Landlords’ challenge to Regis’s CVA is a triable issue

Background

Regis UK Limited entered into a company voluntary arrangement (“CVA”) on 26 October 2018. Regis’s landlords claimed the CVA should be revoked as it unfairly prejudiced their interests, there were material irregularities at or in relation to the meeting approving it and the supervisors were in breach of their duties as nominees (the “CVA Challenge”).

The CVA terminated when Regis entered into administration on 23 October 2019. Notwithstanding the CVA’s termination, the landlords continued to pursue the CVA Challenge. The supervisors applied to strike out the landlords’ claim.

Court’s decision

The court refused to strike out the CVA Challenge given that:

• Developing area of law - Recent cases demonstrate that landlords are focussing on retail CVAs and as such, the law in this area is developing. The law should therefore be determined after full argument and in light of the facts found by the trial judge.
• Court’s power to revoke the CVA - The court has a discretion, under section 6(4) IA 1986, to revoke the CVA notwithstanding its termination.
• Prospect of the supervisors being ordered to repay its fees and expenses – The court may have the power to make a costs order against the supervisors of a CVA. The trial judge should determine whether the conduct of the supervisors is such that they should be required to repay their fees and remuneration and/or whether creditors should benefit from the supervisors’ services without paying for them.
• Legitimate purpose – The landlords have a legitimate purpose in pursuing the CVA Challenge notwithstanding the CVA’s termination. Given that, the supervisors may be ordered to pay sums into the estate and any variations to the leases may be undone if the CVA is revoked.
• Abuse of process – The respondents’ argument that a claim solely about the £45,000 paid in respect of the supervisors’ fees is an abuse of process falls away. As the trial judge will be required to determine several wider issues; the claim is not solely about the supervisors’ fees. 

Williams v Carraway Guildford (Nominee A) Limited [2019] EWHC 3073 (Ch)