationality and honesty; it does not withhold approval merely because it would not itself have exercised the power in the way proposed. The court, however, acts with caution, because the result of giving approval is that the beneficiaries will be unable thereafter to complain that the exercise is a breach of trust or even to set it aside as flawed; they are unlikely to have the same advantages of cross-examination or disclosure of the trustees' deliberations as they would have in such proceedings. If the court is left in doubt on the evidence as to the propriety of the trustees' proposal it will withhold its approval (though doing so will not be the same thing as prohibiting the exercise proposed). Hence it seems that, as is true when they surrender their discretion, they must put before the court all relevant considerations supported by evidence. In our view that will include a disclosure of their reasons, though otherwise they are not obliged to make such disclosure, since the reasons will necessarily be material to the court's assessment of the proposed exercise."

In paragraph 33 David Richards J said:

“Applying [that] approach, [he was] satisfied that Mr Fleming, with the benefit of appropriate legal advice, and acting on behalf of the CMP Trustee has properly formed the view that the proposed compromise is for the benefit of clients as beneficiaries of the trust and that there is no reason why the court should not give liberty to the CMP Trustee to enter into the proposed compromise, and indeed every reason why it should do so.”

At paragraph 40 David Richards J having identified

“… all [of the] considerations which the CMP Trustee has had to take into account in considering whether it is appropriate to settle the potential claims on the terms proposed [indicated that], having regard to all the factors mentioned above, the CMP Trustee is satisfied that the settlement is in the best interests of the decreased clients as well as the other clients. This is a view with which I agree, although I need only be satisfied that the CMP Trustee's decision is a reasonable decision taken on proper grounds.”

At paragraph 45 David Richards J said that:

“… Mr Heis, with the benefit of his own expert legal advice, has concluded that the proposed settlement is in the best interests of the general estate and the general body of unsecured creditors. I am satisfied that this is, at the very least, a reasonable conclusion for him to reach and it is accordingly an appropriate case in which to direct that he be at liberty to enter into the proposed settlement.”

In other words, I am not myself forming any view in the matter. I am concerned to satisfy myself that the decision which the Joint Administrators have reached to enter into the settlement of the Canadian claims is a reasonable decision, taken on proper grounds, and with full regard to all the relevant considerations, and not ignoring any such considerations.

Mr. Smith submits, and I accept, that in the present case there is no real doubt that the Joint Administrators have the necessary power to enter into the Settlement Agreement, and to continue to perform it, pursuant to section 42 of, and paragraph 18 of Schedule 1 to, the Insolvency Act 1986. Thus, the present application falls into this second category, as formulated by Robert Walker J. There is no surrender of their discretion by the Administrators to the court; but, because the decision is particularly momentous in the context of the administrations of the companies, the court’s sanction is sought for the execution, and performance, of the Settlement Agreement.

The reason why the Settlement Agreement is a significant – indeed a momentous – event in the administrations is that it provides for the settlement of the claims which, apart from the Purchase Price Allocation, have become one of the main focuses of the administration of 19 entities, including 18 which were incorporated outside this jurisdiction. The claims have been settled in return for admitted claims of up to approximately US$125 million, and of the broader claims against the companies of approximately US$100 million.

Given that the UKPI is not a party to the Canadian settlement, in contrast to its participation in the US settlement, and the UKPI together constitute some 93% of Nortel Network UK Limited’s creditors, the importance of seeking court approval is enhanced. Thus, whilst it is true that in commercial matters generally Administrators should be expected to exercise their own judgment rather than to rely upon the approval or endorsement of the court to their proposed course of action, the present case is, I accept, an example where, because of the significant nature of the settlement in the context of the administrations of a number of different companies dotted across Europe, it is appropriate to seek directions from the court.

But it is necessary to bear in mind the limited extent of the court’s role. It does not have to be satisfied that it would have entered into the Settlement Agreement; merely that the performance of the Settlement Agreement is both rational and a decision honestly reached. As Sir Andrew Morritt, the Chancellor, said in another of the authorities cited to me, Tamlin v. Edgar [2011] EWHC 3949 (Ch) at paragraph 25:

“It must be demonstrated that the exercise of [the Administrators’] discretion is untainted by any collateral purpose such as might engage the doctrine misleadingly called a fraud on the power. They must satisfy the court that they considered and properly considered their proposals to be for the benefit of [those for whom they act].”

That requires full and frank disclosure to the court of all relevant facts and circumstances, which I am satisfied has been undertaken in this case. The court is not a rubber stamp, and the parties and their advisers must be astute not to appear to treat the court as such.

The Joint Administrators, through Mr. Smith, submit that the court should direct that they be at liberty to perform, and to procure the companies to perform, the terms set out in the Settlement Agreement. To that end, the court must be satisfied: (1) that the Joint Administrators can properly form the view that the Settlement Agreement is for the benefit of each of the companies and their creditors; and (2) that the Joint Administrators have, in fact, formed that view.

The decision to enter into the Settlement Agreement, and the reasons for doing so, are addressed at paragraphs 54 through to 63 of Mr. Bloom’s witness statement. At paragraph 55 Mr. Bloom says this:

“The Joint Administrators believe, after considering the advice of their Canadian and English counsel, that the Canadian Settlement is within the range of outcomes that could be considered fair and appropriate under the circumstances.”

He proceeds to summarise the Joint Administrators’ reasons in the following paragraphs of his witness statement.

The overall effect of the Canadian Settlement is that the companies will avoid the risks of the claims trial and the potential for some or all of the claims failing and the companies suffering adverse costs orders in return for admitted claims against the Canadian Debtors of between just under US$100 million and just under US$125 million. In addition, substantial trade debt claims of approximately US$100 million, asserted by the Canadian Debtors against the companies, will be withdrawn. The legal advice which the Joint Administrators have received on the merits of the claims is said to indicate that the proposed settlement is an appropriate one.

Prior to coming into court I had had the opportunity of reading a bundle containing the confidential legal advice which the Joint Administrators have received. I have read a letter and memorandum of merits, analysis and recommendations prepared by English solicitors, Herbert Smith Freehills LLP. I have also seen letters from US attorneys, Debevoise & Plimpton LLP, and from two limited liability partnerships comprising Canadian attorneys. They are Davies Ward Phillips & Vineberg LLP and Lax O’Sullivan Scott Lisus, both with offices in Toronto, Canada. That advice must remain confidential. But the reasons for entering into the Settlement Agreement are set out at paragraphs 56 and following of Mr. Bloom’s witness statement.

He says that there are significant risks in relation to the claims identified. The claims were factually and legally complex, with their quantum difficult to assess, giving rise to a difficulty in determining litigation strategy and litigation risk. Mr. Bloom proceeds to elaborate upon those difficulties in terms which it would be inappropriate for me to set out in a public judgment.

Mr. Smith summarised the advantages of the settlement as follows: first, the settlement eliminates those material risks; secondly, it gives certainty to what would otherwise be an uncertain outcome of the Canadian claims; thirdly, it eliminates the counterclaims which themselves had given rise to the possibility of a net liability from the companies, the subject of this application, to the Canadian companies; fourthly, the settlement avoids any potential costs liability, which could be substantial; and, fifthly, it enables the companies to focus upon the allocation dispute, the resolution of which is presently pending before the US and Canadian courts. Mr. Smith emphasises the fact that the Settlement Agreement is to be treated as a package deal.

At paragraph 61 Mr. Bloom has addressed the position of the individual companies. NNUK is said to benefit from the release of claims against its subsidiary companies, to the extent that these are solvent. There are other advantages. Mr. Bloom sets out the way in which the companies all stand to benefit from the Canadian settlement at paragraph 61 of his witness statement. At paragraph 62 Mr. Bloom says this:

“In view of the risks identified above, and after considering the advice of English and Canadian counsel, the Joint Administrators have concluded that a settlement of the claims in return for (a) a claim in to the Canadian estate of US$100 million, to be increased to US$125 million in the event that the French Liquidator’s claims both in Canada and in France are withdrawn, dismissed or finally determined for no enforceable liability against the Canadian estate; and (b) the release and/or assignment and subordination and dismissal of the Canadian claims, and any potential claims against the companies for costs, is within the range of outcomes that could be considered fair and appropriate under the circumstances. The Joint Administrators have been advised that it is not possible to be certain that the French proceedings will be resolved on this basis; but the resulting claim of US$100 million would remain a fair and appropriate return under the circumstances.”

At paragraph 65 Mr. Bloom states that:

“Given that the UKPI has decided not to participate in the Canadian settlement” – Ms. Toube pointed out that that was not a conscious decision on the part of the UKPI – “the Joint Administrators have determined that it is prudent to apply for directions in the terms set out in the draft order. The Joint Administrators reasonably believe that the order sought will achieve much needed certainty for all creditors of the companies.”

Having addressed various other matters Mr. Bloom states at paragraph 75 that:

“In view of the uncertainty of the outcome, the Joint Administrators have been advised, and believe, that entry into the Canadian settlement will ultimately be in the interests of each of the companies and their respective creditors overall.”

There is before the court an exchange of letters dated 15^th July 2014 between Hogan Lovells (for the UKPI) and Herbert Smith Freehills (for the Joint Administrators). The position of the UKPI is that they are minded to take no position on the application, and to leave it to the court to determine whether to accede to it. But UKPI have a number of material concerns as to the proposed settlement, and the manner in which it has been negotiated. Hogan Lovells state that their clients reserve in full their rights on all such issues, and do not consider that any approval which the court may grant on the Joint Administrators’ application will obviate the need for these issues to be scrutinised and properly addressed in due course. Herbert Smith Freehills’ response to those concerns was set out in their letter (also of 15^th July), with which Debevoise & Plimpton expressed their agreement in a letter (also of 15^th July 2014).

Before me, Ms. Toube indicated that the UKPI do not oppose this application, but that they wish to put down a marker in relation to the UKPI’s concerns. Those concerns relate to what will happen next. It was said that there would be a need to examine the position between the individual EMEA entities and, in particular, the ultimate allocation of assets and liabilities, and the incidence of costs. Ms. Toube acknowledged that the court could not determine any issues of conflict between the individual companies today; and she did not invite the court to attempt to do so. But her principal concern, on behalf of the UKPI, was that, on its face, the lead UK company, Nortel Networks UK Limited, appeared to be giving up 50% of what she described as a “good claim”. There were also issues as to the level of costs, and who should ultimately bear the burden of such costs.

I gave Ms. Toube and Mr. Smith, and those behind them, the opportunity to discuss the matter; and, as a result of those discussions, they agreed a form of wording which I should incorporate into my judgment, without it being recited in the court’s order. The form of words (which I adopt) is that:

“The court is not addressing any issues in relation to the Purchase Price Allocation; and the rights of the UKPI to raise arguments in relation to the Purchase Price Allocation, including in respect of the incidence of costs and benefits under the Settlement Agreement, are reserved.”

Subject to that qualification, I am satisfied that it is appropriate to accede to the Joint Administrators’ application; and, pursuant to paragraph 63 of Schedule B1, I direct that the Joint Administrators be at liberty to perform, and to procure the companies to perform, the agreement settling EMEA Canadian claims, and related claims, dated 9^th July 2014. I am satisfied that in accordance with the guidance contained within the authorities which I have previously cited, it is appropriate to give such a direction. I am not simply rubber-stamping what the Joint Administrators have done. I am satisfied, on the evidence, that the Joint Administrators have considered the Settlement Agreement with the benefit of appropriate legal advice; and that, in the light of such advice, they genuinely, and properly, consider it to be for the benefit of each of the companies of which they are Administrators to implement the terms of that Agreement.

Mr. Smith also seeks an order pursuant to Insolvency Rule 7.31(5) that the right of inspection otherwise available in insolvency proceedings should not be exercisable in relation to Mr. Bloom’s tenth witness statement and its exhibit without prior leave of the court. He relies upon: (1) the high profile nature of the administrations and the companies, and the commercial sensitivity surrounding the information; (2) the fact that litigation by other parties in relation to the claims trial and the allocation trial continues; and (3) confidentiality provisions in the Settlement Agreement. So far as the latter factor is concerned, I am not satisfied that that is a sufficient reason for making the order sought in relation to Mr. Bloom’s witness statement because (as I think Mr. Smith acknowledged) the confidentiality provision in clause 8.1 of the Settlement Agreement is now spent, because of the motion to the Ontario Superior Court of Justice and the Companies Creditors’ Arrangement Act proceedings, and also because of the application that has been made to this court.

I am, however, satisfied that the information contained within Mr. Bloom’s witness statement and his exhibit is confidential and commercially sensitive information, particularly in relation to the reasons for the entry into the Settlement Agreement; and for that reason I will make the order that is sought that Mr. Bloom’s tenth witness statement and the exhibit be not open to inspection without the prior leave of this court.

I also direct that the costs of the application be paid as an expense of the administration out of the assets of the companies.

That, of course, leaves the question outstanding of the costs of attendance of UKPI.