High Court quashes Miss Sixty CVA
Published: 23 July, 2010
A High Court ruling has quashed a Company Voluntary Arrangement (CVA) entered into by the owners of fashion brand Miss Sixty.
The dispute centered on a rental guarantee that Mourant, the owners of Liverpool’s Metquarter shopping centre which leased Miss Sixty and Energie stores, had been given by Sixty UK’s Italian parent company, Sixty SPA, in April.
Under the terms of the CVA, which enables a company to reach an agreement with its creditors about how debt is to be repaid while allowing it to continue to trade, meant that Mourant lost the guarantee in return for just £300,000.
Mr Justice Henderson today accused Sixty UK’s joint administrators Peter Hollis and Nicholas O’Reilly - former president of R3, the trade body for insolvency, which is meant to promote high standards - of misconduct and ruled that they had unfairly sided with the retailer against Mourant.
Mr Justice Henderson, said: “Unfortunately, the administrators in the present case seem to have lost a proper sense of objectivity, and they allowed themselves to side with Sixty group against the interests of the guaranteed landlords of the closed stores. They permitted Sixty SPA to dictate the crucial terms of the CVA, and they misrepresented the true position to the creditors.”
The British Property Federation (BPF) welcomed the decision. "This is of huge significance because it shows that immoral acts designed to let directors manage retailers into the ground, blame the landlord and walk away will not be tolerated by the courts,” said Liz Peace, chief executive of the BPF. “Common sense has won out and this will hopefully make future cases of firms cynically using insolvency laws less likely."
Ian Fletcher, director of policy at the BPF, added: “It is extremely disappointing that landlords are seen as such soft targets and have to go to such hassle and expense to defend their interests in court.
“Such a damning judgement can only further erode confidence in the insolvency practitioner sector’s ability to self-regulate itself. Over the course of the recession landlords have shown a willingness to support legitimate rescues and what a pity they will be more suspicious in future because of cases like this.”
This ruling comes after the ‘Powerhouse’ case in 2007 where the electrical retailer’s parent PRG Group was told that its CVA to escape the lease liabilities was “unfairly prejudicial” to landlords.
It is now unlikely that any CVAs of this nature will go ahead in future.
