Third party funded creditor CVA challenge

Caffè Nero applied to strike out the CVA challenge and have summary judgment granted in its favour. Caffè Nero argued the challenge was an abuse of process and LC had no legitimate interest. Caffè Nero argued LC was the third party’s ‘puppet’, bringing the challenge for the third party’s collateral purpose. Caffè Nero alleged that as LC had terminated the relevant lease pursuant to the CVA terms, they no longer had a legitimate interest to challenge the CVA.

The court dismissed Caffè Nero’s application. Regarding collateral purpose, it would be premature to consider the merits of the CVA challenge or LC’s motivations before a full trial. It was possible the third party and LC had separate purposes for the CVA challenge.

The court held Caffè Nero had failed to demonstrate LC had no real prospect of showing at trial that LC had a legitimate interest in the CVA challenge. LC had standing to bring the challenge due to their voting entitlement in the CVA. LC’s belief they would achieve a better financial outcome if the challenge was successful was sufficient for there to be a legitimate interest.

Nero Holdings Limited v Young [2021] EWHC 1453 (Ch)