England and Wales High Court (Chancery Division) Decisions

Barings Plc and Related Companies, Re [2001] EWHC Ch 466 (13th December, 2001)

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT

		01056 of 1998 01057 of 1998 Royal Courts of Justice Strand, London, WC2A 2LL
		13th December 2001

The Vice-Chancellor:

1. The principal, but by no means only, question for my determination is whether to sanction the compromise of proceedings brought by Barings PLC and other companies within the Barings Group against two of its former auditors Coopers & Lybrand London and Coopers & Lybrand, Singapore.
2. As is well known the Barings Group became insolvent in February 1995 due to the fraud of Mr Nick Leeson, an employee of one of its subsidiaries in Singapore. In consequence administrators, or their equivalent, were appointed by the courts of the various countries in which the group companies were incorporated or operated. Subsequently most of the relevant companies were wound up. In particular Barings PLC, Bishopscourt (BGH) Ltd, Bishopscourt (BB&Co.) Ltd were wound up in England and Bishopscourt (BS) Ltd was wound up in the Cayman Islands. I will refer to the respective companies as “PLC”, “BGH”, “BB&Co” and “BSL”.
3. At the time the various companies were wound up Barings Group had two classes of loan capital. The first was an issue by Barings BV in 1986 of US$150m floating rate capital notes (“the 1986 Notes”). The issue was guaranteed by PLC. The notes are repayable to Law Debenture Trustees Ltd as the delegate of Law Debenture Trust Corporation (“the 1986 Trustee”) as trustee for the holders. The second was an issue in 1996 by PLC of £100m Perpetual Subordinated Notes (“Perpetual Notes”) repayable to Law Debenture Trust Corporation plc (“the Perpetual Trustee”) as trustee for the holders thereof.
4. PLC also had two classes of share capital, namely £57.75m nominal value Preference shares of £1 each divided into five classes, £60m restricted voting ordinary shares held by the Barings Foundation, a registered charity, and 100 ordinary voting shares held by some directors of PLC.
5. Thus, in the winding up of PLC there are potentially four classes of creditor or member interested in the assets available for distribution with successive priorities, namely, (1) the 1986 Trustee and other ordinary unsecured creditors, (2) the Perpetual Trustee, (3) the Preference Shareholders and (4) the Ordinary Shareholders. The other unsecured creditors include 57% of the Perpetual Noteholders who have claims against PLC, amongst others, for compensation under s.150 Financial Services Act 1986 for the alleged mis-selling of Perpetual Notes.
6. On 8th March 1995 the administrators sold the business of Barings to ING. The terms of the sale were complicated. For present purposes it is sufficient to record that a Buffer Fund was constituted with an initial sum of £62m provided by ING for the purpose of satisfying various uncertain obligations of Barings and the costs and expenses of the liquidation. In so far as not used for those purposes the Buffer Fund was to be repaid to ING. In addition £10m was paid by ING to Barings Foundation. I was told that this payment was made ex gratia and in the light of its forward commitments to various charitable projects which would be adversely affected by the failure of Barings Group from which its income was derived.
7. The relevant proceedings were commenced in January and February 1996 by PLC and BSL in London and Singapore. The latter action was, in substance, reconstituted with BFS as an additional claimant as an action in England in 1999. The defendants are Coopers & Lybrand, in both England and Singapore, and Deloitte & Touche, Singapore. The actions are known and I will refer to them as “the Auditors Action”.
8. The Auditors Action consists of claims for negligence in and about the audit of the accounts of PLC and a number of other companies in the Barings Group. The claim is quantified at £1bn. The heads of loss claimed are bonuses paid to management (£12.2m), advances to BFS (US$627m) and the loss of the business and goodwill of BSL and BGH. The Auditors deny negligence. In addition they contend that the claimants were contributorily negligent and that the loss of the business and goodwill of BSL and BGH are not recoverable at law.
9. In 1997 and 1998 the City Disputes Panel brokered a compromise of the proceedings on the footing that the Auditors paid damages of £33m. It was envisaged that the settlement would be effected by means of a Scheme of Arrangement under s.425 Companies Act 1985. On 26th November 1997 Sir Richard Scott, Vice-Chancellor, gave directions for meetings of creditors to be held on 6th July 1998 for consideration of the CDP compromise. The Scheme envisaged that there would be a fund of £84m comprising £33m from the Auditors, £23.5m from ING and others and existing assets of £27.5m. The Scheme provided for £58.5m to be distributed to the 1986 Trustee, £23.63 to the Perpetual Trustee, £14.3m to be repaid to ING from the Buffer Fund and £13.8m to paid to ING by BSL. Nothing was to be paid to the Preference Shareholders. The Scheme was rejected by the holders of the 1986 Notes at their class meeting in November 1998 and went no further.
10. Following the rejection of those proposals representatives of the 1986 Noteholders, who had constituted a 1986 Steering Committee, indicated to the then liquidators that they wished to become more closely involved in the conduct of the liquidations. At much the same time representatives of Coopers & Lybrand informed the former liquidators that they wished to negotiate with the 1986 Steering Committee as representing the 1986 Noteholders by whom the CDP proposals had been rejected. The former liquidators agreed that the 1986 Steering Committee might enter into settlement negotiations, on a non-exclusive basis, with representatives of Coopers & Lybrand and ING. Such negotiations started in Autumn 1999.
11. The Auditors Action was due to commence before Evans-Lombe J on 18th June 2001. It was adjourned to enable settlement discussions to continue. In the meantime the 1986 Trustee had, on 16th May 2001, served a requisition notice on the then liquidators asking them to convene a meeting of creditors at which a resolution for their replacement might be moved. For the reasons given in the judgment I handed down on 18th June 2001, now reported at [2001] 2 BCLC 159, I directed the liquidators not to convene the meeting sought by the 1986 Trustee.
12. In the event those settlement negotiations did not succeed and the hearing of the Auditors Action commenced on 2nd October 2001. In the meantime an accommodation had been reached between the 1986 Trustee, the Perpetual Trustee and the former liquidators which led to applications to Neuberger J to replace the former liquidators, partners in Ernst & Young, with the present liquidators, partners in KPMG.
13. On 9th October 2001 Evans-Lombe was informed that definitive binding settlement agreements had been signed by the liquidators of the relevant companies in Barings Group, Coopers & Lybrand, ING, members of the 1986 Steering Committee and representatives of the Perpetual Noteholders. Each of the agreements provides that it is to terminate with immediate effect if, amongst other events, the approval of this court to the various agreements is not obtained by the liquidators before a specified date.
14. Thus the first of the applications before me is one by the liquidators of PLC, BB&Co and BGH for the sanction and approval of the court to an agreement dated 8th October 2001 for the compromise of the Auditors Action (“the C&L Agreement”). There is a comparable application by the liquidators of BSL, made pursuant to a letter of request issued by the Grand Court of the Cayman Islands pursuant to s.426 Insolvency Act 1986.
15. Before referring to the terms of the C&L Agreement I should explain other developments in the Auditors Action. On 21st September 2001 Evans-Lombe J ordered that PLC, BSL and BFS provide security for the Auditors’ costs in the aggregate sum of £19.5m on or before 21st December 2001. Of the amount required £10m.is allocated to the claim against the Coopers & Lybrand firms and the balance of £9.5m. to the claim against Deloitte & Touche, Singapore (including £2.5 million in respect of security ordered on contribution proceedings brought by D&T Singapore against BSJ). On 23rd October 2001 Evans-Lombe J ordered the trial of a preliminary issue to commence on 14th January 2002 whether the alleged fraud and deceit of Simon Jones, the finance director of BFS would, if proved, constitute a defence to the claim. On 23rd November 2001 he struck out the claims of PLC and BSL against Deloitte & Touche, Singapore and ordered an interim payment of £1m in respect of its costs. Thus the claim against Deloitte & Touche, Singapore is now confined to that of BFS, as to which the maximum recovery is thought to be £161m, and must await trial of the preliminary issue to which I have referred.
16. The essential provisions of the C&L Agreement and of the other four connected with it are that:

a) Coopers & Lybrand pay £65m. to the liquidators of PLC in settlement of the claim made against them in the Auditors Action. When added to the other available cash resources within the Barings Group (£23.189m.) and the Buffer Fund (£17.674m.) to be contributed by ING there will be a fund of £105.863m.

b) £83.387m from that fund is to be distributed to the 1986 Trustee from which £32.5m will be put into an Escrow Account to fund the costs of the continuing proceedings against Deloitte & Touche, Singapore, leaving £50.887m for immediate distribution to the 1986 Noteholders;

c) £7.515m (£4.71m after costs) is to be distributed to the Perpetual Trustee, with a further £3.8m if the outcome of the action against D&T Singapore justifies it;

d) £5.35m is repaid to ING.

17. These terms are supported by the 1986 Noteholders and the Perpetual Noteholders. In the case of the former a written extraordinary resolution dated 30th October 2001 authorising the 1986 Trustee to approve the compromise was signed by persons representing 86.053% by value of the 1986 Notes. In the case of the Perpetual Noteholders the compromise was approved at a meeting held on 3rd December 2001 by a majority in number and 96.37% in value.
18. The evidence of the liquidators contains detailed calculations demonstrating that in the light of the relative priorities for which the terms of issue of the 1986 Notes, the Perpetual Notes and the Memorandum of Association of PLC provide nothing would be payable to the Preference Shareholders unless recoveries in the Auditors Action exceed £345m. The liquidators also record that at the time of the CDP proposals Coopers & Lybrand indicated that the maximum insurance cover available to their partners was £47m. Thus if a judgment for £345m. were obtained £298m would have to be recovered from the partners of Coopers & Lybrand individually.
19. By contrast the recovery of £65m from Coopers & Lybrand is sufficient to fund the distributions to the 1986 Noteholders and the Perpetual Noteholders to which I have referred. In the case of the 1986 Noteholders, when taken with distributions already received from the issuer, Barings BV, the aggregate amount received, including the amount to be put into the Escrow Fund, will represent 83.78% of their provable claim and 66% of their claim if interest accrued since the date of winding up is included. In addition any recovery from Deloitte & Touche up to the value of the Perpetual Notes, which are to be assigned to the 1986 Trustee, will enure for the benefit of the 1986 Noteholders.
20. Though the debt due in respect of the Perpetual Notes is subordinated to the claims of the 1986 Noteholders, the claims of the Perpetual Noteholders for compensation under s.150 Financial Services Act 1986 rank as ordinary unsecured debts. It is accepted that the 43% who have not yet sued could still do so. Accordingly the claims of all Perpetual Noteholders are recognised to the extent that they are being paid, subject to costs, not more than 8.89% of the face value of their notes, the precise amount depending on the costs and outcome of the claim against Deloitte & Touche, Singapore.
21. The compromise provides nothing for the Preference Shareholders. They point out that even the ordinary shareholders have received some benefit in that the Baring Foundation was given £10m by ING in the circumstances I have mentioned and claims against directors of Barings some of whom hold the ordinary shares are to be released. Accordingly they oppose the application. They rely on the statement of Sir Richard Scott, Vice-Chancellor, made on 26th November 1997 when deciding that the scheme of arrangement to implement the CDP proposals did not require a separate meeting of preference shareholders to be convened. He said

"The proposition that the liquidators can proceed to decide whether or not to recommend the compromise to the court without regard to the interests of shareholders seems to me to be prima facie wrong. They must have regard to the interest of everybody but they can decide that on balance, the compromise should be supported, notwithstanding that it does not provide anything for shareholders.

The shareholders do not have a veto. The veto notion, I think, derived from the Section 425 point. The shareholders simply have a right that their interests should be taken into account with the possible consequence - but by no means the inevitable and some might say not even the likely consequence - that the compromise cannot go ahead, or should not receive sanction, because it provides them with nothing but they are entitled to have their interests taken into account on the application for sanction."

22. It is in those circumstances that the liquidators apply to the Court pursuant to ss.167 and 168 Insolvency Act 1986 for orders that the C&L Agreement, amongst others, be sanctioned and approved and that they be at liberty to carry them into effect. They need the sanction of the court because the power to compromise contained in Schedule 4 Part I paras 2 and 3 is only exercisable with the sanction of the court, the liquidation committees being inquorate since the CDP proposals were rejected. The jurisdiction of the Court to make such an order is not disputed. The question is whether, in the exercise of its discretion it should do so.
23. Before considering the basis on which the discretion of the court is to be exercised it is convenient to recapitulate certain well-known propositions. The winding up of a company brings into force a statutory scheme for the realisation of the property of the company, the ascertainment of the respective rights of creditors and the application of the assets of the company in discharge of the debts of creditors and the distribution of any surplus amongst those entitled to it. Ayerst v C & K (Construction) Ltd [1976] AC 167, 176-7. The legislative provisions in which such scheme is to be found are Insolvency Act 1986 ss. 143(1), 148 and 154 and Insolvency Rule 4.179. In performance of his functions the liquidator is enjoined to have regard to the wishes of creditors and contributories and for the purpose of ascertaining what those views are may convene meetings. Insolvency Act ss.168(2) and 195(1). Subject thereto and to the directions of the court the liquidator is to use his own discretion in the management of the assets and their distribution among creditors. S.168(4) Insolvency Act 1986.
24. The basis on which the discretion of the Court is to be exercised was recently considered by the Court of Appeal in Re Greenhaven Motors Ltd [1999] 1 BCLC 635. In that case Chadwick LJ, with whom Aldous and Potter LJJ agreed, dealt with the weight to be attached to the views of creditors and contributories. At page 642 he said

“The court may, and usually will, take into account the views of someone claiming to be a creditor or contributory, but it is not bound by those views. If the claim appears thin, or the claimant can be seen to have no real interest in the assets having regard to prior claims, his views may carry little weight. I would think it inappropriate for the court to embark, in the context of an application under s 167(1)(a) of the Act, on a detailed examination of the question whether a person wishing to be heard is indeed a creditor or a contributory. The circumstances in the present case demonstrate that such examination is likely to prove inconclusive. I think it is sufficient that the court should be satisfied that the claim is made bona fide and it is not plainly misconceived. If the claimant satisfies that test, then he should be heard. It remains a matter for the court what weight should be given to his wishes.”

At page 643 Chadwick LJ continued

“In deciding whether or not to sanction a proposed compromise the court must consider whether the interests of those, whether creditors or contributories, who have a real interest in the assets of a company in liquidation are likely to be best served (i) by permitting the company to enter into that compromise with all the terms that it contains; or (ii) by not permitting the company to enter into that compromise. It is not for the court to speculate whether the terms of the proposed compromise were the best that could have been obtained; or whether the proposed compromise would have been better if it did not contain all the terms that it does contain. Unless it is satisfied that, if the company is not permitted to enter into the compromise on the terms which the liquidator has negotiated, there will then be better terms or some other compromise on offer, the decision is between the proposed compromise and no compromise at all.

In reaching that decision, the court may have to weigh the different interests of creditors and contributories and, perhaps, the different interests of preferential and non-preferential creditors. It will not give weight to the wishes of those who will be unaffected whichever way the decision goes; for example, the interest of contributories who have no realistic prospect of receiving a distribution in any foreseeable circumstances, or the wishes of preferential or secure creditors who will be paid in full in any event. Subject to that, the court will give weight to the wishes of creditors and contributories whose interests it has to consider, for the reason that creditors and contributories, if uninfluenced by extraneous considerations, are likely to be good judges of where their own best interests lie. For the same reason the court will give weight to the views of the liquidator, who may, and normally will, be in the best position to take an informed and objective view. But, as I have said, at the end of the day it is for the court to decide whether or not to sanction the compromise.”

25. I have also been referred to two cases which make plain that the jurisdiction to approve a compromise is not to be used to confiscate the interests of any person. Thus, in Re Alabama, New Orleans, Texas and Pacific Junction Railway Company [1891] 1 Ch.213 the Court of Appeal upheld the decision of North J to approve a scheme. At page 243 Bowen LJ said

“Everybody will agree that a compromise or agreement which has to be sanctioned by the Court must be reasonable, and that no arrangement or compromise can be said to be reasonable in which you can get nothing and give up everything. A reasonable compromise must be a compromise which can, by reasonable people conversant with the subject, be regarded as beneficial to those on both sides who are making it. Now, I have no doubt at all that it would be improper for the Court to allow an arrangement to be forced on any class of creditors, if the arrangement cannot reasonably be supposed by sensible business people to be for the benefit of that class as such, otherwise the sanction of the Court would be a sanction to what would be a scheme of confiscation. The object of this section is not confiscation. It is not that one person should be a victim, and that the rest of the body should feast on his rights. Its object is to enable compromises to be made which are for the common benefit of the creditors as creditors, or for the common benefit of some class of creditors as such.”

To the like effect is the comment of Bramwell JA in Re Austin (1876) 4 Ch.D 13, 15 that a compromise involves give and take between the parties. I accept as the overall test to be applied that which was summarised by Giles J in Re Spedley Securities Ltd (1992) 9 ACSR 83, 85 namely whether the proposed compromise “is in the interests of those concerned in the winding up” and “is for the benefit of all concerned”.

26. Counsel for the Preference Shareholders has forcefully pointed out that the compromise makes no provision for the Preference Shareholders. He submits that the Preference Shareholders have been wrongly excluded from the negotiations. He contends that the Preference Shareholders have grounds for thinking that the liquidators have not been impartial as between the various class of persons interested in the assets of Barings Group. It is not suggested that the Preference Shareholders are entitled to veto the proposed compromise, only that they were entitled to be consulted at the earlier stages when the compromise was under discussion. They protest at the manner in which they have been presented with a fait accompli and the lack of candour they perceive on the part of the liquidators, contrary to their duty as described by James LJ in Gooch’s Case (1872) 7 LR Ch App 207, 211.
27. They point out that the liquidators have refused to produce documents or more than minimal answers to questions concerning (1) the concerns I expressed in my earlier judgment [2001] 2 BCLC 159 at paras 51 and 52; (2) the accommodation between the 1986 Trustee and the Perpetual Trustee which preceded and led to the application to Neuberger J on 20th September 2001 for orders replacing the former liquidators with the partners in KPMG earlier proposed by the 1986 Trustee; (3) the arguments addressed to Evans-Lombe J by the claimants in opposing the application of the Auditors for security for costs.
28. It is suggested that the liquidators' attitude to the payment of the costs of the representative Preference Shareholders pursuant to my order of 31st October 2001 was obstructive and inconsistent with their duty to remain impartial between the various classes of person interested. The Preference Shareholders complain that the liquidators left the negotiations to the 1986 Steering Committee
29. Each of these contentions is disputed by the liquidators and the 1986 Trustee and the Perpetual Trustee. They contend that the Preference Shareholders are unable to demonstrate the requisite real or tangible interest in the assets available for distribution in the liquidation. In any event, it is submitted, the views of the creditors should prevail as their interests have priority over those of the members.
30. The problems in this case are compounded by the fact that each side has assumed in its own favour the answer to the fundamental question which has to be resolved, namely, whether the Preference Shareholders do have the requisite real or tangible interest in the assets available for distribution in the liquidation. The Preference Shareholders contend that they do. On that basis they have sought the production of documents by the liquidator on a scale, quantity and relevance wholly disproportionate to the barely spectral interest the liquidators contend that they enjoy. By contrast the liquidators, having taken the view that the Preference Shareholders do not have such a real or tangible interest, have sought to minimise the costs incurred by or in response to the Preference Shareholders.
31. Accordingly I must at the outset reach some conclusion as to the reality of the interest of the Preference Shareholders. It is not disputed that they can receive nothing in the liquidation until all the 1986 Noteholders and all the Perpetual Noteholders have been paid in full, not only the amounts of their provable debts but the full amounts of interest to which they are contractually entitled. Likewise it is not disputed that there could be no surplus for distribution to shareholders pursuant to s.143(1) Insolvency Act 1986 unless and until £345m net of costs of recovery has been recovered from the Auditors.
32. It is true, as submitted by counsel for the Preference Shareholders, that there is no opinion of counsel before the court expressing any view as to the likely amount of any judgment. This is why they wish to see the skeleton arguments adduced by counsel for PLC in resisting the application for security for costs made by the Auditors. It is apparent from the judgment of Evans-Lombe J that counsel in relying on a lengthy skeleton argument prepared for the trial suggested that the case for the claimants was so strong as to justify refusing the application on that ground alone. I note that the judge’s own view at that stage was that

“There are formidable arguments on both sides and it would be wrong, it seems to me, for me to arrive at any conclusion on this application by reference to the strength of the parties’ rival cases.”

33. It is also true that the evidence of the Preference Shareholders indicates that a judgment for the £345m to £405m, needed partially or wholly to repay the Preference Shareholders would be within the means of the partners in Coopers & Lybrand collectively. It has been demonstrated that the amount per partner would be approximately equal to one year’s share of profits. If time to pay were required then the whole amount could be paid in four years whilst leaving each partner with £125,000 per annum on which to live. As the Preference Shareholders point out such calculations take no account of any capital assets the partners may have, nor to their likely wish to avoid bankruptcy.
34. Nevertheless the fact remains that though the amount to be paid by all the Auditors has been increased from the sum of £33m in 1998 to £65m by Coopers & Lybrand alone now there is no evidence at all that the Auditors would be prepared to increase their offer to the fivefold sum needed to provide any distribution in favour of the Preference Shareholders. In ordinary circumstances if a claimant is not satisfied by the amount offered he can always continue his action, but at some risk as to costs. This is not an ordinary case. Continuing the action would be at the risk of the 1986 Noteholders, not the Preference Shareholders; but the 1986 Noteholders are satisfied with the amount on offer and do not wish to continue.
35. Where there are creditors or contributories with different priorities dilemmas such as that I have just mentioned are only capable of sensible solution if the creditor of later priority buys out those with the prior interests. Though not concerned with priorities some such solution appears to have appealed to Lord Johnston in Ecuadorian Association v Fox (1907) 14 SLT 699. If the prior interests are bought out then the creditor or contributory of lower priority can pursue the action in his own interests and at his own risk as to costs. The Preference Shareholders do not ask for an opportunity to reach any such agreement with the 1986 Noteholders or the Perpetual Noteholders and for very obvious reasons.
36. The problems in this case are further compounded by the fact of the order for security for costs. The order must be complied with in little over a week’s time. PLC and BSL do not have the means with which to do so. If money is to be found it will have to come from those interested in the assets available for distribution in the liquidation. But the Preference Shareholders have not offered to contribute and the creditors, for obvious reasons, do not wish to do so.
37. In the light of all these considerations I am driven to the conclusion that the Preference Shareholders do not have a real or tangible interest in the assets available for distribution in the winding up of PLC in any foreseeable circumstances. The absence of any opinion of counsel expressing views as the chances of success in obtaining and enforcing a judgment of £345m or more is of no consequence in face of the economic realities of the Auditors Action.
38. Counsel for the Preference Shareholders sought to establish an alternative interest to be derived from the presence of the Preference Shareholders at the negotiating table. He suggested that it would amount to confiscation if his clients were paid nothing. In that event the other creditors would have been prepared to provide some solatium for them so as to buy off their opposition. But this submission presupposes that the Preference Shareholders have an interest which the creditors consider they need to buy. In my view, for the reasons I have already given, they do not. Moreover I accept the submission for the 1986 Trustee that, just as it would be wrong to allow the compromise to work a confiscation of an interest, so also it would be wrong to withhold consent in order to disturb the undoubted priorities enjoyed by the various classes of creditor or contributory. There is nothing in the evidence to give any credence to the suggestion that if the Preference Shareholders had been admitted to the negotiating table the 1986 Trustee would have been prepared to allow them to share in the funds to be provided by Coopers & Lybrand.
39. Accordingly whichever way one approaches the problem the Preference Shareholders interest is theoretical only. They have no commercial or economic interest in the assets of PLC available for distribution in the liquidation. Nor are there any foreseeable circumstances in which they might obtain one. I can see no ground on which it would be appropriate to prefer their views to those of the 1986 Noteholders and the Perpetual Noteholders. Given the choice to which Chadwick LJ referred in Re Greenhaven Motors [1999] 1 BCLC 635, 643h I will sanction the compromise.
40. Before leaving this application it is appropriate that I give further consideration to some of the submissions made on behalf of the Preference Shareholders. First, given the absence of interest to which I have referred I do not think that the liquidators are to be criticised for the stance they took in face of the requests by the Preference Shareholders for more documents, information and money for costs. Unless and until a company is demonstrated to be solvent the choice of liquidator is a matter for the court and the creditors alone. Insolvency Act 1986 ss.135 and 139. Accordingly I consider that the response of the liquidators to the matters referred to in paragraph 27(1) and (2) above was appropriate. Likewise in respect of the matter referred to in paragraph 27(3), what mattered was the attitude of the judge, demonstrated in the transcript of his judgment a copy of which had been supplied and which I have quoted in paragraph 32 above.
41. It was also suggested on behalf of the Preference Shareholders that the views of the 1986 Noteholders as persons who had acquired their notes after the collapse of Barings should somehow be discounted. I do not accept that submission. There is no reason to think that their motives are influenced by anything other than their commercial interests as creditors, none the less because their acquisition cost may be lower than that of the other creditors or contributories. In particular there is no evidence to suggest that their views are affected by concurrent holdings of Perpetual Notes or that their views should be discounted if they were.
42. Finally I should advert to the fact that the negotiations for a settlement were carried on primarily between the 1986 Steering Committee and the representatives of Coopers & Lybrand. I have summarised the bare history of the negotiations above. It is the case that from the autumn 1999 until 18th June 2001 the negotiations were conducted by those two parties, together with representatives of the Perpetual Noteholders, but to the exclusion of any others. After 18th June 2001 the stage reached was revealed to the liquidators. Thereafter the liquidators participated in the negotiations and were actively concerned to obtain the approval of the court.
43. In the light of the circumstances prevailing after the 1986 Noteholders rejected the CDP proposals it is understandable that Coopers & Lybrand wished to negotiate direct with their representative. Indeed the liquidators would have been open to criticism if they had sought to frustrate any such direct approach. The Preference Shareholders had no right to attend any of those discussions and there is no reason why, if they had asked to attend, they should have been invited. Vis a vis Coopers & Lybrand the liquidators concern was the same as that of the 1986 Steering Committee and of the Perpetual Noteholders, namely to get as much out of the Auditors as possible. There was no reason why, or occasion for, the liquidators to be partial as between one class of creditor or contributory and another. The differences between the various classes of creditor and the Preference Shareholders arise from the different priorities accorded to them by the conditions on which the two classes of note and the Preference Shares were issued, not from any action or inaction on the part of the liquidators. The Preference Shareholders disclaim, rightly, any criticism of the liquidators integrity or competence. In my view the suggestion of partiality is unfounded too.
44. For all these reasons I approve the compromise in principle and, subject to any further points on the details of the C & L Agreement, make the order sought in respect of that agreement.