A group of landlords unsuccessfully challenged the company voluntary arrangement of fashion retailer New Look. The CVA challenge contained multiple grounds and pleaded issues of jurisdiction, unfair prejudice and material irregularity.
The jurisdictional challenges included an argument that on true analysis, the CVA proposal merely represented separate arrangements with different creditor groups. This was rejected with the Court stating that a CVA could treat different creditor groups differently. The Court also held that whilst CVA proposals must include an element of "give and take", this had been achieved because the compromised landlords were receiving a return which equalled or exceeded what they could expect to receive if New Look entered an alternative insolvency process. Another supportive factor was that the landlords were receiving new termination rights under the CVA in respect of their leases.
The landlords argued that they had been unfairly prejudiced on various grounds including that the necessary voting majorities had been achieved from creditors unaffected by the CVA. The Court found whilst this was important it was not determinative of unfair prejudice. Further, there was no requirement that CVAs only lower the rent by the minimum possible amount, especially where landlords retained termination rights.
As part of considering unfair prejudice, the Court was also willing to consider New Look’s wider restructuring. In that context, the creditors who were unaffected by the CVA were effected by New Look’s scheme of arrangement.
Lazari Properties 2 Ltd & Ors v New Look Retailers Ltd & Ors [2021] EWHC 1209 (Ch)