Debenhams CVA challenge heading to appeal
The judge that largely dismissed a challenge to the Debenhams company voluntary arrangement (CVA) has now granted one of the landlord objectors permission to appeal.
Sir Alastair Norris gave Southampton Estates Ltd the go-ahead to renew its attack on the CVA at the Court of Appeal, ruling that its arguments have “a real prospect of success”. In addition, he granted Debenhams Retail Ltd permission to bring a cross-appeal, against his earlier finding that a CVA cannot deprive a landlord of a right to forfeit.
Last September, the judge ruled that the CVA could stand, but held that a forfeiture restriction in the CVA was in excess of powers under the Insolvency Act 1986. He severed that forfeiture restriction from the CVA, but otherwise upheld it.
The judge that largely dismissed a challenge to the Debenhams company voluntary arrangement (CVA) has now granted one of the landlord objectors permission to appeal.
Sir Alastair Norris gave Southampton Estates Ltd the go-ahead to renew its attack on the CVA at the Court of Appeal, ruling that its arguments have “a real prospect of success”. In addition, he granted Debenhams Retail Ltd permission to bring a cross-appeal, against his earlier finding that a CVA cannot deprive a landlord of a right to forfeit.
Last September, the judge ruled that the CVA could stand, but held that a forfeiture restriction in the CVA was in excess of powers under the Insolvency Act 1986. He severed that forfeiture restriction from the CVA, but otherwise upheld it.
Now Southampton Estates, one of the six landlords that took the case to the High Court, has secured permission to appeal on a number of grounds, including that the judge erred in law in holding that a landlord could be a “creditor” in respect of future rent and in holding that a CVA can permit a tenant to retain possession of the property at less than the contractual rent.
No date has yet been scheduled for the hearing of the appeal.
If the Court of Appeal ultimately rules in favour of Southampton Estates, the case could have major repercussions not only for Debenhams, if its restructuring plans were forced back to the drawing board, but also for the future of controversial retail CVAs, which typically see landlords forced to accept rent reductions in order to keep stores open.
The CVA was approved at a meeting of Debenhams’ creditors on 9 May 2019, with more than 94% of voting creditors by value (with claims worth £989.5m out of total unsecured claims of £1.5bn) voting in favour. Debenhams Retail Ltd says the CVA was also approved by 82.1% of landlords by value of claims.
To send feedback, e-mail jess.harrold@egi.co.uk or tweet @estatesgazette
