Thames Water - Case Update

The Court of Appeal has released its decision on costs after dismissing an appeal of an order sanctioning the restructuring plan of Thames Water Utilities Holdings (Thames Water), ordering the company’s shareholder and a group of junior creditors to pay 60% of Thames Water’s costs.

The High Court sanctioned the restructuring plan in February of this year. In April, the Court of Appeal handed down its judgment dismissing the appeal brought by Kington S.À.R.L., the Class A AHG, Mr Charles Maynard MP, and Thames Water Limited (TWL), the plan company’s shareholder, with one modification to the release clause.

Thames Water, which had incurred costs of approximately £2.26 million on the appeal, sought recovery of 80% of those costs (approximately £1.81 million) against Kington and TWL, arguing that it was the successful party and that costs should follow the event. No costs order was sought against Mr Maynard or the Class A AHG.

Kington and TWL argued that the general rule on costs does not apply to schemes of arrangement or restructuring plans and that, at first instance in such cases, as a general rule, costs orders are not made against objecting creditors. The Court disagreed, finding that the plan company was, overall, the successful party and was entitled to a costs order in its favour. Taking into account the reductions to reflect the fact that no costs order was sought against Mr Maynard, the release point, and the appellants' success on certain legal issues, the Court ordered that Thames Water was entitled to recover 60% of its costs from TWL and Kington, with each liable for 30%.

However, in considering an appropriate amount to order on account of costs, the Court noted that approximately £1.4 million was incurred by the plan company's solicitors, and that counsels' fees (across the three counsel at the hearing) were in excess of £0.8 million. The hourly rates for the plan company's solicitors (e.g. £1,232 to £1,400 for a partner) were far in excess of the guideline rates, with no real justification offered, other than that this was a complex case.

In circumstances where the plan company instructed more than eight professionals, where the appeal was mostly confined to issues of law, and where the parties had argued the same issues before the judge only a matter of weeks earlier, the Court considered that there was a greater than usual risk of overlap between the work done by the various professionals. Therefore, the Court ordered a payment on account of 35%—that would result in the total costs claimed being reduced to the “still very generous amount” of £791,000. When applied to 60% of the costs incurred, the resulting payment on account, rounded up, was £475,500. Therefore, each of Kington and TWL were ordered to pay £237,750 on account of the plan company's costs.

Read the decision HERE.

Professionals involved:

• Tom Smith KC, Charlotte Cooke and Andrew Shaw of South Square (instructed by Linklaters) for the plan company

• Adam Al-Attar KC and Edoardo Lupi of South Square (instructed by Akin Gump) for an ad hoc group of Class A supporting creditors

• Tony Singla KC and Charlotte Thomas of Brick Court Chambers and Mark Phillips KC, Jamil Mustafa, Imogen Beltrami and Matthew Abraham of South Square (instructed by Quinn Emanuel Urquhart & Sullivan) for an ad hoc group of Class B opposing creditors

• Stephen Robins KC of South Square (instructed by Allen Overy) for a group of bank supporting creditors

• Andrew Thornton KC of Erskine Chambers and Georgina Peters of South Square (instructed by Freshfields) for Thames Water Limited

• William Day and Lucas Jones of 3VB and Niamh Davis of XXIV Old Buildings and Dr Riz Mokal and Rabin Kok of South Square (instructed pro bono by Marriott Harrison) for Charlie Maynard MP