Shoosmiths secures first indemnity costs order in Madagascar Oil restructuring

Law firm Shoosmiths has successfully advised Madagascar Oil, a leading onshore oil producer in Madagascar, through a landmark restructuring case that has now secured a novel indemnity costs order against an opposing creditor for frivolous and vexatious conduct.

In a continuation of “firsts” following the sanction of the Restructuring Plan in August 2025, the Court has now ordered that the Plan Company’s opposing creditor pay most of the costs of the Plan Company, on an indemnity basis. This is a precedent-setting win for Madagascar Oil and a clear indication that UK Courts are prepared to penalise unreasonable or unfocused challenges in Restructuring Plan proceedings.

Creditors can no longer expect to be protected from cost rulings when bringing claims against a Restructuring Plan if they are unfocused in their challenge. Not only has the Plan Company not been asked by the court to pay the costs of the challenging creditor, but the creditor has been asked to pay a significant percentage of the Plan Company’s costs on an indemnity basis.

The matter was led by Lee Sennett (Partner, Corporate Restructuring and Advisory) and Hayley Çapani (Legal Director). They were supported by a team comprising Lucy Sanderson (Senior Associate) and Yasmin King (Associate) and worked alongside Matthew Abraham and Rabin Kok from South Square.

The ruling that Madagascar Oil has obtained will establish a baseline for costs awards against creditors who pursue meritless challenges and offer no assistance to the court. A common approach of creditors to restructuring cases of “throwing the kitchen sink” has been rebutted, and as a result, firms with advisory roles to creditors in such cases must recalibrate their approach.

As Restructuring Plans are often challenged at a speculative level, the ruling is an exceptional marker on how Courts intend to manage creditor conduct.

“Shoosmiths continues to be at the forefront of the restructuring and insolvency market, and this indemnity costs order recognises the leading work we have been doing in the field,” said Lee Sennett and Hayley Çapani in a joint statement.

Lucy Sanderson added: “This ruling highlights the importance of having a focused approach, with Courts now looking to consider whether creditors have a legitimate challenge in relation to costs. Many have been keeping a close eye on the case for good reason; it’s a one of a kind restructuring plan, demonstrating how a plan can be used to protect against a sole ransom creditor, whose actions are now penalised on costs.”