Supervisors fail to strike out challenge to revoke a terminated CVA

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

A group of landlords brought proceedings to revoke an already-terminated company voluntary arrangement (CVA) and to claim against the CVA's supervisors for their fees and legal costs in administering the CVA.

The supervisors applied to have the proceedings struck-out before the matter got to trial on multiple grounds, one being that revoking the CVA (effectively undoing it) had practically the same effect as termination. The supervisors argued that the landlords had no legitimate interests in revoking the CVA, so the application should not proceed to trial.

Decision

The Judge ruled that the landlords had a legitimate interest in revoking the CVA because certain clauses could potentially continue to affect the Landlords after termination, for example by changing the terms of their leases.

In addition the Judge decided that, despite termination, the supervisors' fees and legal costs (including those incurred as nominee supervisors) were to be covered by the insolvent company, and if the landlords wanted to challenge these costs, they would have to revoke the CVA.

In deciding on each ground the Judge reasoned that as CVA challenges by landlords are becoming a frequent occurence the case should proceed to trial to allow for full argument before a trial judge.

Commentary

The decision will concern CVA supervisors who may find their protections under CVAs are at risk of being revoked after a CVA is automatically terminated. Supervisors will likely have to defend their fees and indemnified legal costs incurred from administering and defending the CVA at trial in such circumstances.

Nick Moser
Alexander Tocili