High Court grants leapfrog certificate challenging Court of Appeal restructuring approach

The High Court has granted a leapfrog certificate enabling Waldorf Production UK PLC to bypass the Court of Appeal and seek permission to appeal directly to the Supreme Court, challenging recent Court of Appeal authority on restructuring plan fairness assessments.

Background and legal challenge

In Waldorf Production UK PLC, Re [2025] EWHC 2297 (Ch), Mr Justice Hildyard declined to sanction the company's restructuring plan under Part 26A of the Companies Act 2006. His decision followed the Court of Appeal's trilogy of cases - AGPS Bondco [2024] EWCA Civ 24, Thames Water [2025] EWCA Civ 475, and Petrofac [2025] EWCA Civ 821 - which marked a departure from the Virgin Active approach.

The Plan Company argued that these Court of Appeal decisions were fundamentally wrong. Under Virgin Active, out-of-money creditors could fairly receive nominal consideration where they would be no worse off under the restructuring than in the relevant alternative. The Court of Appeal trilogy, however, requires assessment of whether the plan achieves "a fair and reasonable allocation of the benefits of the Restructuring having regard to the amounts contributed by each creditor class".

The leapfrog application

The Plan Company contended that the Court of Appeal's approach was unworkable and uncertain, creating scope for gaming the system. It argued that the emphasis on failed negotiations to establish fairness was misconceived and that a discretionary fairness test lacked the certainty required for effective restructuring planning.

Mr Justice Hildyard identified the central legal issue as whether fairness to out-of-money creditors should be assessed by reference to what they would receive in the relevant alternative (Virgin Active), or by reference to what properly informed creditors would fairly expect to be paid to surrender their claims to enable restructuring benefits.

Decision on general public importance

The judge found this constituted a point of law of general public importance, noting Part 26A's considerable domestic and international significance. He rejected HMRC's argument that discretionary matters could not satisfy section 12(3) requirements, emphasising that the question concerned the correct legal test for exercising judicial discretion.

Under section 12(3)(b) of the Administration of Justice Act 1969, the judge concluded he was bound by Court of Appeal decisions in the trilogy, particularly Petrofac. Whilst acknowledging the unanimous Court of Appeal decisions and Snowden LJ's increasingly firm rejection of his previous Virgin Active approach, Mr Justice Hildyard recognised that the Virgin Active approach could not be dismissed as unarguable.

Supreme Court considerations

The judge noted that the Court of Appeal had not granted permission to appeal to the Supreme Court in any of the trilogy cases, suggesting limited need for further systemic guidance. However, he concluded that only in the Supreme Court could the Plan Company deploy its full argument on the central point of law.

His decision was influenced by an existing Supreme Court application in Petrofac, suggesting efficient consideration of both applications together. The judge granted the certificate whilst extending time for filing an appellant's notice until either withdrawal of the Supreme Court application or 14 days after refusal of permission by the Appeal Panel.

Implications for restructuring practice

The case highlights the tension between legal certainty and fairness in restructuring proceedings. The Virgin Active "bright line" test offered predictability but was deemed to apply a false fairness test. The Court of Appeal's approach, whilst more subjectively fair, creates uncertainty about what constitutes adequate consideration for out-of-money creditors.

The Supreme Court's decision on whether to hear either or both applications will significantly impact restructuring practice, particularly regarding the treatment of unsecured creditors in cross-class cramdown scenarios. The outcome may determine whether the restructuring regime maintains the Court of Appeal's emphasis on fair benefit allocation or returns to the more mechanistic Virgin Active approach.