Overview

In June 2007 we reported on the decision in Prudential Assurance Company Ltd v PRG Powerhouse Limited. Although the case has given rise to a great deal of debate, until now there has been no subsequent reported case in which the court has had to consider whether and how a company voluntary arrangement (CVA) might fairly effect a compromise of a landlord's claim against a guarantor of its tenant.

The High Court has now had an opportunity to consider the issue again in Mourant & Co Trustees Limited v Sixty UK Limited.

Sixty UK Ltd (Sixty) trades under the names Miss Sixty and Energie. It has 11 stores and a number of concessions. Having traded at a loss for several years, the company became insolvent and administrators were appointed in September 2008. The administrators put forward proposals for a CVA. Under the proposals, four stores were to close, but the others would continue to trade. The CVA was approved at a meeting of creditors in April 2009. The landlords of two stores at a shopping centre in Liverpool, which had been earmarked for closure, challenged the CVA. The challenge was made on the same basis as that brought by the landlords in Powerhouse - that the CVA was unfairly prejudicial within the meaning of section 6 of the Insolvency Act 1986. The Liverpool leases were for a term of 10 years from 2006, and were guaranteed by Sixty's Italian parent company; Sixty SpA. The landlords of the other two stores which were to be closed did not benefit from the parent company guarantee.

To read this article click ‘View Briefing’