Case No. 10072 of 2010
Neutral Citation Number: [2015] EWHC 815 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 27/03/2015

Before :

MRS JUSTICE ROSE

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IN THE MATTER OF WELCOME FINANCIAL SERVICES LIMITED AND

IN THE MATTER OF THE COMPANIES ACT 2006

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David Allison QC and Julia Smith (instructed by Freshfields Bruckhaus Deringer LLP) for the Applicants
Andrew Clark (instructed by Miller Gardner solicitors) for those affected by the Application

Hearing dates: 15, 16, 19 and 20 January and 23 March 2015
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Judgment
Mrs Justice Rose : 
1.	The Applicants are Welcome Financial Services Limited (‘Welcome’) and three people appointed to implement the scheme of arrangement (‘the Scheme’) which is the subject of this dispute.  They seek declarations concerning the proper construction of the Scheme that has been entered into for the purpose of restructuring, amongst other things, Welcome’s business.  The business of Welcome was that of making loans to individuals, in particular individuals whose poor credit records meant that they could not obtain loans on ordinary terms from banks.  It operated under the Welcome Finance brand and also under the Shopacheck brand.  Since the Scheme came into effect a large number of customers and former customers of Welcome have come forward asserting claims against Welcome arising out of their credit agreements.  The question arises whether all or some of these claims are now barred because they were claims covered by the Scheme and the customer did not submit a claim in accordance with the terms of the Scheme.  Mr Allison QC and Ms Smith contend on behalf of the Applicants that all the claims which are the subject of this application are covered by the wording of the Scheme and have therefore been compromised.  If that is right, then there are only limited circumstances in which the customers will be able to assert any of the statutory or contractual rights they may have.  The contrary arguments have been put before the court by Mr Clark.  He was initially instructed by the solicitors Miller Gardner who were acting for some of the customers who want to bring claims now against Welcome.  By an order of Norris J on 7 July 2014, Mr Clark was appointed to represent in addition all Welcome’s customers who would be affected by the declarations that the Applicants are seeking. 
2.	After the main hearing in January, I circulated a draft judgment to the parties on 2 February 2015 and invited them to draw up a declaration to reflect the terms of the judgment.  That exercise revealed some issues that had not been fully debated at the first hearing but which needed to be resolved so that the declarations could provide as much clarity to those implementing the Scheme as possible. A further short hearing was therefore held on 23 March 2015 to consider those issues. 
I. THE CREATION AND APPROVAL OF THE SCHEME
3.	The background to the Scheme was set out in the witness statement of  Christine Laverty who is an insolvency practitioner and one of the three people appointed as Scheme Supervisors under section 8 of the Scheme to administer the arrangement.  The Scheme forms part of the restructuring of a larger group of companies known as the Cattles group.  The group was balance sheet insolvent at the end of 2010 and, absent a scheme of arrangement, would have had to enter into administration.  The group’s audited results for the year ending 31 December 2009 showed a loss before tax of over £745 million.  In November 2010 the directors of the parent company announced the proposed restructuring with the aim of enabling all group companies to return to solvency. Ms Laverty says that the intention was to maximise cash collections from the Welcome Finance business and other businesses of the group and as a result to improve the expected return for creditors.  There were four schemes in all but this application concerns only the scheme for compromising the claims of creditors of Welcome. 
4.	The Scheme is made under Part 26 of Companies Act 2006 (‘CA 2006’).  An order convening the scheme meetings was made by Henderson J on 16 December 2010.  Three meetings were convened but only one is relevant to the Application Claims; that for the Welcome Scheme Creditors.  The order directed that notice of the Welcome Scheme Creditors’ meeting was to be given by sending a notice by post or email at least 40 days in advance of the meeting to each person who Welcome believes is or might be a Welcome Scheme Creditor where Welcome has a postal or email address for that person.  Further, the relevant documents had to be made available on the Cattles website and be available for inspection at the offices of Freshfields Bruckhaus Deringer. The order also provided that advertisements giving notice of the Welcome Scheme Meeting and stating how the documents can be obtained must be published once in each of the Financial Times (International Edition), The Daily Telegraph, the Daily Mail and the Yorkshire Post.  The Yorkshire Post was chosen because many of Cattles’ shareholders were in Yorkshire. 
5.	Welcome did not send individual notices to any of the customers affected by this application but it did place the advertisements as required by the order.  The meetings were held on 1 February 2011 and the Scheme was approved by an overwhelming majority.  The Scheme was sanctioned by order of Newey J on 28 February 2011, the necessary documents were filed with the Companies Registrar and the Scheme became effective on 2 March 2011.   
6.	Ms Laverty states in her witness statement that Welcome did not have the customers who are now asserting claims in mind when Welcome and its advisers were considering the categories of creditors and potential creditors who might be affected by the Scheme.  The two main groups of people who they thought might have claims (in addition to bank lenders) were those who had lost money investing in shares in Cattles because there had been a shortfall in the group’s impairment provisions and customers who had been mis-sold payment protection insurance (PPI). 
7.	The effect of the Scheme very broadly is that Scheme Creditors are, save in limited circumstances, prohibited from commencing or continuing proceedings against Welcome.  Scheme Creditors can submit a claim form to the Scheme Supervisors on or before the Bar Date fixed by the Scheme in order to be entitled to receive a distribution in respect of their Scheme Claims.  The Bar Date was 2 June 2011. 852 claims were submitted by the Bar Date and those amounted to claims in excess of £4 billion.  693 of those claims have been accepted by the Scheme Supervisors in whole or in part.  By the end of April 2014, the Scheme Supervisors had made distributions of around £427 million to the Scheme Creditors.
II. THE CLAIMS COVERED BY THIS APPLICATION AND THE ISSUES RAISED
8.	Norris J ordered on 7 July 2014 that a Joint Memorandum be drawn up describing the claims. The claims raised by customers fall into five categories: (a) CCA Claims (b) Non-PPI Liabilities; (c) Overpayment Claims; (d) Uncashed Cheques Claims; and (e) Charges Claims.  I refer to these claims together as the Application Claims. 
(a) CCA Claims
9.	There are three kinds of claims that might be brought under the Consumer Credit Act 1974 (‘CCA 1974’).   All references to section numbers in the rest of this judgment are to sections of the CCA 1974 as amended unless otherwise stated. For ease of exposition I have simplified the content of the sections, for example in section 140A referring only to the credit agreement rather than to the credit agreement or any related agreement and not referring to the associate or former associate of the creditor as well as the creditor.  I do not intend by that simplification to limit my conclusions about the application of statutory provisions to the Application Claims. 
(i) CCA: improper execution claims under s 65(1) or s 142.  
10.	Section 65(1) provides that a regulated credit agreement which is improperly executed is not enforceable against the debtor without an order of the court.  The requirements for the proper execution of an agreement are set out in section 61(1) and they include a requirement that there must be a document in the prescribed form containing all the prescribed terms and conforming to regulations made under section 60(1).  It must also have been signed by the debtor and creditor. The form and content requirements for the proper execution of a consumer credit agreement have been prescribed in regulations such as the Consumer Credit (Agreements) Regulations 1983 (SI 1983/1553) (‘the 1983 Regulations’).  It is alleged by some of Welcome’s customers that their agreements were improperly executed in a number of ways, for example that the amount of credit and/or the APR (annual percentage rate of interest charge) were stated incorrectly or the form of consent to the purchase of PPI was completed incorrectly.  
11.	A lender can apply to the court under section 65(1) for an order that he can enforce the agreement against the customer.  The exercise of the court’s discretion is governed by section 127(1) which provides that the court shall dismiss the lender’s application if it considers it just to do so having regard to the prejudice caused by the contravention in question, the degree of culpability for it and the other powers available to the court.  Those other powers include (a) the power in section 127(2) to reduce or discharge any sum payable by the debtor or by any surety so as to compensate him for prejudice suffered as a result of the contravention in question; (b) the power to impose conditions on the enforcement of the agreement; and (c) the power to amend the agreement consequential on the making of an enforcement order. 
12.	Where an agreement has been improperly executed, a customer can apply to the court under section 142(1)(b) for pre-emptive relief in the form of a declaration that the lender is not entitled to enforce the agreement.  The court may make such a declaration if it thinks just. It is accepted that the test set out in section 127(1) should apply to an application by the debtor under section 142 as it applies to an application by the creditor under section 65. 
13.	Section 127(3) used to provide that a court must not make an enforcement order in a case where there had been no document containing all the prescribed terms and signed by the debtor.  In such a case, therefore, the agreement was irredeemably unenforceable.  That subsection was repealed with effect from 6 April 2007 so that in relation to agreements entered into after that date, the court has a discretion to enable the lender to enforce the agreement even in those circumstances. 
14.	Where a declaration is made under section 142 or when a creditor’s application under section 65 is dismissed, section 113(3) applies.  That provides that in such a case section 106 applies to any security provided in relation to the agreement.  Where section 106 applies then a number of consequences follow:
i)	The security so far as it is provided in relation to the improperly executed agreement shall be treated as never having effect: section 106(a).
ii)	Any property lodged with the creditor solely for the purposes of the security as so provided shall be returned by him forthwith: section 106(b). 
iii)	The creditor shall take any necessary action to remove or cancel an entry in any register, so far as the entry relates to the security as so provided; section 106(c). 
iv)	Any amount received by the creditor on realisation of the security shall, so far as it is referable to the agreement, be repaid to the surety: section 106(d). 
(ii) CCA: Unfair relationship claims
15.	Sections 140A–D confer on the court powers to make orders in connection with a credit agreement where the court determines that the relationship between the creditor and the debtor arising out the agreement is unfair to the debtor.  According to section 140A(1), the unfairness can arise because of one or more of the following: (i) any of the terms of the agreement; (ii) the way in which the creditor has exercised or enforced any of his rights under the agreement; or (iii) any other thing done (or not done) by or on behalf of the creditor either before or after the making of the agreement.  Such a declaration can be sought in relation to either a regulated or an unregulated credit agreement. 
16.	Section 140A(2) provides that in deciding whether to make a determination that the relationship was unfair, the court must have regard to all matters it thinks relevant including matters relating to the creditor and matters relating to the debtor.  A determination of unfairness can be made even where the relationship has ended.  Where the court determines that the relationship was unfair it may make an order to that effect under section 140B.  That section provides that an order may do one or more of the following:
    “(a)	require the creditor … to repay (in whole or in part) any sum paid by the debtor or by a surety by virtue of the agreement … (whether paid to the creditor, … or to any other person);
(b)	require the creditor … to do or not to do (or to cease doing) anything specified in the order in connection with the agreement … ;
(c)	reduce or discharge any sum payable by the debtor or by a surety by virtue of the agreement …;
(d)	direct the return to a surety of any property provided by him for the purposes of a security;
(e)	otherwise set aside (in whole or in part) any duty imposed on the debtor or on a surety by virtue of the agreement …;
 (f)	alter the terms of the agreement …; or
 (g)	direct accounts to be taken, … between any persons.”
17.	Where a debtor or surety alleges that the relationship between the creditor and debtor is unfair to the debtor, section 140B(9) provides that it is for the creditor to prove to the contrary.
18.	The meaning of unfairness in these provisions has recently been considered by the Supreme Court in Plevin v Paragon Personal Finance Ltd and another [2014] UKSC 61.  There Lord Sumption JSC, with whom the other Justices agreed, stated that section 140A is deliberately framed in wide terms with very little in the way of guidance about the criteria for its application. Its application ‘must depend on the court’s judgment of all the relevant facts’: paragraph 10. 
	(iii) CCA: extortionate credit bargains
19.	Sections 140A-D replaced the earlier provisions in sections 137 to 140 dealing with extortionate credit bargains. Section 139(1) provided that a credit agreement could be reopened on the application of the debtor if the court thought just on the grounds that it was an extortionate credit bargain.  Section 138(1) defined a credit bargain as extortionate if it required the debtor to make payments which were grossly exorbitant or otherwise contravened ordinary principles of fair dealing.  The court was required to consider factors such as the debtor’s age and experience, business capacity and state of health and whether he was under financial pressure at the time the bargain was made.  Section 139(2) set out the orders that a court could make in reopening the agreement for the purpose of relieving the debtor from payment of any sum in excess of that fairly due and reasonable.  These included orders-
i)	to direct accounts to be taken between any persons;
ii)	to set aside the whole or part of any obligation imposed on the debtor by the credit bargain; 
iii)	to require the creditor to repay the whole or any part of any sum paid under the credit bargain;
iv)	to direct the return to the surety of any property provided for the purposes of security; or 
v)	to alter the terms of the credit agreement or any security instrument.
20.	The transitional provisions dealing with the repeal of the extortionate credit bargain powers were set out in Schedule 3 to the Consumer Credit Act 2006 which inserted sections 140A-D into the CCA 1974.  The effect of the transitional provisions is that in respect of agreements which were entered into before 6 April 2007 and which were completed (that is all payments due were made) before 6 April 2008, the court retains jurisdiction under section 139.  Further, where proceedings have been lodged before 6 April 2008 in relation to an agreement, whether by a customer or a third party, then the court similarly retains jurisdiction to apply the provisions of section 139.  For all other agreements, the court must apply the new unfair relationship provisions in any dispute about the agreement, not the extortionate credit bargain provisions.
(iv) PPI Liabilities that are also CCA Claims
21.	It is convenient here to describe one class of claims that customers could make under the CCA 1974 where Welcome accepts that the claim would not be covered by the Scheme because it would be an Excluded Liability under the Scheme.  Excluded Liabilities, as I will describe later, include ‘PPI Liabilities’. PPI Liabilities are defined in the Scheme as meaning a ‘Protected PPI Liability’ and an ‘Unprotected PPI Liability’.  A Protected PPI Liability is defined as follows: 
“Protected PPI Liability means any Liability (i) to a retail customer of the Company (who, in addition, is an eligible claimant under COMP and satisfies all other relevant requirements of COMP) which is a protected claim, within the meaning of COMP 5.2 of the FSA Handbook (as may be replaced, varied, amended or supplemented from time to time) or (ii) to the FSCS, as an assignee of any such protected claim, under the PPI Settlement Agreement;”
22.	It is accepted by Welcome that the term ‘Protected PPI Liability’ is a misnomer because the definition of the term is not limited to liabilities arising from sales of PPI but covers any liabilities arising from Welcome’s sales of general insurance to retail customers on or after 14 January 2005.  That is the date on which Welcome’s business of mediating insurance became an activity regulated by the Financial Conduct Authority. 
23.	The reference to ‘COMP’ in the definition is a reference to the compensation rules and guidance applicable to the Financial Services Compensation Scheme (that is the FSCS) as made by the FCA and as contained in the compensation section of the FCA Handbook.  It is common ground that the relevant COMP rules as regards Welcome’s mediation of insurance only came into effect on 14 January 2005.  So Protected PPI Liabilities can only arise from contracts entered into before that date.  
24.	An Unprotected PPI Liability is also defined in the Scheme: 
“Unprotected PPI Liability means any Liability to a retail customer of the Company arising from the sale by the Company of a payment protection insurance policy, before 14 January 2005.”
25.	In a letter of 14 January 2015 to Miller Gardner (‘the 14 January letter’), Welcome explained that they regarded the exclusion of PPI Liabilities as including the following kinds of claims. 
26.	The first kind is where there is a claim brought under section 142 asserting that a credit agreement was unenforceable where the grounds relied on to establish that the credit agreement was improperly executed include the allegation that Welcome had required the purchase of PPI as a condition of the grant of credit but that the amount of credit and/or the APR was stated incorrectly in the agreement because the PPI premium was incorporated into the calculations as part of the total credit and not part of the total charge for credit.  This refers to regulation 4 of the Consumer Credit (Total Charge for Credit) Regulations 1980 (SI 1980/51) which sets out what items should be included in the total charge for credit.  This should include the premium under a PPI contract where the making of the contract of insurance is required by the creditor.  If, therefore, Welcome had in fact required a customer to enter into a PPI contract when taking out a loan, but had included the cost of the insurance in the credit total rather than in the charge for credit, this would result in the total charge for credit being mis-stated in the agreement.  The correct statement of the total charge for credit is one of the prescribed terms for the purposes of section 61 so that if it is mis-stated, the agreement is only enforceable by order of the court.  The 14 January letter accepts that where a CCA claim is brought under section 142 in such a situation, it is in effect a claim arising out of the misselling of PPI and will therefore be treated as an Excluded Liability.  This will take outside of the Scheme a claim for a declaration under section 142 even where the result of such a declaration would be an entitlement to consequential relief in accordance with section 113(3)(d) and section 106(d). 
27.	The second category of CCA Claim that is excluded as a PPI Liability is where a claim is made under section 142 on the basis that the form of consent to the purchase of optional PPI was not completed correctly.  This refers to the fact that regulation 33 of the Consumer Credit (Agreements) (Amendment) Regulations 2004 (SI 2004/1482) inserted into Part II of Schedule 5 to the 1983 Regulations imposes a requirement that the agreement provide a little box which must be ticked by the customer to indicate that he wishes to buy PPI insurance as well as to take out the loan.  The allegation is that in some cases, this box was ‘pre-ticked’ by Welcome thereby undermining the protection that the tick box is supposed to afford by requiring the customer to turn his mind to the question whether he really wants PPI or not.  The requirement for the tick box was introduced as from 31 May 2005.  If the box was pre-ticked, this would mean that the agreement was improperly executed and therefore is not enforceable without an order of the court.  In the 14 January letter, Welcome accepts that where a claim under section 142 (including one which would result in consequential relief under section 106(d)) is based on this breach, the claim arises out of the mis-selling of PPI and is therefore an Excluded Liability not covered by the Scheme. 
28.	The third category of CCA Claim accepted by Welcome as an excluded PPI Liability is where the customer alleges that the credit relationship is unfair within the meaning of sections 140A-D and the unfairness is based on either the mis-statement of the total charge for credit or on the pre-ticking of the consent box as described in the previous paragraphs. Welcome accepts that the exclusion from the Scheme would cover both claims for a declaration under section 140B and a claim for an order for repayment of monies by Welcome on these grounds. 
29.	The fourth and fifth categories of CCA claims regarded as excluded PPI Liabilities are where a customer seeks an order under section 139 for repayment of monies on the basis that the reason why the credit agreement was extortionate was the conduct described in paragraphs 26 and 27 above, or where a customer seeks restitution of payments made under the mistaken belief that the agreement was enforceable and the reason why it was not in fact enforceable was because of conduct of the kind described in paragraphs 26 and 27  above. 
30.	Those five categories of CCA Claims described in paragraphs 26, 27, 28 and 29 have to be disregarded for the purposes of most of the remainder of this judgment because they are to be treated as PPI Liabilities and therefore Excluded Liabilities for the purposes of the Scheme. 
(b) Non-PPI Liabilities
31.	The remaining four kinds of Application Claims are, thankfully, less complicated than the CCA Claims.  Non-PPI claims are, as the name suggests, claims which arise from the sale by Welcome of general insurance rather than PPI.  However, as noted in paragraph 22 above, this is not all non-PPI insurance sales but only those where the agreement was entered into before 14 January 2005, the date on which sales of general insurance became regulated.  So all insurance entered into thereafter falls within the definition of Protected PPI Liabilities for the purposes of the Scheme.  Claims in respect of these contracts cannot be claims based directly on alleged breaches of FCA rules since the product was not regulated at the time.  But where claims allege negligence in informing customers about the insurance contracts available, the scope of Welcome’s duty of care even before 14 January 2005 may depend on the rules or voluntary codes of conduct in force at the time. 
32.	There may be an overlap between such allegations and CCA Claims in the sense that when a customer is alleging that a relationship is unfair or that the credit bargain was extortionate they may seek to rely on conduct which occurred in the context of the sale of Non-PPI insurance before 14 January 2005.  It is accepted that such a claim would still be classed as a CCA Claim rather than a Non-PPI Claim. 
(c) Overpayment Claims
33.	There are claims which might be made on the basis that Welcome was unjustly enriched at the customer’s expense.  This might have happened because Welcome has incorrectly calculated the sums payable by the customer under the credit agreement and the customer has therefore paid more than he should.  The parties are agreed that this category is limited to overpayments made by the customer on or before 2 March 2011. 
34.	Again, where there has been overpayment but the customer does not assert a restitutionary claim but relies on the overpayment as evidence of unfairness for the purposes of mounting a claim under sections 140A-D, those claims would be regarded as CCA Claims and not Overpayment Claims.
(d) Uncashed Cheques Claims
35.	In some instances Welcome has issued a cheque to a customer but the customer has not cashed the cheque.  It is agreed that we are only considering here cheques which were written on or before 2 March 2011.  In those circumstances it is unlikely that a bank would be prepared to cash the cheque if it were presented now or that an action could be brought on the cheque itself.  It is more likely that the action would be brought for an underlying liability which prompted the issue of the cheque some years ago.  
36.	Mr Clark submitted, and I agree, that one cannot consider the uncashed cheques as a group without considering the underlying claim.  Although one might think that the issue of a cheque indicates that the customer’s claim must have been for a money sum, we do not know the nature of the claim that prompted the attempted payment.  I will therefore treat this category as limited to the three instances which Ms Laverty describes in her witness statement.  These are - 
i)	advancing sums to be lent under loan agreements, that is where the customer entered into a credit agreement and was sent the loaned money but for some reason did not cash the cheque to take up the loan;
ii)	making refunds to customers of overpayments of the kind considered in the previous category; or 
iii)	paying redress to customers in respect of complaints about sales of PPI by Welcome. 
(e) Charges Claims
37.	Finally, there are claims for the refund of default charges and administration charges which Welcome applied to customers’ accounts in accordance with the terms of the credit agreement where it is alleged that the charges- 
i)	were unlawful at common law and constituted unenforceable penalties; and/or 
ii)	were unlawful under the Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083).  These Regulations implemented EU Council Directive 93/13/EEC on unfair terms in consumer contracts.  Regulation 8 provides that an unfair term in a contract concluded with a consumer shall not be binding on the consumer.  An unfair term is defined by Regulation 5(1) as a contractual term which has not been individually negotiated and which, contrary to the requirement of good faith, causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer. 
38.	It is alleged in some Application Claims that the charges applied to customer accounts by Welcome did not reflect Welcome’s true costs and were disproportionate and unfair. Again, where there is an allegation that charges were excessive but the customer relies on that as conduct evidencing unfairness for the purposes of sections 140A-D (or possibly as evidencing an extortionate credit bargain under sections 137-140), those claims would be regarded as CCA Claims and not Charges Claims.
39.	Although Welcome’s skeleton argument for the hearing referred to charges paid by customers prior to the Scheme, the draft order attached to the application did not limit the declaration sought to charges imposed before 2 March 2011 and Ms Laverty’s witness statement made clear that charges had been imposed on accounts both before and after that date.  I therefore do not limit my consideration of Charges Claims to those claims where the charges were before the Record Date. 
III. THE PROVISIONS OF THE SCHEME AND THE RELEVANT CASE LAW
40.	The Scheme was accompanied by an Explanatory Note in compliance with Part 26 of the Companies Act 2006.  The Scheme is dated 16 December 2010.
(i) The Scheme provisions in more detail
41.	The purpose of the Scheme was described in clause 1.4: 
“1.4 The Purpose of the Scheme 
The purpose of the Scheme is to enable the Company to continue to collect amounts outstanding under its loan portfolio on a solvent basis, to preserve the Shopacheck business of the company as a going concern, to restructure the Group indebtedness and to maximise recoveries for the Scheme Creditors while meeting the Company’s Liabilities to its other creditors in full in the ordinary course of business (subject to the terms of the Scheme, including its application following Scheme Reversion).”
42.	Clause 13.3 expressed the comprehensive nature of what the Scheme was intended to cover:
“13.3 Application of the Scheme 
The provisions of this Scheme shall apply to each Scheme Creditor whether or not he participates in the Scheme in any way and at any stage.”
43.	The principal provisions for our purposes are in Sections 2 and 3 of the Scheme.  Clause 2.1 sets out the scope of the Scheme:
“2.1 Application of the Scheme 
The Scheme shall apply to all Scheme Liabilities and bind all Scheme Creditors …. The Scheme shall not affect the rights of creditors of the Company in respect of any Excluded Liabilities.” 
44.	Clause 2.2 provided for a stay of all claims brought by Scheme Creditors, subject to some exceptions:  
“2.2 Stay of Proceedings 
2.2.1 Subject to the provisions of clauses 2.2.2 and 2.2.4, no Scheme Creditor shall be permitted to commence or continue any Proceedings against the Company, in any jurisdiction. 
2.2.2 A Scheme Creditor shall only be permitted to commence Proceedings against the Company: 
… 
(c) with the consent of the Scheme Supervisors; 
…  or 
(e) in response (by way of claim or counterclaim) to Proceedings commenced or continued by the Company against the Scheme Creditor and where the subject matter of the Proceedings commenced by the Scheme Creditor is the same transaction or occurrence as the subject of the Proceedings commenced or continued by the Company.
…
2.2.4 No order, judgment, decision or award obtained by a Scheme Creditor in breach of clause 2.2.2 shall give rise to an Ascertained Scheme Claim. The Scheme Creditor shall not be entitled to rely on such an order, judgment, decision or award to evidence a Submitted Scheme Claim and shall have no right to enforce the order, judgment, decision or award or to seek to place the Company into administration, liquidation or any insolvency, reconstruction, bankruptcy or analogous proceeding in any jurisdiction in reliance upon such an order.” 
45.	I shall refer to the stay of proceedings imposed by clause 2.2 as ‘the Moratorium’.  
46.	The Scheme then deals with how Scheme Creditors are to submit claims.  Clause 3.4 provides that Scheme Creditors are to be informed of the date on which the Scheme becomes effective and hence of the Bar Date by which claim forms must be submitted to the Scheme Supervisors for consideration.  The Bar Date was 2 June 2011, three months after the effective date. Clause 3.5 provides that Welcome must make claim forms available for download from its website and send a blank form to particular categories of people.  Each person wishing to make a claim must submit a claim form to the Scheme Supervisors to arrive on or before the Bar Date. Clause 3.6 provides: 
“3.6 Requirement to submit Claim Form 
… in order to be entitled to any Scheme Payment, Scheme Creditors must, on or prior to the Bar Date, submit a Claim Form. No payments will be made in respect of Scheme Liabilities that are not submitted as Submitted Scheme Claims.”
47.	Clause 3.7 then provides for the Scheme Supervisors to examine each claim form to consider whether to accept the claim or not.  They notify the Scheme Creditor of their decision.  If the Scheme Supervisors agree the claim it becomes an Ascertained Scheme Claim. If the claim is not agreed within six months of the Bar Date then it becomes a Disputed Claim: clause 3.7.8.  There is provision in clause 3.8 for those who have submitted Disputed Claims to appeal against the rejection of the Claim to the court.  The Scheme also provides for the determination of the amount of ‘Net Free Cash’ by the Scheme Supervisors on various Distribution Dates. After every specified period, Welcome must inform the Scheme Supervisors of the Net Free Cash available for distribution. The Scheme Supervisors then calculate how much should be paid in respect of each Ascertained Scheme Claim in accordance with the formula set out in Section 6 of the Scheme. Scheme payments to those with Ascertained Scheme Claims can then be made. 
48.	The key to applying these provisions lies in the many defined terms.  Looking first at clause 2.1 there are three defined terms that need to be unpacked.  The Record Date referred to was 2 March 2011.  The term ‘Scheme Creditor’ is defined as follows - 
“Scheme Creditor means 
(a) …; and 
(b) any person who is, or claims to be, a creditor of the Company in respect of a Scheme Liability, at the Record Date;”
49.	A ‘Scheme Liability’ is defined as - 
“Scheme Liability means: 
(a) any Liability of the Company (before the application of any set-off, as applicable), other than an Excluded Liability, which either: 
(i) has arisen on or prior to the Record Date; or 
(ii) may (subject to clause 2.5.1) arise after the Record Date as a result of an obligation incurred [or as a result of an event occurring or act done] on or before the Record Date; or 
(b) …”
50.	I have put square brackets round part of the definition because Mr Allison clarified at the hearing that Welcome was not relying on those words as extending the ambit of the Scheme to any of the Application Claims. 
51.	The term ‘Liability’ is defined widely as: 
“Liability means any liability of a person, whether it is present, future, prospective or contingent, whether its amount is fixed or undetermined, whether or not it involves the payment of money or performance of any act or obligation and whether it arises at common law, in equity or by statute, in England or in any other jurisdiction, or in any other manner whatsoever, including, without limitation, claims in respect of breach of contract, tort, restitution, breach of trust, financial indebtedness, guarantee or indemnity claims, claims arising by way of subrogation, contribution or counter-indemnity, claims for mis-representation, negligence, wilful default or fraud, mis-selling claims, claims under FSMA, Consumer Credit Act 1974 or Pensions Act 1995 or 2004 and any other claims which may arise ancillary to any such financial liability, but in all cases excluding: 
(a) any liability which is barred by statute or is otherwise unenforceable; or 
(b) a liability under a contract that is void or, being voidable, has been avoided;” 
52.	Excluded Liabilities are those set out in Schedule 3 to the Scheme. The most important for this application is paragraph 1: 
“1. Any ordinary course business liability of the Company (i) properly incurred after the Record Date (…) or (ii) that may arise after the Record Date as a result of an obligation properly incurred by the Company before the Record Date and adopted by the Company after the Record Date as envisaged by the Scheme (for the avoidance of doubt not including obligations where the Company has given notice to terminate such arrangements). …; ”
53.	There is also paragraph 4 which excludes:
“4. Any PPI Liability, including for the avoidance of doubt any fees payable to the Financial Ombudsman Service any Liability of the Company to the FSCS under the PPI Settlement Agreement and the Claims Handling Agreement; ”
54.	I have considered the definition of a PPI Liability earlier: see paragraphs 21, onwards.   
55.	Also relevant for construing clause 2.2.4 is the definition of ‘Proceedings’:
“Proceedings means any process, action, step, or other legal (or quasi legal) or judicial (or quasi judicial) proceeding (including, without limitation, any demand, arbitration, alternative dispute resolution, expert determination process, judicial review, adjudication, execution, seizure, distraint, lien, enforcement of judgment, or enforcement of any security interest or right of set-off or any proceeding for the purpose of placing the Company into administration, liquidation or any insolvency, reconstruction, bankruptcy or analogous proceeding in any jurisdiction;”
(ii) Principles of construction of the Scheme
56.	The parties are agreed that the principles that I should apply when construing the Scheme are those set out by Henderson J in Re Marconi Corporation plc [2013] EWHC 324 (Ch); paragraph [37].  They can be summarised as follows. 
i)	The Court must consider the language used and ascertain what a reasonable person would have understood the parties to have meant.  A reasonable person in this context is someone who has all the background knowledge which would reasonably have been available to the parties in the situation they were at the time of the entry into the instrument.
ii)	The words used in an instrument should be given their natural and ordinary meaning.  This means that the Court will not readily accept that the parties have made linguistic mistakes in formal documents.
iii)	That said, in relation to a commercial instrument, if detailed semantic and syntactical analysis of words is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense. 
iv)	Where one is dealing with complex commercial instruments of the kind in issue here, there are bound to be ambiguities, infelicities and inconsistencies and an over-literal interpretation of one provision without regard to the whole may distort or frustrate the commercial purpose.  Accordingly, the wording must be interpreted as a whole in light of the commercial intention which may be inferred from the face of the instrument and from the commercial context.
v)	In cases where the language is ambiguous or there are two possible constructions, it is generally appropriate to prefer the construction which is more consistent with business common sense and reject the other.
(iii) The meaning of ‘creditor’ in the Scheme
57.	It is common ground that the word ‘creditor’ used in the term ‘Scheme Creditor’ bears the same meaning as it bears in section 895 of the CA 2006; the first provision in Part 26 of that Act dealing with company arrangements and reconstructions.  It was established in relation to a predecessor provision that the term covers contingent creditors: see In re Midland Coal, Coke and Iron Company [1894] 1 Ch 267.  
58.	The meaning of the word ‘creditor’ and hence the scope of Part 26 was considered more recently by Blackburne J in Lehman Brothers International (Europe) (in administration) (Number 2) [2009] EWHC 2141 (Ch) (‘Lehman Brothers’).  The issue there was whether the court had jurisdiction to sanction a scheme of arrangement that was proposed by the administrators under Part 26. The judge referred to 1,214 trust property claims that had been received in relation to client assets held by LBIE: see paragraph 12.  Simplifying further what was already a summarised description of the proposed scheme in the judgment, the proposed scheme defined ‘scheme creditors’ as limited to those with both a pecuniary and a proprietary claim against LBIE - a person was only a scheme creditor if he had a pecuniary claim against LBIE and also a proprietary claim to a security which was held on a segregated basis at the time of the administration.  The scheme set a cut off date for the submission of claims and stated that any claims made after that bar date could be disregarded although there was provision for any such late claimant to obtain a payment if there was money left after the satisfaction of claims brought before the bar date. 
59.	The judge noted that the scheme would therefore interfere with the client’s property rights in assets held for that client on a fiduciary basis by LBIE and that that might happen against the will of the client: see para [33]. The question for the court was whether the scheme creditors were creditors of LBIE, given that it was confined to those with pecuniary claims against LBIE.  The learned judge answered that question in the following terms:
“57  The key question to my mind is whether the scheme proposed affects the clients who are intended to be bound by it in their capacity as creditors of LBIE. Insofar as it does not, there is, in my judgment, no jurisdiction under Part 26 to force the scheme on those clients who do not assent to it. 
58  In my judgment, it is abundantly clear that the scheme is largely concerned with the discharge by LBIE towards its clients of its obligations concerned with the holding or control of client property, in particular the return of that property to the clients for whom it is held. As such and largely for the reasons advanced in argument by Mr Snowden [counsel for the respondent], it is outside the scope of Part 26. 
59  It is nothing to the point that LBIE's concern is to vindicate clients' property rights or to facilitate the early return of the property in question, highly desirable though those aims obviously are. The fact that the clients may also have pecuniary claims against LBIE and, as such, are creditors (whether actual or contingent) of LBIE and that the claims stem from LBIE's conduct of their property rights is, to my mind, immaterial. The fact that the ascertainment of clients' net contractual positions is intimately linked to their claims as property owners, both as against LBIE and inter se, is likewise immaterial.”
60.	Blackburne J went on to consider whether the administrators’ contentions were supported by the decision in Re T&N Ltd (No3) [2006] EWHC 1447 (Ch).  In that case it was held that a scheme of arrangement was effective to compromise claims by employees not only against their former employer but also against that employer’s insurers against whom the employees might have claims under the Third Parties (Rights Against Insurers) Act 1930.  Blackburne J rejected that contention:
“65. In my judgment, this case provides no support for the proposition that a scheme designed to deal with (and, so far as necessary, alter) the property rights of persons who happen also to be creditors of the scheme company constitutes a compromise or arrangement within the scope of Part 26. What clearly emerges from T & N Ltd (No 3) is that the scheme affected the EL claimants' rights against T & N as (and only as) creditors. It also, and directly, affected their rights against the EL insurers. But that was because the scheme was an integral part of a single tripartite proposal involving T & N, the EL insurers and EL claimants. Here, by contrast, the property rights of LBIE's clients - their Asset Claims in the terminology of the scheme - are enjoyed quite independently of any claims which those clients have against LBIE arising out of LBIE's defaults.”
61.	Blackburne J also referred to authorities which hold that the word ‘creditors’ in Part 26 can embrace creditors holding a security and where schemes were sanctioned notwithstanding that their effect was to deprive the creditors of their security.  He held that the schemes in question were still ‘directed to the indebtedness owed to the debenture holders – the creditors – by the company in question’: paragraph 68.  On that basis he held that it was entirely comprehensible that schemes under Part 26 concerned with the rearrangement of claims against a company's general estate (which, on analysis, is the effect of any scheme by a company with its creditors) should be capable of extending to claims against the company secured on some or all of that estate:
“69.  In my judgment, the position is wholly different in the case of property which is not, and has never formed, part of the company's assets and which the company holds as custodian or trustee (either directly or through others) for the clients as beneficial owners. In such a case, which is the position of clients who have entrusted property to LBIE, the obligation of LBIE is to administer the trust according to its terms, and to return the property to the client as beneficiary if that is what the client requests. Part 26 is simply not in point as a means of giving effect to the property rights of the client in question. If LBIE has any interest in the property at all, it is that of a creditor holding security (which may be no more than a lien) for indebtedness owed to the company (or to its affiliates) by the client as its beneficial owner.”
62.	He therefore held that there was no jurisdiction to make the scheme so as to bind dissentients by recourse to Part 26. Blackburne J’s decision was upheld by the Court of Appeal in Re Lehman Brothers International (Europe) [2009] EWCA Civ 1161. Patten LJ noted at paragraph 28 of his judgment that although a creditor for the purposes of Part 26 is not limited to someone with an immediately provable debt in a liquidation, it does require that person to have a pecuniary claim against the company which (once payable) would be satisfied out of the assets as a debt due from the company.  He stressed that the court was not concerned with the fairness and reasonableness of the proposed scheme but with whether the court would have jurisdiction to sanction it.  He referred to ‘creditors’ as anyone who has a monetary claim against the company which, when payable, will constitute a debt, including contingent claims.  He also noted that the LBIE scheme was drawn up in such a way that every scheme creditor had to have a current or contingent claim for damages or equitable compensation against the company, either of which is sufficient to render the claimant a creditor “at least in that respect”. However he held:
“65. It seems to me that an arrangement between a company and its creditors must mean an arrangement which deals with their rights inter se as debtor and creditor. That formulation does not prevent the inclusion in the Scheme of the release of contractual rights or rights of action against related third parties necessary in order to give effect to the arrangement proposed for the disposition of the debts and liabilities of the company to its own creditors. But it does exclude from the jurisdiction rights of creditors over their own property which is held by the company for their benefit as opposed to their rights in the company's own property held by them merely as security.
66.  I do not accept Mr Trower's [counsel for LBIE] submission that the reference to a creditor was intended to act as no more than a gateway to the inclusion of that person in the Scheme and that s.895 leaves the court with jurisdiction to sanction the compromise or removal of rights which the creditor does not hold as a creditor. That would, I think, be inconsistent with the expressed purpose of the legislation which must be to allow the company to re-arrange its contractual or similar liabilities with those who qualify as its creditors. A person is the creditor of a company only in respect of debts or similar liabilities due to him from the company. I am not persuaded that Parliament can have intended to allow creditors to be compelled (if necessary) to give up not merely those contractual rights but also their entitlement to their own property held by the company on their behalf. 
67.  A proprietary claim to trust property is not a claim in respect of a debt or liability of the company. The beneficiary is entitled in equity to the property in the company's hands and is asserting his own proprietary rights over it against the trustee. The failure by a trustee to preserve that property in accordance with the terms of the trust may give rise to a secondary liability to make financial restitution for the loss which results, but that is a consequence of the trust relationship and not a definition of it.
68. …	The commercial nature of these agreements is not in dispute but the trust mechanism has long been regarded as an important safeguard against insolvency and has been imported into commercial contracts for that very reason. In the case of pure custody agreements, it is, of course, paramount. I do not therefore accept that the trust element in these arrangements ought in some way to be merged into the general contractual framework and treated merely as ancillary when considering the limits of the Scheme jurisdiction or (which is more important) that Parliament ever intended to deal with it in that manner.”
63.	Lord Neuberger MR agreed: 
“78. … As a matter of ordinary language, section 895 appears quite clearly to be dealing with arrangements between a company and one or both of two groups of people – its members and its creditors. If a person's claim cannot be said to render him a creditor or a member, then it appears to me to follow that the subject matter of the claim could not be covered by the arrangement. The fact that he may, in connection with a different claim, be a creditor, does not justify him being treated as a creditor for the purpose of the first claim.”
64.	Both the Master of the Rolls and Patten LJ rejected the relevance of Re T&N Ltd (No. 3) relied on by the company.  Longmore LJ agreed with both judgments. 
(iv) The meaning of the phrase ‘claim arising from an obligation incurred’ before 2 March 2011 
65.	It was also agreed between the parties to the present application that where the second limb of the definition of Scheme Liability refers to a Liability that may arise after 2 March 2011 as a result of an obligation incurred before that date, it is intended to mirror the wording of Insolvency Rules 13.12(1)(b). That wording, as applied to administrations, defines the word ‘debt’ as including ‘any debt or liability to which the company may become subject after [the date of the administration] by reason of an obligation incurred before that date’. 
66.	The question when a liability arises ‘by reason of an obligation incurred’ before the relevant date has been considered in a number of cases.  In Unite (The Union) v Nortel Networks UK Ltd [2010] EWHC 826 (Ch) (‘Unite the Union’), Norris J considered the claims of employees of the company in administration arising from their alleged unfair selection for redundancy.  He considered potential claims for damages for wrongful dismissal (i.e. breach of contract), for compensation for unfair dismissal and for compensation for discrimination.  He held that:
“25. …  (b) The breach of contract claim alleging breach of the notice requirements is also a debt. It was a contingent liability for the payment of money to which the Company was subject at the date of administration. If the Joint Administrators have terminated the contracts in breach of their terms and the Company is liable to pay compensation then the compensation is "a debt" because the Company has become subject to the liability after the date of administration by reason of a contractual obligation incurred before that date. 
(c) The claim for compensation for unfair dismissal is also (on the material and arguments deployed before me) a "debt". It was a contingent liability for the payment of money to which the Company was subject at the date of administration. If the Joint Administrators have operated the dismissal procedure unfairly then (given that the claimants want money and not reinstatement) the Tribunal is directed to make an award of compensation for unfair dismissal; and that compensation for post-administration breach of duty is a liability to which the Company has become subject after the date of administration by reason of a statutory obligation incurred before that date.
(d) The claims for compensation in respect of unlawful discrimination also fall to be treated in the same way, and are likewise "debts"”
67.	More recently the Supreme Court has considered the issue in In re Nortel GmbH (in administration) and related companies [2013] UKSC 52 (‘Nortel’).  That case concerned the pension rights of employees in the insolvent administration of their former employer company.  The Pensions Regulator began investigations into the pension schemes and issued a financial support direction (FSD) to the companies pursuant to powers under the Pensions Act 2004, requiring them to put in place financial support for the schemes. The administrators applied to court for directions as to how any liabilities arising under the FSD, or any contribution notices subsequently served to enforce compliance with the FSD, should be discharged.  This raised the question whether any such liabilities would have arisen from an obligation incurred before the administration for the purposes of IR 13.12(1)(b).
68.	Lord Neuberger of Abbotsbury PSC with whom the other Justices agreed held that the liabilities in question would be liabilities ‘under an enactment’ within rule 13.12(4).  He held that the word ‘obligation’ used in rule 13.12(1)(b) “must imply a more inchoate, or imprecise, meaning than "liability", as the liability is what can be proved for, whereas the obligation is the anterior source of that liability”: see paragraph 74.  He then dealt with the paradigm case of a liability under a contract:
“75. Where a liability arises after the insolvency event as a result of a contract entered into by a company, there is no real problem. The contract, in so far as it imposes any actual or contingent liabilities on the company, can fairly be said to impose the incurred obligation. Accordingly, in such a case the question whether the liability falls within para (b) will depend on whether the contract was entered into before or after the insolvency event.”
69.	 He went on to consider the position where the liability arose under statute: 
“77.  However, the mere fact that a company could become under a liability pursuant to a provision in a statute which was in force before the insolvency event, cannot mean that, where the liability arises after the insolvency event, it falls within rule 13.12(1)(b). It would be dangerous to try and suggest a universally applicable formula, given the many different statutory and other liabilities and obligations which could exist. However, I would suggest that, at least normally, in order for a company to have incurred a relevant "obligation" under rule 13.12(1)(b), it must have taken, or been subjected to, some step or combination of steps which (a) had some legal effect (such as putting it under some legal duty or into some legal relationship), and which (b) resulted in it being vulnerable to the specific liability in question, such that there would be a real prospect of that liability being incurred. If these two requirements are satisfied, it is also, I think, relevant to consider (c) whether it would be consistent with the regime under which the liability is imposed to conclude that the step or combination of steps gave rise to an obligation under rule 13.12(1)(b).”
70.	Applying that test to the liabilities there in question, he held that all three limbs of the test were satisfied.  As regards the first two limbs he held: 
 “84. As to the first requirement, on the date they went into administration, each of the Target companies had become a member of a group of companies, and had been such a member for the whole of the preceding two years – the crucial look-back period under the 2004 Act. Membership of a group of companies is undoubtedly a significant relationship in terms of law: it carries with it many legal rights and obligations in revenue, company and common law. 
85. As to the second requirement, by the date they went into administration,  the group concerned included either a service company with a pension scheme, or an insufficiently resourced company with a pension scheme, and that had been the position for more than two years. Accordingly, the Target companies were precisely the type of entities who were intended to be rendered liable under the FSD regime. Given that the group in each case was in very serious financial difficulties at the time the Target companies went into administration, this point is particularly telling. In other words, the Target companies were not in the sunlight, free of the FSD regime, but were well inside the penumbra of the regime, even though they were not in the full shadow of the receipt of a FSD, let alone in the darkness of the receipt of a CN.”
71.	Lord Sumption JSC, with whom the other Justices also agreed, expressed his conclusion on the issue in the following terms: 
“130. The critical question is what constitutes an "obligation incurred" for the purpose of rule 13.12(1)(b) of the Insolvency Rules 1986. The context shows it means a legal rule applying before the date when the company goes into liquidation which may, contingently on some future event, give rise to a "debt or liability" arising after that date. But it cannot extend to every legal rule which may on any contingency have that effect. Otherwise every debt or liability would be provable irrespective of the date when it accrued, unless the law changed after the company went into liquidation. Since the scheme depends on there being a common date as at which the fund falls to be valued and distributed pari passu, that cannot be right. Some limitation must be read into sub-paragraph (b). But what limitation?”
72.	Lord Sumption held that where the mandatory provisions of a statute may create a legal relationship between the company and a creditor or potential creditor giving rise to a provable debt, then there is no reason why it should not do so contingently on some future event.  He referred to a number of instances including the case of Secretary of State for Trade and Industry v Frid [2004] 2 AC 506 where the Secretary of State was subrogated by statute to the claims of employees to compensatory notice pay and redundancy payments. The liability of the company to meet those claims did not arise until the employees were dismissed, which was after the company went into liquidation. But, Lord Sumption held, the obligation existed before, “because the statutory scheme superimposed upon the contract of employment created the legal relationship which made the compensatory notice pay and the redundancy payments due”: see paragraph 134.  In Nortel, the Supreme Court overruled earlier cases which had held that liability for litigation costs arising from a judgment given after the commencement of the insolvency was not provable as a contingent debt even if the litigation was in progress when the company went into liquidation.  Lord Neuberger reversed those cases holding that by becoming a party to legal proceedings, a person is brought within a system governed by rules of court which carry with them the potential for being rendered legally liable for costs, subject of course to the discretion of the court: see paragraph 89 and also Lord Sumption’s judgment at paragraph 179.
IV. THE APPLICATION OF THESE PRINCIPLES TO THE APPLICATION CLAIMS
73.	For each kind of Application Claim it is therefore necessary to consider the following questions:
i)	The first question: Is the customer making this kind of claim as a Scheme Creditor bearing in mind both that that term incorporates the word ‘creditor’ as used in section 895 of the Companies Act and that the jurisdiction of the court is limited to compromising claims between the company and its creditors: see Lehman Brothers?
ii)	The second question: Is the claim a ‘Scheme Liability’ because it is a Liability of Welcome and it arises after 2 March 2011 as a result of an obligation incurred by Welcome before that date?
iii)	The third question: is the claim an Excluded Liability?
(a)  CCA Claims
74.	The first question. In my judgment CCA Claims are not claims that are compromised by the Scheme where the customer making that claim is not doing so in the capacity as creditor but in the capacity as a debtor, party to a consumer credit agreement.  The fact that the same customer may have a claim as creditor as well as a claim as debtor does not convert all his claims in whatever capacity into claims as a creditor.  That is clear from the judgments of the Court of Appeal in Lehman Brothers. In that case the pecuniary claims were held not to amount to a ‘gateway’ through which the other claims made by the same person in a different capacity could be made.  However, where a credit agreement has been completed so that the customer is no longer a debtor of Welcome, he may still wish to bring proceedings for a declaration under section 142 in order to generate an entitlement to the repayment of amounts that Welcome has received on realisation of the security it held, pursuant to section 106(d). In that situation he is, in my judgment, making the application for a declaration in the capacity as creditor because the only result can be that Welcome owes him money rather than the other way round.  In that situation he is seeking a declaration in his capacity as creditor of Welcome, not as debtor. 
75.	The consequence of this is that claims - 
i)	for a declaration under section 142 that the contract is not enforceable against him, except in cases where the contract has already been settled, fully refinanced or otherwise discharged;
ii)	for non-monetary relief consequential on a declaration made under section 142, pursuant to section 106(b) (return of property held as security for the loan) or section 106(c) (order that Welcome takes steps to remove or cancel any entry in any register relating to the security provided);
iii)	for an order under section 140A of the CCA (as amended) determining that the relationship between Welcome and the customer is unfair; 
iv)	for non-monetary relief consequent on the making of an unfair relationship determination under -
a)	section 140B(1)(c) (reduction or discharge of any sums owed by the customer to Welcome); 
b)	section 140B(1)(d) (return of any property to the surety); 
c)	section 140B(1)(e) (setting aside any duty imposed on the debtor or surety under the agreement); 
d)	section 140B(1)(f) (altering the terms of any agreement or related agreement); 
e)	section 140B(1)(g) (directing accounts to be taken or an accounting made between any persons);  
are not claims which are covered by the Scheme and are not subject to the Moratorium.
76.	Although they were not covered by the Joint Memorandum, I accept Mr Clark’s submission that claims - 
i)	for a declaration at common law that an agreement is not enforceable because of sections 77(4) or 78(6) of the CCA 1974 (failure to comply with statutory duties to give customer information); or 
ii)   for a time order under section 129 of the CCA 1974
would also not be claims covered by the Scheme and so are not covered by the Moratorium.
77.	There are some CCA claims which are pecuniary claims and which are therefore made by the customer in his capacity as creditor.  Mr Clark acknowledged this in relation to -
i)	a claim for a declaration under section 142 in circumstances where the only purpose is to obtain pecuniary relief pursuant to section 106(d) (repayment of amounts received by Welcome on realisation of security so far as referable to the agreement);
ii)	a claim under section 140B(1)(a) (requiring Welcome to repay any sums paid by the debtor or surety where the relationship was unfair); 
iii)	a claim under section 139(2)((c) (requiring Welcome to repay any sums paid to Welcome under an extortionate credit bargain); 
iv)	a claim in restitution arising from a breach of the CCA 1974. 
78.	Welcome relies on the width of the definition of ‘Liabilities’ in the Scheme as expressly covering any liability ‘whether or not it involves the payment of money or performance of any act or obligation’.  I agree that those words may be wide enough to cover all claims made under the CCA 1974.  But that cannot confer jurisdiction on the court to make a scheme wider than Part 26, as construed in Lehman Brothers, permits.  For the same reason the fact that the Scheme was sanctioned by an order of the court in those wide terms cannot confer jurisdiction on the court to give effect to the Scheme to the extent that it purports to apply beyond the power conferred by the statute. 
79.	Welcome also relies on the purpose of the Scheme which is to mirror what would happen in a distributing administration.  The purpose as expressed in both the Scheme and the Explanatory Note is to achieve finality as between Welcome and its customers and to avoid the need for the company and the Scheme Supervisors becoming embroiled in litigation arising out of past relationships.  Mr Allison submits that if the company had in fact gone into a formal administration under the Insolvency Act then the moratorium provided by paragraph 43 of Schedule B1 to the Insolvency Act would be complete and would preclude all CCA Claims.  That submission may well be right but that does not mean that where a company chooses to obtain the advantages of entering into a scheme of arrangement in order to avoid a formal administration, it is entitled to the same degree of protection.  The degree of protection conferred by the scheme of arrangement is determined by the scope of Part 26 of the CA 2006 and that limits the compromise to claims of creditors, not all claims. 
80.	I also accept the submission of Mr Clark that Welcome’s proposed construction of the meaning of Scheme Liability is not consistent with the commercial sense of the Scheme.  The effect of the Scheme is to replace a Scheme Liability with the entitlement to submit a Claim Form to the Scheme Supervisors.  The Scheme Supervisors are not empowered or equipped to decide whether to make declarations of unenforceability in the terms envisaged by the CCA.  They cannot purport to release the debtor from his obligations under the credit agreement or amend the terms of that agreement.  The Scheme cannot work in relation to these kinds of claims.  
81.	Mr Allison also points to the final words of the Scheme definition of Liability which cover ‘any other claims which may arise ancillary to any such financial liability’.  In my judgment, however, where a customer wishes to bring a claim for a declaration of unenforceability under section 142 that that relief will be of use to him other than as a trigger for pecuniary relief under section 106(d), the fact that pecuniary relief might follow because security has been realised does not mean that the customer is claiming in the capacity of a creditor of Welcome in relation to the other consequences of the declaration; it would then be turning the position on its head to describe the claim for a declaration as ‘ancillary’ to the return of the money. 
82.	I should make clear that the distinction here is not simply a distinction as to what relief is sought in the proceedings brought by the customer.  A customer cannot convert a claim for a pecuniary amount into a non-pecuniary claim merely by framing the relief sought in terms of a declaration that money is owed rather than seeking an order that money be paid. It is the nature of the claim that is important.  Mr Clark referred to cases where a declaration of invalidity is sought in respect of completed agreements.  He accepts that such a claim must be the precursor to a money claim and so would be covered by the Scheme.  But where there is some value to the customer in obtaining the declaration other than as a precursor because he is still a debtor of the company, then I consider that it is not a claim made by the customer as a creditor.  
83.	The second question: in so far as I have held that some CCA Claims for money will be made by customers in their capacity as creditors, are they Scheme Liabilities?  This depends on whether the liability to make the payment arises from an obligation incurred before 2 March 2011, having regard to the authorities (Unite the Union and Nortel) that I have considered earlier. 
84.	On this point I find that these liabilities do arise from obligations incurred earlier within IR 13.12(1)(b) and within the second limb of the definition of Scheme Liabilities.  I accept Mr Clark’s submission that this is not a straight-forward contractual dispute of the kind referred to in paragraph 75 of Lord Neuberger’s judgment (set out in paragraph 68, above).  The claim is not to enforce the contractual obligations but rather to engage the court’s jurisdiction to override those contractual terms.  One must therefore apply the three fold test propounded by Lord Neuberger, though bearing in mind that he expressly refrained from setting out a ‘universally applicable formula’.  The entering into the credit agreement amounts, in my judgment, to the taking of a legal step which imposes legal duties under the CCA 1974 and creates a legal relationship between the creditor and debtor.  This relationship results in the creditor being vulnerable to applications under the various provisions that have been discussed.  That ‘vulnerability’ arises from the combination of the credit agreement and the statutory provisions even if the allegations of misconduct founding the claim wholly or partly relate to events which occurred later.  I further consider that it does not matter for this purpose whether the credit agreement is a regulated one or an unregulated one.   
85.	So far as the third criterion of consistency with the regime under which the liability is imposed is concerned, Mr Clark urged that the aim of the statutory provisions is to protect consumers and it would be inconsistent with that regime to arrive at a result here whereby a customer who was not given individual notice of the Scheme is now barred from pursuing it.  But one cannot look at the effect of the provisions only in the context of this particular instance.  As Mr Allison pointed out, the effect of holding that the statutory provisions do not give rise to a contingent liability for the benefit of a customer as at the date of the administration would be to preclude a customer from having a provable claim in the insolvency of a lender.  Mr Allison described this as a ‘terrifying conclusion’ since it would mean that the customers would only receive a payment on an insolvency if there were a surplus after all the provable debts had been paid in full. Mr Clark argued that there was no need to interpret the wording in the Scheme as bearing the same meaning in all respects as the wording that applies to a formal administration, particularly where there is an important difference between the conduct of the Scheme and of an administration.  Here, he points to the fact that creditors with a contingent liability may receive a very discounted valuation of their claim if the distribution occurs before the factors which would influence the value of the claim have come into existence.  A creditor benefits from hindsight if the value of the claim becomes clearer (and greater) in the period between the date of the administration and the distribution: see Wight and others v Eckhardt Marine GmbH [2004] 2 BCLC 539 paragraph 32. There is a greater possibility of such hindsight benefiting a contingent creditor in the context of a formal administration because the creditor only has to lodge his claim at the date notified by the administrator as the date being not less than 21 days before a distribution.  By that time – which may be many months after the administration order has been made – the value of the claim may be clearer.  Under the Scheme, by contrast, the unsecured creditors had to submit their claim forms within three months of the Record Date and the Scheme Supervisors had only six months in which to determine whether to accept the claim.  Although the Scheme provides that the Scheme Supervisors should take account of intervening events, the truncated time table means that there is less likelihood of events occurring between the Record Date and the determination of the value of the claim.  
86.	I accept that the use of the same words in the Scheme may have a different result from the result achieved in a formal administration.  But that does not, in my view, mean that it is inconsistent with the regime in the CCA 1974 for me to hold that the conclusion of the credit agreement is a step which makes the lender ‘vulnerable’ to the various liabilities that can arise from the operation of that Act in respect of that relationship.  I therefore consider that the third criterion is also satisfied here.  I consider further that the CCA 1974 provisions are ‘superimposed’ on the credit agreement just as the employment protection provisions referred to by Lord Sumption in his judgment in Nortel are superimposed on the contract of employment. 
87.	There may be situations where the customer is relying on events or conduct on the part of Welcome after 2 March 2011 as the foundation for the unfairness of the relationship under s 140A-C.  Mr Clark points as an example to the decision of Etherton C in In re London Scottish Finance Ltd (in administration) [2013] EWHC 4047 (Ch). In that case loan agreements entered into by the loan company in administration, LSF, were improperly executed.  The Chancellor held that the mere fact that the agreements were improperly executed was not itself sufficient to give rise to an unfair relationship within section 140A(1).  But where the company had sent letters to customers threatening legal proceedings to recover the debt and the agreement with that customer was in fact irredeemably unenforceable under section 127(3) (as it applied to agreements entered into before 6 April 2007), that did make the relationship unfair. 
88.	Mr Clark also referred me to the judgment of George Leggatt QC (then sitting as a Deputy High Court Judge) in Patel v Patel [2009] EWHC 3264 (QB). In that case the debtor brought an application under section 140B on the basis that his relationship with the creditor was unfair.  The question arose whether the claim was time barred.  The learned judge held that the cause of action under section 140B was an ongoing one which accrued from day to day until the relationship ended.  Further, the assessment of unfairness would be determined as at the date of the trial and should take into account all matters up to that date. The claim for relief was not therefore time barred.  In my judgment there is no inconsistency between holding that a contingent liability has arisen under section 140B once a credit agreement has been concluded for the purposes of the Insolvency Rules, even though the court must consider matters postdating that time when determining unfairness. Nortel is clear authority that there is sufficient link between the liability and the pre-existing contract even where all the conduct complained of as making the relationship unfair occurred after 2 March 2011.
89.	I therefore find that those CCA Claims which are made by the customer as creditor are Scheme Liabilities because they arise from obligations incurred by Welcome before 2 March 2011.
90.	The third question is whether they are Excluded Liabilities as listed in Schedule 3 to the Scheme.  I note again here that Welcome has accepted that some of them may be according to 14 January letter. I also note that although Welcome’s principal lending business ceased taking on any new business on 16 December 2009, its business conducted under the brand name Shopacheck continued after 2 March 2011 until the business was sold in 2014.  There may therefore be customers who entered into agreements with Welcome after the Record Date and those, as I understand it, Welcome accepts would be Excluded Liabilities under paragraph 1(i) of Schedule 3.
91.	In so far as the claims do not fall within paragraph 4 of Schedule 3, do they fall within paragraph 1?  I set out that paragraph so far as relevant again:
“1. Any ordinary course business liability of the Company (i) properly incurred after the Record Date ... or (ii) that may arise after the Record Date as a result of an obligation properly incurred by the Company before the Record Date and adopted by the Company after the Record Date as envisaged by the Scheme (for the avoidance of doubt not including obligations where the Company has given notice to terminate such arrangements). …” 
92.	Mr Allison says that CCA Claims do not fall within either limb of this exclusion.  He refers to the Explanatory Note which describes the exclusions in Schedule 3 as broadly of three kinds; liabilities which need to be paid in full in order to allow the Welcome business to continue to operate and to generate value for the Welcome Scheme Creditors; liabilities in respect of PPI claims and liabilities which may be characterised as the costs to Welcome of implementing the Scheme.  In each case, either the liability must be incurred by the administrators after 2 March 2011 or it arises before that date but the administrators decide to adopt the liability for the benefit of the administration. Mr Clark submits that there is no reason why one should interpret liabilities properly incurred after 2 March 2011 covered by limb (i) as bearing the same meaning as the similar phrase in the definition of Scheme Liabilities and therefore that these liabilities may fall within limb (i).  He accepts, as I understand it, that the claims cannot fall within limb (ii) as they are not ‘adopted’ by the administrators. 
93.	I can see that the construction placed on paragraph 1 by Mr Allison does put these agreements in an odd position.  Mr Clark submitted that with the general run of contracts entered into by a company for the purchase of supplies or services, the counterparty knows when the company goes into administration or enters into a scheme that the administrators or scheme supervisors will have to choose whether to terminate the contract or adopt it and carry it forward.  If the administrators terminate the contract the counterparty will cease any further supply and can claim the pari passu payment of any outstanding monies owed.  If the administrators decide to stay with that supplier, they will adopt the contract and can pay any monies due as at the date of the administration as well as for future supplies.  The counterparty can press the administrators to make a decision whether to terminate or adopt.  Further, under a formal administration there is no equivalent of the Bar Date for the submission of provable claims.  In the present case, Mr Clark says, these credit agreements were entered into by Welcome before 2 March 2011 in the ordinary course of its business as a loan company - but Welcome asserts that it can keep the agreements going for the purposes of collecting in the debts of the customers, imposing charges etc after 2 March 2011 without ‘adopting’ the contract and so can avoid any liability to pay out sums that come due in the other direction.  In my judgment, that is the effect of the wording of the Exclusion.  I do not accept that these obligations can be regarded as obligations incurred after 2 March 2011 for the reasons I have explained citing the Nortel decision.  Those words bear that same meaning here.  
94.	I therefore find that where a CCA claim is of a kind that is brought by the customer in his capacity as creditor then in so far as it not covered by the exclusion for PPI Liabilities, it is not an Excluded Liability. 
(b) Non-PPI Claims
95.	The first question In relation to Non-PPI Claims, Mr Clark accepted that these are claims brought by the customers in their capacity as creditors for the purposes of section 895 of the CA 2006 and hence for the purposes of the definition of Scheme Creditors.  There is one caveat to this which relates to where the Non-PPI Claim is really a CCA claim in the sense that the claimant is relying on conduct falling under this head as evidence of unfair relationship.  If the claim, as a CCA Claim is not a claim for pecuniary relief and not a claim brought by the customer in his capacity as creditor, then it falls outside the Scheme.
96.	The second question I also consider that these claims are claims that arise by reason of an obligation incurred on or before 2 March 2011 and so are within the definition of Scheme Liabilities. 
97.	The third question  Mr Clark accepted that insofar as Non-PPI Claims are Liabilities they are not Excluded Liabilities. This acceptance was subject to the caveat in relation to claims where reliance was placed on matters which occurred on or after 2 March 2011 for the purposes of a CCA Claim, consistent with his argument that CCA Claims do not arise from obligations incurred before that date.  I have rejected that argument in relation to CCA Claims and hence hold that none of the Non-PPI Claims are Excluded Liabilities within the meaning of para 1 of Schedule 3 to the Scheme. 
(c) Overpayment Claims
98.	The first question Mr Clark accepted that in most cases a claim for an overpayment is made by the customer in his capacity as a creditor for the purposes of the definition of Scheme Liabilities.  I consider that even where the claim for an overpayment is asserted by claiming a set off against the amount still due from the customer as debtor, it is still a claim for a pecuniary amount and so made by the customer in his capacity as a creditor. 
99.	The second question I also consider that these claims are claims that arise by reason of an obligation incurred on or before 2 March 2011 and so are within the definition of Scheme Liabilities.   This follows from the Nortel decision as I have analysed it in relation to CCA Claims. 
100.	The third question For the same reasons, I consider that insofar as Overpayment Claims are Liabilities they are not Excluded Liabilities. 
(d) Uncashed Cheque Claims 
101.	The first question  For the purpose of this application, these claims are limited to those that fall within the three categories described by Ms Laverty, that is cheques refunding overpayments, cheques arising from the mis-selling of PPI insurance and cheques advancing monies under loan agreements. Mr Clark accepted that all three of these claims would be asserted by the customer in the capacity as creditor. 
102.	The second question I also consider that these claims are claims that arise by reason of an obligation incurred on or before 2 March 2011 and so are within the definition of Scheme Liabilities.   This follows from the Nortel decision as I have analysed it in relation to CCA Claims.
103.	The third question Since these claims must be limited to events that occurred on or before 2 March 2011, Mr Clark accepted that they cannot be Excluded Liabilities within paragraph 1 of Schedule 3 if they arise from underlying liabilities of the three kinds described by Ms Laverty.
104.	Mr Clark also raised the question of whether any Uncashed Cheque Claims might be excluded because the cheque might have been sent by Welcome in satisfaction of a claim that is regarded by Welcome as a PPI Liability as described in the Welcome letter of 14 January 2015.  Since those cheques were not one of the three kinds mentioned in Ms Laverty’s witness statement and are not treated as covered by this application, I am not deciding whether or not Uncashed Cheque Claim of that kind is an Excluded Liability under paragraph 4 of Schedule 3. 
(e)  Charges Claims
105.	The first question  As to whether a claim in relation to a charge which has been applied is made by the customer in his capacity as a creditor for the purposes of the definition of Scheme Liabilities, I consider that where the agreement has been completed at the time that the claim is asserted then an assertion that the charges that have been paid were excessive can only be asserted in order to bring about the return of the money – there is no point to it otherwise.  Where an agreement has been completed therefore the claim for excessive charges must be a claim made by the customer as creditor.  That is still the case even if the customer purports to seek only declaratory relief rather than a money payment in the relief sought. The nature of the relief sought cannot change the nature of the capacity in which the customer asserts the claim and, in any event, the declaration there is truly ancillary to the underlying monetary claim.
106.	Where the agreement is extant I consider that the situation is different.  The customer is still primarily a debtor of Welcome and has an interest in knowing what terms of the contract still bind him as to the size of his future payments.  Where a claim is made for a declaration that a clause in the agreement is penal or that it is unfair pursuant to the Unfair Terms in Consumer Contracts Regulations 1999 and so not binding on the customer, then in my judgment that claim is asserted by the customer in his capacity as debtor and is not compromised by the Scheme.  I agree with Mr Clark that a declaration that a clause is not binding on one or both of those grounds may give rise to a right to a restitutionary claim for the repayment of past charges and that would be a claim brought as a creditor.  But the potential for such a claim does not convert the claim for a declaration as to the future status of the clause into a claim by someone in their capacity as creditor.  Provided the non-pecuniary claim has an intrinsic value to the customer, for example because it facilitates the return of property provided by way of security or a discharge from a continuing obligation, it is not a claim made as a creditor. 
107.	The second question Mr Clark accepts that where the charges claimed have been imposed before 2 March 2011, the Liability to repay must be a Scheme Liability.
108.	However where the liability relates to charges imposed after 2 March 2011, Mr Clark contends that they will not be Scheme Liabilities because the obligation to make the repayment is incurred on or after 2 March 2011 and so does not fall within either limb (i) or (ii) limb (a) of the definition. I do not accept that submission.  Where the charges were imposed after 2 March 2011 under a contract entered into before that date, I consider that the obligation to repay the charges is a liability that arises after that date as a result of an obligation incurred before that date within the meaning of the Nortel decision. I consider that all the Charges Claims are Scheme Liabilities.
109.	The third question Mr Clark accepts that where the charges have been imposed before that date, they cannot be Excluded Liabilities.  However where the liability relates to charges imposed after 2 March 2011, Mr Clark contends that the obligation to make the repayment is incurred on or after 2 March 2011 and so falls within the first limb of paragraph 1 of Schedule 3. Again, I do not accept that submission because of the Nortel judgment. I consider that none of these Charges Claims are Excluded Liabilities.
V. OTHER ISSUES
110.	There were two other issues included in the list of issues prepared by the parties. One raises the issue of the lack of individual notice of the Scheme meetings given to the customers who have Application Claims.  I do not consider it is open to the customers to raise this point.  They were given notice by the placing of advertisements in accordance with the order of Henderson J and once the Scheme had been sanctioned by Newey J, it is binding by virtue of Part 26 regardless of any alleged defect or irregularity that may have occurred in the steps leading up to the making of the sanction order: see Chief Commission of Pay-Roll Tax v Group Four Industries [1984] NSWLR 680.
111.	The final issue arises because the Scheme does not provide clearly what happens to a claim based on a judgment obtained by a creditor in Proceedings that have been commenced outside the Moratorium in one of the circumstances described in clause 2.2.2.  This may be a claim commenced with the consent of the Scheme Supervisors or in response to Proceedings commenced or continued by Welcome against the Scheme Creditor in respect of the same transaction.  Clause 3.6 provides that no payments will be made in respect of Scheme Liabilities that are not submitted as Submitted Scheme Claims.  A Submitted Scheme Claim is defined as ‘any purported Scheme Liability in respect of which a Scheme Creditor has submitted a Claim Form in accordance with clause 3.5.3 and 3.5.4’.  Clause 3.5.3 provides that the Claim Form must be sent to the Scheme Supervisors to arrive on or before the Bar Date.  If a judgment is obtained by a creditor in Proceedings brought outside the Moratorium, it does not therefore appear that it can be made the belated subject of a Submitted Scheme Claim assuming that judgment is only obtained after the Bar Date.  If it cannot be a Submitted Scheme Claim then it cannot be an Ascertained Scheme Claim for the purpose of section 6 of the Scheme dealing with distributions. 
112.	Mr Allison submitted that this means that no payment can be made in respect of such a judgment unless the creditor has submitted a claim form in time.  Thus, according to his interpretation of the Scheme, Welcome could bring proceedings to enforce the debt; the customer could raise a successful defence based on the CCA 1974 provisions and claim repayments; the court could find in favour of the customer but Welcome could still refuse to pay or set off the sums awarded by the court if the customer had not lodged a claim form by the Bar Date.  Mr Clark made the counter-argument that since the Moratorium does not bite on such a claim, there is no need to submit a Claim Form and the claim has not been compromised by the Scheme.  The judgment must therefore be paid in full by the Scheme Supervisors rather than the creditor being limited to his pari passu distribution along with the other Ascertained Scheme Claims. 
113.	I do not consider that either of these is a tenable construction of the Scheme.  Mr Allison’s construction would in my view ‘flout business common sense’ contrary to the principles of construction set out in the Marconi case referred to earlier.  There does not seem to be much purpose in carving certain situations out of the Moratorium in clause 2.2.2 if the claim is still extinguished at the Bar Date unless a Claim Form has been submitted.  On the other hand, in my judgment a reasonable person would not expect that creditor who only makes a claim in response to Proceedings brought by Welcome to be in a much better position compared to a creditor who had submitted a Claim Form in accordance with the Scheme.  That would be the consequence if, as Mr Clark submitted, he was entitled to 100 pence in the pound rather than a pari passu distribution.  Certainly there seems to be no commercial reason why such a person should be in a stronger position than someone who has had a Disputed Scheme Claim determined by the court, in which case the Claim becomes an Ascertained Scheme Claim for the amount of the judgment: see clause 3.8.2.   
114.	In my judgment, the proper construction of the Scheme is that where a claim commenced in accordance with clause 2.2.2(e) is successful, the claimant is entitled to set off the judgment sum against any debt he owes Welcome, by analogy with clause 3.7.1(c) of the Scheme and any remaining sum owed to the customer must be treated as if it were an Ascertained Scheme Claim for the purpose of the provisions of the Scheme relating to distributions. 

Conclusion
115.	I will make a declaration in accordance with the terms of this judgment.