Steinhoff International Holdings N.V., Re

To begin with, I should say I am satisfied that the relevant statutory requirements have been complied with.

I have already noted above that the required statutory majorities were obtained. I am also satisfied that the meetings were summoned and conducted in accordance with the Convening Order made by Sir Alastair Norris. I am also satisfied as to classcomposition. Sir Alastair in his Judgment approved the Company’s proposal that there be two classes of Scheme Creditor, on the basis that Facility A2 is subordinated to Facility A1, but that no further fracturing of those two classes was justified: here I adopt the reasoning of Sir Alastair at paragraphs [15]-[19] of his Judgment.

I am also satisfied as to the bona fides of the statutory majorities: the turnout was high, and the decisions they made seem entirely rational. I have seen nothing to suggest that the majorities were not acting in the interests of their respective classes.

I will come on below to address the third aspect of the analysis derived from Buckley (the perspective of the intelligent and honest scheme member), since that seems to me to be related to the question whether there is a “blot in the scheme.” To deal with two other points at this stage, however, I should first mention the question of jurisdiction. As regards the Company, I am satisfied that although incorporated abroad, it has a sufficient connection with the jurisdiction for it to be wound up as an unregistered company under the Insolvency Act 1986: this conclusion is justified on the basis that the Facility A1 and A2 arrangements are governed by English law and the SEAG CPU is governed by English law: see Re Drax Holdings Ltd [2004] BCC 334, and Re Vietnam Shipbuilding Industry Group [2014] BCC 433, at [9]. As regards EU domiciled Scheme Creditors, I am satisfied, in accordance with the settled practice of assuming that the Recast Judgments Regulation (EU) No. 1215/2012 applies, that jurisdiction is established both under Article 25 (on the basis of the jurisdiction clauses contained in the SEAG CPU and the SEAG Intercreditor Agreement), and under Article 8 (on the basis that 10 Scheme Creditors are domiciled in England & Wales, and can act as anchor defendants in respect of the remainder).

The second point is the international effectiveness of the Scheme. The purpose of the Scheme, put shortly, is to confer authority under English law for the amendment of debt instruments which are already governed by English law. The conclusion that such amendments will be regarded as effective in jurisdictions outside England & Wales is consistent with the general approach in private international law, and as regards the Netherlands and South Africa specifically, the conclusion is supported by evidence served by the Company (there are expert opinions on South African law from Mr Michael Fitzgerald QC and Mr Roger Wakefield, and on Dutch law from Dr Dennis Faber). Taking these matters together, I am satisfied that the Scheme will be effective internationally.

Under this heading, it is convenient to consider what seem to me to be a series of interrelated matters, all of which feed into the overall analysis of whether Conservatorium has standing, and whether the present Scheme is a fair one or whether it is tainted by a “blot” such that the Court should refuse sanction.

Having considered the factors in play in this section, I will then set out my overall conclusions in a separate section below.

I accept the proposition, advanced by Conservatorium, that the present Scheme must be regarded as connected with the proposed Steinhoff Global Settlement. That seems entirely obvious. As already explained above, the purpose of the Scheme is to permit amendments to be made to certain English law documents, which are necessary in order to allow the Steinhoff Global Settlement to be implemented. Mr du Preez for the Company put the matter as follows in his evidence:

“The Scheme … is a vital ‘stepping-stone’ for the Scheme Company in its efforts to implement the Steinhoff Group Settlement. This is because the Scheme Company requires the consent of its financial creditors to proceed with such efforts. In other words, it is a key gating item, without the achievement of which there is no prospect of implementing the Steinhoff Group Settlement.”

I also have little doubt that the present Scheme Creditors will have assessed the appropriateness of the Scheme by reference to that overall objective. I have already mentioned (see [54] above) that at least one material benefit, namely the new security to be provided by the Company in respect of liabilities under the SEAG CPU, will become available only when the settlement overall becomes effective. Moreover, the Scheme Creditors were encouraged to take a holistic view. For example, in its Explanatory Statement circulated pursuant to the Convening Order, the Company said the following, in the context of describing the benefits of the Scheme:

“The Scheme Company believes that these factors will in combination operate to the benefit of the Scheme Creditors relative to a situation in which the Steinhoff Group Settlement fails. Specifically, the Scheme Company believes that a successfully completed settlement will bring substantial finality to the significant contingent litigation liabilities and related uncertainty to which the Group is currently subject and will remove the overhang of the legacy events from the Group and its underlying businesses for the benefit of the continuing creditors of the Scheme Company, including the Scheme Creditors.”

In other words, in deciding how to vote, the Scheme Creditors were invited to compare the benefits thought to flow from overall implementation of the Steinhoff Group Settlement with the consequences of there being no settlement. As to the latter point, the Company’s position, as explained in the evidence of its CEO Mr du Preez, is that the no settlement scenario is likely to lead to liquidation. I will need to return to one point on this issue below, but I will say now that, having considered Mr du Preez’s evidence, I am satisfied that that is an appropriate comparator. As the Company has indicated, if settlement is not achieved there is a material risk that adverse judgments may be obtained from the latter part of 2021 onwards, and that given that its debt presently matures at the end of 2021, the Company will not be in a position to satisfy such judgments or to refinance its present indebtedness. Any liquidation proceedings are likely to be very complex and to take years to resolve. Financial experts, Analysis Group, have conducted modelling on the likely outcome of a liquidation scenario, which shows predicted returns to creditors (including the present Scheme Creditors)

At the same time, however, and while acknowledging that the overall equation for the Scheme Creditors was between an overall settlement on the one hand, or no settlement and liquidation on the other, it seems to me important to acknowledge that achieving the hoped-for overall settlement is not a foregone conclusion, and is certainly not achieved by means of the present Scheme alone.

On the contrary, other, and significant steps, will be required in order for the Steinhoff Group Settlement to be successfully implemented. Mr du Preez’s descriptions of the

It follows, as it seems to me, that the question to be addressed by the Scheme Creditors was not so much about giving final approval for the Steinhoff Global Settlement, but about whether it was in their interests to allow the remainder of the process a chance to run its course, or whether it was better to stop it in its tracks.

This question of future uncertainty, even in the event of approval of the present Scheme by the Scheme Creditors, was addressed in the Judgment of Sir Alastair Norris at [25]. Sir Alastair was concerned with the question whether the future uncertainty, arising in particular from the need for further Court approval processes to be conducted in South Africa and the Netherlands, was such that there was no utility in convening the requested meetings of creditors. Sir Alastair considered that, despite the admitted uncertainty, the meetings should nonetheless continue. He said:

“The question has arisen in the context of whether the court should grant sanction where the scheme is a part of an overall restructuring which involves a CVA where the CVA is under challenge. The point was before Zacaroli J in Re New Look Financing plc, [2020] EWHC 2793 (Ch) and before me in Re PizzaExpress Financing 2 plc [2020] EWHC 2873 (Ch), both sanction hearings. Zacaroli J and I shared the view that the desirable position was to put the pieces of the jigsaw on the table and then to see whether in the events it was possible to slot them together. The test to apply is to assess whether acceptance of the CVA in that case or acceptance of the group settlement agreement in this case is a fanciful prospect. At this stage it is certainly not fanciful, and uncertainty is not an obstruction in the way of convening meetings.”

The analogy of putting the pieces of the jigsaw on the table is an interesting and apposite one. It suggests that the better approach, in a case where a threshold or “gating” issue arises, will usually be to allow the step to be taken which at least allows an opportunity for the remaining pieces of the puzzle to be assembled, rather than shutting the gate and foreclosing the opportunity entirely.

Before me, there was some debate as to precisely what is intended by the Company as regards further steps in South Africa and the Netherlands. Conservatorium described the Company’s position as “coy”, which seemed to be a reference in particular to the fact that it had made no final decision, as far as the Netherlands is concerned, as between the Suspension of Payments procedure and the WHOA procedure.

As I have mentioned, however, matters became much clearer as a result of the Company producing a copy of its draft section 155 proposal, as now submitted to the South African Court. It follows that the South African process has now started. We can assume it will continue. Moreover, again as already noted, the section 155 proposal is consistent with the idea that the Company’s preferred method of approach in the Netherlands will be by way of the Suspension of Payments procedure, rather than the WHOA procedure, and indeed Mr Al-Attar told me that that was likely to be the case, although he did not feel able to say that a final decision had been made. Mr Al-Attar’s indication is obviously consistent with the Company’s apparent opposition to the WHOA procedure initiated by Conservatorium itself. In those circumstances, it seems to me that although there is obviously still uncertainty about the eventual outcomes of the two processes, the Court has a sufficiently clear picture of what the Company now intends should follow.

It is also relevant to note one further, and important aspect of the intended further processes. This concerns the ability of Conservatorium to participate in them. On this topic I have evidence from Mr du Preez, in his Second Witness Statement. He says the following at paragraph 50:

“(i)

in the context of any of the implementation processes chosen by Steinhoff in the Netherlands (the “Dutch Implementation Process”), I understand that:

(a)

as a non-acknowledged creditor whose alleged rights will be directly impacted by the Dutch Implementation Process, Conservatorium will be entitled to be heard by the Dutch court prior to any decision to confirm the Steinhoff Group Settlement;

(b)

in particular, in either a Suspension of Payments

Procedure … or a … WHOA … procedure Conservatorium will be entitled (as of right) to be heard by the court (as to any issue going to voting entitlements) ahead of any confirmation hearings;

(c)

Conservatorium will also be entitled (as of right) to be heard by the court at the confirmation hearing and would be allowed to rase any grounds it wishes with a view to persuading the court not to confirm the plan, unless implementation occurs by way of WHOA proceedings and it has by that stage been determined by the Dutch court that Conservatorium is not entitled to vote on the WHOA Composition Plan …

(ii)

in the context of the Section 155 process in South Africa, I understand that:

(a)

as a creditor whose alleged rights will be directly impacted by the proposal, Conservatorium will be entitled to be heard by the South African court prior to any decision to sanction the proposal;

(b)

Conservatorium may seek to persuade the court that Steinhoff should not be permitted to implement the Steinhoff Group Settlement, on the basis that it is inconsistent with Conservatorium’s (alleged) rights or otherwise unfair … “.

That evidence was not directly challenged, although for Conservatorium Mr Smith QC said that the position in relation to the South African section 155 process was unclear, insofar as in South Africa (as in this jurisdiction) there may be a question of standing. In response, Mr Al-Attar, on instructions, indicated that the Company would not take any point on Conservatorium’s locus to object to the section 155 scheme as an alleged creditor, although not a Scheme Creditor.

Thus far, I have focused on one element of uncertainty in the overall mix, which is the question of uncertainty of outcome as regards the intended Dutch and South African approval processes. But there is another important element of uncertainty, which is the uncertainty as regards Conservatorium’s entitlement to advance the Thibault Claim at all.

That entitlement is asserted, but not accepted by Thibault/Titan. Proceedings are pending in which the issue is engaged, but have not yet been resolved. In part the issue of entitlement to the Thibault Claim depends on construing the scope of the security granted pursuant to the 2016 and 2017 Security Agreements, which are governed by English law (do “Related Rights” include causes of action for misrepresentation and the like?) Neither side, however, has invited a determination of that question, and in fact Conservatorium’s position is very emphatically that the “pending dispute as to the ownership of the [Thibault] Claim] should not be determined by anyone other than by the Dutch or South African Courts.” In any event, determining the English law question would not provide an answer because there is also the separate question of what rights were transferred under the Dutch law Asset-for-Share Exchange Agreement of October 2016.

As matters have developed, this ongoing uncertainty presents a problem for the Company in seeking to achieve an overall settlement of claims against the Steinhoff Group. What is now proposed as a response to this uncertainty, although at an earlier stage the proposal was a different one, is that the Company should proceed on the basis that Thibault/Titan are the correct claimants, not Conservatorium.

Pausing there, I should say that on this point, I disagree with the characterisation in Conservatorium’s Skeleton (para. 64) that the effect of the Company’s proposal, if implemented, will be to “determine” the ownership contest between Thibault and

I therefore cannot accept the submission made (for example) at para. 57 of Conservatorium’s Skeleton, to the effect that the proposal involves the Company

To put it another way, it might well have been appropriate to describe the Steinhoff Global Settlement as unfair if it purported to operate in disregard of established legal rights, but it is not obviously unfair for the Company to put forward a proposal based on a particular assumption as to ownership, which is not binding as between the competing claimants, and which it accepts will not be binding on Conservatorium if it turns out to be wrong.

Thus, Conservatorium’s complaint is really about the Company’s failure to propose terms which maintain the status quo, as it did originally, but which it has now resiled from.

Again, however, given the uncertainty, I do not see this as infringing Conservatorium’s rights. It does not have an established right to require the relevant settlement amounts to be paid into an escrow account. It would if it applied for, and obtained, interim relief, perhaps most appropriately in South Africa, but so far it has not done so, and if it were to make such an application (as Mr Al-Attar pointed out) it would likely have to be accompanied by a cross-undertaking in damages, to make good any losses accruing to other affected parties in the event it turned out the order was wrongly granted.

This uncertainty over ownership of the Thibault Claim forms part of the backdrop to the revised proposal in the Second Term Sheet. But there were other factors in the mix as well, which Mr du Preez in his Second Witness Statement describes as follows:

“As I explained at paragraph 128 of my First Witness Statement, having initially proposed that the proceeds of the Thibault Claim be paid into escrow, it became clear to Steinhoff that the Steinhoff Group Settlement would not stand a realistic prospect of success if it were proposed on that basis. Important considerations in this respect are that:

i)

the Thibault Claim is by far the largest claim in the SIHPL estate, comprising approximately 87% by value of the ‘Contractual Claims’ asserted against SIHPL (which comprise a separate class for the purposes of the proposed Section 155 compromise);

ii)

there is no basis therefore on which SIHPL's proposed Section 155 compromise, and therefore the Steinhoff Group Settlement as a whole, can succeed without voting support in respect of the Thibault Claim;

iii)

as Steinhoff has indicated to Conservatorium several times in correspondence (including by means of Linklaters letter dated 8 June 2020 […]) , although it will ultimately be a matter for the chairperson of the relevant Section 155 meeting, Steinhoff’s clear view, for all of the reasons set out above and in correspondence, is that a properly advised chairperson would admit Thibault rather than Conservatorium to vote in respect of the Thibault Claim;

iv)

for reasons explained below, Steinhoff (as well as other key creditors of the Scheme Company and SIHPL) have very material doubts as to whether Thibault would vote in favour of a Section 155 compromise that did not provide for the proceeds of the Thibault Claim to be paid to it or its nominee; and

v)

if Thibault did not vote in favour, SIHPL's proposed Section 155 compromise, and therefore the Steinhoff Group Settlement as a whole, would fail to the detriment of the Scheme Company, SIHPL and their respective creditors and contingent creditors

(including the Scheme Creditors and Conservatorium).”

On the question of the relative merits of the competing claims to ownership of the Thibault Claim, Mr du Preez had earlier said the following at para. 91 of his First Witness Statement (emphasis added):

“It is important to make clear that Steinhoff’s reformulation of the proposal in this respect is wholly consistent with its understanding of the legal position. Having carefully considered the evidence put forward to date by each of the relevant parties, Steinhoff’s assessment of the matter is that there is no credible basis for Conservatorium's contention that the Thibault Claim transferred to Upington pursuant to the Exchange Agreement and that Upington never otherwise became entitled to assert it or any equivalent claim. Steinhoff takes that view, among other things, on the basis of: (i) a plain reading of the Exchange Agreement, which contains no express language purporting to transfer claims in the nature of the Thibault Claim; and (ii) the absence of any evidence to suggest that the Exchange Agreement should for these purposes be read otherwise than in accordance with its plain language.”

Conservatorium invite me to characterise the Company’s action in reformulating the proposal in the First Term Sheet as the Company cynically caving in, on an unprincipled basis, to the demands of a major creditor.

I do not agree with that characterisation of the evidence. Approaching the question broadly, it seems to me more natural to characterise the revised terms as an attempt by the Company to balance a number of competing factors. One is the uncertainty over ownership of the Thibault Claim; another is the importance to the Group of the Steinhoff Group Settlement being achieved; another is the relative importance of the Thibault Claim given its size; another is the urgency which arises from the need to extend the current maturity dates for the Group’s indebtedness beyond the end of 2021; and yet another is the Company’s own advice, and assessment, of the relative merits of Thibault’s claimed entitlement to ownership versus Conservatorium’s claimed right. Balancing those factors together, the Company has formed the view that the revised proposal in the Second Term Sheet gives it the best chance of securing approval for the Steinhoff Global Settlement. I do not see that as involving unprincipled favouritism. Rather, it is the acceptance of a hard commercial reality, arrived at after a lengthy period of negotiation in an environment which is no doubt highly demanding, and in which different parties have entirely polarised views as to what outcome they would prefer.

Having set out that conclusion, I should deal briefly with two particular points made by Conservatorium. The first is an assertion that the duty of full and frank disclosure (see per Snowden J. in Re Indah Kiat International Finance Co. [2016] BCC 418 at [40]), which the Company accepts it is subject to, extended as far as requiring “a full and frank account” of the dealings with “Dr Wiese, the Wiese entities and their representatives … including copies of relevant communications.” Conservatorium says this is required in particular because of Mr Slabber’s email of 7 October (above at [67]), the timing of which gives rise to the inference that in publishing the Second Term Sheet on 9 October, the Company was cynically doing just what Dr Wiese and his associates wanted. Conservatorium say that that point needs to be fully ventilated and investigated, and the Company should have given a full account of it.

I do not accept that submission. The duty of full and frank disclosure is a vital one, and is no doubt fact specific as Mr Smith QC pointed out, but I cannot agree that in the present context, it requires a detailed account to be given, together with production of relevant copy documents, of the course of negotiations with one of the affected parties. For one thing, whatever the background, the end point of the Company’s deliberations

The second point to mention is the reference in Mr du Preez’s First Witness Statement to the Company viewing Conservatorium’s claim to ownership as having “no credible basis.” It is said that that cannot be true, in particular in light of the decision of the South African Court to permit Conservatorium to intervene in the proceedings begun by Thibault. That being so, Conservatorium say that the reference to “no credible basis” is a smokescreen to disguise the Company’s real motivation, which is to prefer the interests of Dr Wiese and his associates.

This point prompted some detailed discussion before me as to what the South African Judge decided, in determining that Conservatorium had demonstrated a “prima facie” case for intervention. It seems to me, however, that that is something of a sterile debate. I am willing to accept that the South African Judge must be taken to have determined that the issue of ownership was a triable issue, and that on the face of it, that is inconsistent with the idea that there is “no credible basis” for Conservatorium’s claimed entitlement. But I do not think I can infer from that that Mr du Preez’s statement of the Company’s view is inaccurate. After all, it is entitled to take its own advice and form its own view, and I have seen nothing to suggest that Mr du Preez’s evidence is anything other than a truthful account of what that view is.

Further and in any event, the key point is perhaps not so much whether the Company’s emphatic assessment of the Conservatorium claim is accurate, but instead whether there are features particular to the Thibault Claim which justify a different approach to that taken in relation to the Upington Claim and indeed others where ownership is disputed. Again, I have not been invited by either party to express a final view, and must be careful not to do so given the pending proceedings elsewhere, but it seems to me there are some points of distinction which rationally might justify a different approach.

As to this, unlike the shares subject to the Upington Claim which were acquired directly, the shares said to be the subject of the Thibault Claim had a more complicated history (see above at [26]-[29]). This makes it difficult to identify the precise number of shares, within the 750m eventually designated as Charged Shares by Upington, which can be traced back to the original acquisition by Thibault in 2014. Conservatorium says this does not matter, because Thibault and Titan accept that at least some shares can be traced back, and that is a factual matter which can be resolved in due course. To be fair to the Company, however, I think its point goes further than that, and is not just about identifying a precise number of shares. It also says that, given the difficulties inherent in tracing through a series of larger, fungible holdings the precise shares derived from an original acquisition made some years before, it is unlikely it was intended to grant a security interest over causes of action which accrued on that acquisition, or indeed to transfer them via the Dutch law Asset-for-Share Exchange Agreement. Again, I offer

Against the background of those various factors, I come to set out my conclusions.

I should first address the issue of Conservatorium’s standing to advance an objection to the Scheme. The Company asserted that Conservatorium had no standing, since it is not a Scheme Creditor, is not affected by the Scheme, and will have the opportunity in other fora (i.e., in South Africa or the Netherlands) to make its objection – and indeed those other fora (borrowing the language of forum non conveniens) are clearly and obviously more appropriate fora for the ventilation of its concerns.

The authorities establish, however, that the discretion of the Court to take into account the interests of third party objectors is a wide one, and has to be exercised in a commercially realistic manner – i.e., taking into account the broader context in which the Scheme is intended to operate.

Both parties referred me to In re BAT Industries plc (unreported, 3 September 1998), a decision of Neuberger J. The scheme there was a members’ scheme of arrangement, involving a proposed reorganisation of the ownership of BAT Industries. Separate from the scheme, but still part of the same overall arrangement if the scheme became effective, BAT Industries proposed to declare a dividend in specie of certain of its investments. At the sanction hearing, objectors who were pursuing litigation claims against BAT industries in the United States sought to say that they would be prejudiced by the declaration of such a dividend, which was likely to have an impact on their ability to enforce their claims if eventually made out.

Neuberger J considered that the objectors had standing before him, but still sanctioned the scheme. On the issue of standing, he said the following, emphasising the broad discretion the Court has:

“There is nothing in s.425(2) which indicates that the power of the court is to be fettered as to whom it can hear and what it must take into account. Given that the circumstances in which a company and its members may wish to come up with a scheme are multifarious, it seems to me scarcely surprising that the legislature did not consider it appropriate to lay down any limitations as to the procedure which the court should adopt or the factors it should take into account, when considering whether to sanction a scheme”

Neuberger J also considered the closely related issue that the objection made was not to the scheme as such, but instead to the dividend in specie which was intended to follow. His approach was that the Court should be realistic (emphasis added in the text below):

“To my mind the fact that the objectors object to a consequence of the scheme does not prevent them from being heard and does not, at any rate without more, prevent them from having their interests taken into account. First, it appears to me that in light of the way in which s.425(2) is framed, and indeed as discussed in the passage which I have cited from Buckley, there is no reason why the court should be required take such a blinkered, narrow and uncommercial approach as to ignore the fact that the scheme which is sought to be sanctioned is the first and necessary stage of a larger process…

However, if it is permissible in an appropriate case to take into account third party concerns when considering whether to sanction a scheme, it seems to me unduly artificial if one can take them into account if they are affected by the scheme itself but not if they are affected by a subsequent step which is clearly dependent on, and consequent on, the sanctioning and implementation of, the scheme.

…when a court is asked to sanction the scheme, it is right, as in this case, for the court to be told, and to take into account, the whole context of the scheme including the process of which the scheme forms part. That must be right: the court can scarcely be expected to sanction the scheme unless it appreciates its full commercial and factual context. If that is correct then it seems to me to follow that one can take into account subsequent steps also for the purpose of considering third party objections. Accordingly, it does appear to me that, as a matter of principle, the court can take into account the concerns of the objectors even though they are not the company, or members of the company, and one can take them into account even though their concerns arise not from the scheme itself but from a step which will inevitably follow if and when the scheme is implemented.”

Applying that approach here, I have reached the conclusion that Conservatorium should be allowed standing, by which I mean it should be afforded the ability to state its objections and have them taken into account by the Court in its overall assessment of whether to sanction the Scheme.

I reach that conclusion on the basis that although it is a third party, and not a Scheme Creditor, Conservatorium has a sufficient interest in the wider restructuring of which the present Scheme forms part to justify its views at least being heard and taken into account. The present Scheme cannot be viewed in isolation; it would be uncommercial and artificial to do so. A fair assessment requires one also to look ahead to the intended Steinhoff Global Settlement. Conservatorium has an interest in the Steinhoff Global Settlement because it has at least the potential to affect its rights (i.e. if the assumption the Company and SIHPL intend to make, namely that Conservatorium is not the true owner of the Thibault Claim, turns out to be wrong).

I think that conclusion is consistent with the somewhat protean nature of the word “blot”, which as Vos J (as he then was) said in Re Halcrow Holdings Limited [2011]

I do not find persuasive the Company’s argument based on an analogy with the forum non conveniens cases – that is to say, the argument that Conservatorium should be denied standing in this jurisdiction because it will have the opportunity of making its case in either South Africa or the Netherlands.

I do not find the forum non conveniens analogy an apt one. Where a case is stayed on forum non conveniens grounds, the Court declines jurisdiction and the entire matter is referred on to another Court for determination. But there is no question of declining jurisdiction here. For one thing, I was not asked to by the Company: it positively wishes its application for sanction to proceed. For another, as David Richards J pointed out in Re T & N [2005] 2 BCLC 488 at [122], the jurisdiction under the statute is not one which the Court has power to decline:

“The English Courts…remain bound by statute to give their own consideration to the fairness of the CVAs or schemes of arrangement, and notwithstanding the strong cross-border element and the desirability of concerted action, have no right or power to cede or qualify that jurisdiction”

It seems to me that if the Court forms the view, as I have, that the objector has raised issues which arguably have a bearing on the question of the fairness of the scheme before it, the Court should consider those issues in determining whether to sanction the scheme or not. It cannot decline to take them into account on the basis that they are better raised elsewhere. If arguably relevant to the fairness analysis, then they should at least be evaluated. The Court cannot decline to deal with one part of the overall inquiry it is bound to undertake.

What it can do, however, is to take account of the likely further steps involved in the related restructuring in determining the fairness of the particular scheme before it, at the point in time at which sanction is sought. I will come back to this point below.

Before leaving the question of standing, I should indicate that nothing I have said above is intended to cut across the injunction contained in Neuberger J’s judgment in BAT Industries, to the effect the court should not be assumed to have some sort of “roving commission” in scheme cases at the suit of any objector who claims some sort of prejudice. The broad discretion must be kept in bounds: see also the recent comments of Trower J. in Re Swissport Fuelling Ltd [2020] EWHC 3414 (Ch), at [34]-[46]. My conclusion is only that, on the particular facts of this case, it is right as a matter of discretion to afford Conservatorium standing and to take account of its objection in determining whether to sanction the present Scheme.

In my judgment the Scheme is a fair one and there is no “blot in the scheme” which should prevent an order sanctioning it.

Taking first the perspective of the “intelligent and honest man, a member of the class concerned and acting in respect of his interest”, I am entirely satisfied that the Scheme is a fair one when viewed through that lens.

The Scheme has the limited effect of authorising amendments to certain finance documents, but forming part of the much larger, anticipated restructuring comprised in the Steinhoff Global Settlement. The outcome of that overall process is uncertain, but what is certain is that it cannot happen without the relevant amendments coming into effect.

The contractual consent process having failed (narrowly) to secure the requisite majorities, the Scheme is proposed as the only effective alternative method of allowing the overall process to continue.

From the perspective of the two classes of Scheme Creditor, it is plainly desirable that it should.

Approval of the Scheme at least allows efforts to be made to bring the Steinhoff Global Settlement to fruition, with the benefits to the Scheme Creditors which will accrue if that is to happen, including not only the certainty which will flow from a cessation of the litigation hostilities affecting the Group, but also such matters as the grant of new security by the Company in respect of liabilities under the SEAG CPU (see above at [55]).

If the Scheme is not approved, however, then the efforts to achieve the Steinhoff Global Settlement cannot proceed and the opportunity to bring it to fruition will be lost. The alternative presented is continuing uncertainty and the likely liquidation of the Group.

I should say on this point that Mr Smith QC for Conservatorium challenged the proposition that the alternative to approval of the present Scheme was insolvency. He suggested that in the real world that would not happen, and that more realistically there would have to be a renegotiation.

I do not think I should proceed on that basis. Mr Smith’s proposition is not supported by the evidence. The evidence is that there has already been a concerted effort at negotiation with multiple parties over a lengthy period, and that patience is beginning to run out (see, for example, Mr Slabber’s email at [67] above). In any event I did not understand Mr Smith’s submission to be made on the basis of any evidence, but rather based on general experience of how complex commercial negotiations tend to be conducted. It is no doubt correct that such negotiations involve a degree of brinksmanship. I do not however think it right for me to formulate an assessment of the possible counterfactual to approval of the Scheme based on a general feeling about how commercial negotiations are sometimes (or perhaps even often) conducted. That seems to me to be straying into just the sort of commercial evaluation which the Courts should shy away from. I refer again to the indication given by David Richards J., at the end of the passage quoted above from In Re Telewest Communications (No. 2) Ltd

I turn then to the question whether there is a “blot in the scheme” such that it should not be sanctioned. I think not.

In summary, my reason is that as matters stand before me, the asserted unfairness is too remote and inchoate to operate as a basis for my declining to sanction the present Scheme.

I have already rejected above (see at [98]-[102]) Conservatorium’s submission that the current iteration of the Steinhoff Global Settlement involves the Company making any determination of Conservatorium’s rights. That is incorrect in my view. Instead, the current proposal is a response to an ongoing state of uncertainty as to the existence of those rights, and represents (see at [106]) an attempt to balance that uncertainty with a range of other factors relevant to the Group’s position.

In any event, more critical is the fact that there is uncertainty also as to whether the Steinhoff Group Settlement will come into effect in its current form. It may do – Sir Alastair Norris thought it at least not fanciful to assume it would – but that is not a foregone conclusion, and importantly Conservatorium will be afforded an opportunity to submit that it should not, and should either be abandoned or amended (see above at [93]-[94]).

I see no unfairness, and nothing which can properly be described as a “blot”, which follows from sanctioning the present Scheme in a manner which allows the anticipated further steps in the process to unfold. There is no unfairness because, even acknowledging Conservatorium’s interest in arguing for the desirability of an escrow or similar arrangement, the remainder of the process will give it the opportunity to raise that point and to invite the Dutch or South African courts to take it into account. Conservatorium will not be foreclosed from taking whatever action it likes. Moreover, the approval processes to be pursued in the Dutch and South African Courts will allow for a better overall assessment to be made than is possible in this Court. That is because evaluating Conservatorium’s position reliably will require it to be considered in light of the Steinhoff Global Settlement as a whole, and that analysis, in turn, is likely to be greatly assisted by an understanding of the positions of the other stakeholders affected by it – i.e., the other financial creditors beyond the present Scheme Creditors, and the other litigation claimants – none of whom are before the Court in this jurisdiction given the limited scope of the amendments sought to be brought into effect by means of the present Scheme.

I should again emphasise that in stating my conclusion in that way, I am not purporting to exercise some discretion analogous to the forum non conveniens discretion. It is not a question of declining jurisdiction in favour of some other Court which is thought more appropriate to decide the question which arises. Rather, it is a question of assessing the issue of “blot” or fairness in a realistic way, which takes account of the fact that the present Scheme is only a limited part of a much broader overall picture, key aspects of which are yet to unfold. Conservatorium in its submissions emphasised the interconnectedness of the present Scheme with the Steinhoff Global Settlement, but I think then attached too little weight, in its argument on fairness, to the opportunities afforded by that wider process to try to make good its objection. There is little doubt that Conservatorium is well resourced and it has shown no lack of creativity in the steps it has taken so far to try and protect its position; it seems entirely reasonable to suppose that it will seek to avail itself of the opportunities which the ongoing process will create. Given the nature of its objection, no unfairness arises from saying that that is what it should do.

The alternative, of course, would be for this Court to decline to sanction the present Scheme. But I fear such a crude response would have the potential for unfairness, because it would effectively foreclose any further efforts to implement the Steinhoff Global Settlement, and that might be unfair to the other stakeholders in the process (already mentioned above) who are not involved in the present application. Much better, it seems to me, to follow the guidance of Zacaroli J in Re New Look Financing plc, [2020] EWHC 2793 (Ch), and of Sir Alastair Norris in Re PizzaExpress Financing 2 plc [2020] EWHC 2873 (Ch), and to put this particular piece of the jigsaw puzzle on the table. Time will tell whether it is possible to slot all the remaining pieces together.

In summary, I propose to sanction the Scheme. I will need to hear separately from counsel in relation to the proposed form of Order.