CVA supervisor failed to comply with obligations

A CVA supervisor failed to comply with his obligations and was ordered to wind up a company following the failure of the CVA.

The company was originally incorporated to develop and operate a “Disneyland-style” theme park in Kent, to be known as “the London Resort”. The cost of the London Resort theme park development was estimated at £3.5 billion and was to be funded by investors.

The company failed to obtain planning permission for the site, and subsequently proposed a CVA based on a debt equity swap in early 2023.

The company was controlled by Mr Abdullah Al-Humaidi (Mr Al-Humaidi). Mr Al-Humaidi ceased to be a director of the company when a bankruptcy order was made against him on 6 November 2023.

The applicant, Paramount Licensing Inc., is a creditor of the company owed £13.5million. It opposed the CVA proposal, alleging that the prospect of any financial return at all for creditors from the CVA was highly remote. 

The CVA was approved on 4 April 2023. The applicant alleged that certain of the debts voted on to approve the CVA were shams, and issued an application to challenge the CVA, which is listed for hearing in April 2025.  

However, the applicant also brought the present application, alleging that the company is in irremediable breach of the fundamental terms of the CVA. The applicant sought an order requiring the CVA supervisor, Mr William Anthony Batty (Mr Batty) to issue a Certificate of Termination and petition for a winding up order without further recourse to creditors.

The company made a cross-application to “stay” the CVA or vary its terms.

Hearing

At the hearing, the company was initially represented by counsel and solicitors. However, during the hearing it became apparent that they had been instructed by Mr Al-Humaidi on behalf of the company, pursuant to a standing authority given by a de jure director.  

When it was pointed out by the court that it is a criminal offence for an undischarged bankrupt directly or indirectly to take part in or be concerned in the management of a company without the leave of the court, the company’s counsel withdrew from the hearing A request for an adjournment made by the company’s solicitors was refused.

In any event, the company’s cross application was dismissed because the company lacked standing, and the application was misconceived. The CVA is a statutory contract and the court has no power to stay or vary it (as was well established by long-standing authority Re Alpa Lighting Ltd [1997] BPIR 341).

Mr Batty as CVA supervisor was represented by counsel and purported to adopt a neutral position. However, the court held that Mr Batty’s witness statement did not read as a “neutral” witness statement, as it was supportive of the company’s position and opposed the applicant’s position on all fronts.

Decision

It was held that the company was in breach of the CVA by failing to issue shares to the CVA creditors within 12 months; materially changing its business by transferring land integral to the theme park site to another company; and by ceasing to trade.

ICC Judge Barber held that it was regrettable that in the face of (at least) three serious and irremediable breaches of the terms of the CVA, the supervisor failed to comply with his obligations to issue a certificate of termination and to present a winding up petition.  She made an order directing him to issue a certificate of termination.

In reference to Paramount Licensing Inc. v William Anthony Batty, The London Resort Company Holdings Limited [2024] EWHC 3287 (Ch).