Windward Prospects - Case Update

The High Court has granted an application by the majority creditors of Windward Prospects to remove the current joint administrators and replace them with new appointees, while also rejecting a cross-application by the administrators to instead appoint conflict administrators.

Windward was a holding company for paper-making facilities which became liable for substantial environmental cleanup costs related to the pollution of US rivers. Through a complex web of indemnities and a 2014 funding agreement, BTI 2014 LLC and BAT Industries PLC became the overwhelming majority creditors (93% by value) of Windward.

Joint administrators were appointed in 2018, but conflicts arose when it emerged that one of the administrators had previously advised the company's directors on share transfers that were now the subject of litigation worth approximately £150 million.

BTI and BAT argued for removal on three main grounds: (1) an unmanageable conflict of interest arising from the administrator’s prior advice to directors now being sued by the company; (2) loss of independence and professionalism in the administrators' conduct; and (3) that as majority creditors, their views should prevail. The administrators countered by proposing "conflict administrators", disputing the applicants' creditor status, and arguing for a 15-month extension of the administration.

The High Court ruled that the administrators should be removed, determining that both applicants were legitimate creditors, that the conflict was so fundamental it could not be managed through appointing conflict administrators (as it would leave the existing administrators with no meaningful role), and that the administrators' conduct had fallen below acceptable standards. The Court was particularly critical of “extraordinary emails” sent by the administrator containing “vituperative attacks” on BTI and BAT.

The Court rejected the administrators' argument that BTI and BAT had adverse interests to the general body of creditors, finding instead that their disputes were with the administrators rather than representing a fundamental conflict with creditor interests generally.

As a result, the Court ordered that the current administrators be removed and that the new administrators identified by BTI and BAT be appointed.

Read the decision HERE.

Professionals involved: James Sheehan KC of Essex Court Chambers, William Willson of South Square and Grace Ferrier of Essex Court Chambers (instructed by Kevin Lloyd, Richard Lawton, Peter FitzGerald and Sarah Sharp of Hogan Lovells) for BTI and BAT