Link Fund Solutions – Appeal of decision sanctioning scheme of arrangement 

On 5 March 2024, Link Fund Solutions Limited’s scheme of arrangement took effect following the High Court’s decision on 9 February 2024 to sanction the scheme but stay its implementation for several weeks to give the parties an opportunity to seek permission to appeal. 

An application for permission to appeal was submitted to the High Court, but ultimately refused, and the scheme took effect some 25 days after it was sanctioned. The case provides useful guidance on how a stay pending an appeal can work in practice in the context of a scheme of arrangement or a restructuring plan.

Applying the guidance from Adler

As a recap, in the recent Adler decision (see our blog here ), the Court of Appeal indicated that, in certain circumstances, it may be appropriate for the court to stay an order sanctioning a restructuring plan or scheme until the court has given full reasons for its decision and determined any application from a party for permission to appeal. One issue that arose in that case was that the order sanctioning the restructuring plan was overturned after the order had already taken effect.

The Link Fund Solutions case sees the High Court apply the Court of Appeal’s guidance in practice and shows the flexible approach that the court is willing to adopt in appropriate cases. 

The scheme concerned claims and potential claims from investors relating to the LF Woodford Equity Income Fund, some of which was the subject of litigation. In return for releasing claims against Link Fund Solutions Limited, which disputed all liability, scheme creditors would receive a distribution from a settlement fund proportionate to their original investment. This scheme was therefore not a financial restructuring of a company’s debt or equity of the type seen in Adler and many other cases.

Mechanics of the stay on implementation 

The events leading up to the Link Fund Solutions scheme of arrangement taking effect were as follows: 

1. on 12 October 2024, the court convened a single meeting of Link Fund Solutions Limited’s creditors; 
2. on 18 and 19 January 2024, Mr Justice Richards heard the sanction hearing;
3. on 9 February 2024,  Mr Justice Richards issued his decision sanctioning the scheme. However, the court stayed its order for 14 days to give parties the opportunity to apply to the High Court for permission to appeal. Subject to this, the order sanctioning the scheme would be sealed by the court six days after this period had lapsed, on 29 February 2024;
4. on 23 February 2024, an application for permission to appeal was submitted to the High Court (i.e. 13 days after the decision sanctioning the scheme);
5. on 26 February 2024, this application was heard by Mr Justice Richards and a short written judgment was delivered. Permission to appeal was refused, but the High Court recognised that the parties may want to seek permission to appeal from the Court of Appeal directly. In this regard:
   • the usual deadline for applying to the Court of Appeal for permission to appeal a High Court decision is 21 days from the relevant decision. This is set out in the Civil Procedure Rules, rule 52.12(2). In this case, that would mean any parties would need to apply to the Court of Appeal by 1 March 2024, which was four days after the High Court’s decision refusing permission;
   • the court has discretion to extend or shorten this 21 day period (also set out in CPR 52.12(2)). Here, Mr Justice Richards extended the deadline by a further three days to 4 March 2024 (meaning a final deadline some 24 days after the decision to sanction on 9 February 2024). The court considered this to be proportionate in the circumstances on the basis that the parties might have to rush to make any application to the Court of Appeal by 1 March 2024; and
   • as a result, the parties had a further 7 days to apply to the Court of Appeal following the High Court’s decision to refuse permission;
6. on 27 February 2024, the High Court sealed the sanction order:
   • this was before the deadline for the parties to apply to the Court of Appeal, but the Judge explained that the court was doing so to enable the parties to take the sealed order to the Court of Appeal if they wished (a sealed order typically being a requirement to apply to the Court of Appeal for permission to appeal);
   • the terms of the scheme provide that the scheme would not take effect until the period for appealing had lapsed, or, if an appeal proceeded, the date on which any appeal was finally determined and any further period for appealing had lapsed; and
   • the slight delay of 24 hours between the court’s decision and the sealing of the order was so that any parties could object specifically to the order being sealed for this purpose; and
7. on 5 March 2024, the scheme took effect - some 25 days after the sanction decision. We are not aware that any parties applied to the Court of Appeal for permission to appeal, or that any permission to appeal was granted. 

Strategic considerations for parties

This case provides a helpful illustration of how a stay on implementation pending an appeal can play out in practice for a scheme or restructuring plan. 

Not all cases will be suitable for this kind of process, in particular where there is a pending maturity of financial debt. The courts are now willing to accommodate a stay on implementation in appropriate circumstances and we should expect to see more examples in future as this practice develops. It will also be interesting to see whether, where a stay is resisted by the scheme/plan company, the court the requires a cross-undertaking in damages, which is likely in practice to preclude a stay.

This all gives rise to strategic considerations for scheme/plan companies and potential challengers - not just relating to timetable - and reinforces yet again that restructurings should be approached as potential pieces of litigation from day one.

The judgment of 9 February 2024 can be accessed here.