England & Wales High Court Rules On Landlords' CVA Challenge

The High Court gave its ruling yesterday in the case of Discover (Northampton) Limited and others v Debenhams Retail Limited and others [2019] EWHC 2441 (Ch), rejecting four of the five grounds on which the Applicants disputed the validity of the company's Creditors Voluntary Arrangement ("CVA"), which was approved by creditors in May 2019.

The main effect of the CVA was that the company's leases were split into categories in order to vary predominantly rent and forfeiture obligations by various degrees. The Applicants (who were landlords who did not vote in favour of the CVA) challenged the CVA on five grounds, four of which were unsuccessful, with the remaining ground being addressed by the deletion of a technical provision in the CVA. The CVA therefore continues to be effective.

Ground 1- rejected: landlords are not creditors with regard to claims for future rent

The court rejected this argument and decided that, while future rent was not a provable debt in a liquidation, it was well established that there was no need for a "creditor" under a CVA to have a provable debt. Future rent is a liability to which a company could be subject under an existing lease notwithstanding the...