Latest in the CVA challenge saga

Court refuses to strike out a challenge to a company voluntary arrangement (CVA), even where it had since terminated when the company went into administration.

A CVA had been approved by 79 per cent of creditors and supervisors were appointed. The company’s landlords applied for the CVA to be revoked pursuant to Section 6(4) IA1986, on grounds that the CVA unfairly prejudiced their interests and that material irregularities existed in relation to its approval. They also sought an order under Section 6(6) that the supervisors repay their fees received for dealing with the CVA.

Before the Landlords’ application could be heard, the company went into administration, resulting in the CVA’s automatic termination. The landlords continued to pursue revocation of the CVA, arguing that significant clauses in the CVA survived its termination.

The supervisors applied to strike out the landlords’ application claiming that the court had no power under Section 6(4) to revoke a CVA that had already been terminated, or to order the repayment of their fees under Section 6(6). 

The application to strike out was refused. Section 6(4) afforded the court a discretion to revoke that was not expressly limited by reference to whether or not the CVA had terminated, and the supervisors had identified no authority to support the contention that there was no power to revoke after termination. The issue was not suitable for strike out or summary judgment. 

Further, the landlords had a properly arguable case that it was in their legitimate interests that the CVA be revoked so that it would be deemed to never have had effect. The recent instances of landlords litigating with regard to retail CVAs demonstrated that it was a developing area of law.

 (1) Edward Williams (2) Christine Mary Laverty v Carraway Guildford (Nominee A) Ltd & 19 Ors (2019)

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