Mourant & Co Trustees Ltd & Anor v Sixty UK Ltd & Ors
July 23, 2010
CHANCERY DIVISION
United Kingdom
CORAM
- MR JUSTICE HENDERSON
Areas of Law
- Corporate Law
- Civil Procedure
- Contract Law
- Property and Real Estate Law
- Commercial Law
July 23, 2010
CHANCERY DIVISION
United Kingdom
CORAM
AI Generated Summary
The trustees of the Met Quarter Property Unit Trust, landlords of Units 39a and 39b at Liverpool’s Met Quarter, applied under section 6(1) of the Insolvency Act 1986 to revoke a creditors’ meeting decision approving a CVA proposed by Sixty UK Ltd’s administrators, Peter Hollis and Nicholas O’Reilly. The CVA closed four loss‑making stores and paid the landlords £300,000 while releasing Sixty SpA, the Italian parent and guarantor, from all liability under guarantees, leaving other creditors to be paid in full and deferring Sixty SpA’s intra‑group debt. Relying on Powerhouse, vertical and horizontal comparisons, and expert evidence, the court found the CVA unfairly prejudicial: it stripped valuable guarantees despite Sixty SpA’s strong covenant, misrepresented valuation assumptions in Appendix C, and treated associated companies and the Trafford Centre landlord more favorably than the applicants. The adjournment was refused; the CVA was set aside and the administrators’ conduct was referred to their professional bodies.
Judgment
Mr Justice Henderson:
Introduction
This is an application by the landlords of two retail units at the Met Quarter shopping centre in Liverpool to revoke the decision taken at a creditors’ meeting on 2 April 2009 to approve a company voluntary arrangement (“CVA”) proposed by the administrators of the tenant of the units, Sixty UK Ltd (“Sixty”). The application is made under section 6(1) of the Insolvency Act 1986 , which provides (so far as material) that an application may be made by any creditor entitled to vote at the meeting
“on one or both of the following grounds, namely –
(a) that a voluntary arrangement which has effect under section 4A unfairly prejudices the interests of a creditor … of the company;
(b) that there has been some material irregularity at or in relation to either of the meetings [ i.e. the meetings of the company and its creditors ]”
The administrators of Sixty, Mr Peter Hollis and Mr Nicholas O’Reilly, are licensed insolvency practitioners and partners of Vantis Plc. They were appointed on 29 September 2008, and at an initial creditors’ meeting held on 8 December 2008 they said that they intended to propose a CVA. The proposal was issued on 17 March 2009. It was then approved at the meeting on 2 April, subject to certain modifications proposed by HMRC which have no bearing on this application. The administrators are also the supervisors under the CVA.
The CVA sought to take advantage of the decision of the High Court in the Powerhouse case ( Prudential Assurance Co Ltd v P R G Powerhouse Ltd [2007] EWHC 1002 (Ch) , [2007] BCC 500 ), which had established that a CVA could lawfully be structured in a manner which would deprive a creditor landlord of the benefit of a third party guarantee of the liabilities of the tenant debtor company. In the present case, the liabilities of Sixty as the tenant of the two units were guaranteed by its ultimate Italian parent company, Sixty SpA. The effect of the CVA was to release Sixty SpA from all liability under the guarantees upon payment of a sum of £300,000 to the applicants as landlords of the units. The figure of £300,000 was said in the proposal to represent 100 per cent of Sixty’s estimated liability to the landlords on a surrender of the leases, and to be calculated on the basis of advice received and certain specified assumptions. Thus the applicants were ostensibly to receive full compensation on the basis of a notional surrender of the leases, but they were to be de