Kroll wins landmark CVA court case

Kroll wins landmark CVA court case

Administrators beat the landlord in court case, but legal issues remain

A High Court judgment has been won by corporate recovery experts Kroll, which
could help clarify the treatment of landlords’ claims in a company voluntary
arrangement.

Landlords for East Sussex-based school Newlands had appealed against the use
of the Insolvency Act to block them from voting on whether the school could
enter into a CVA, a move the landlords would have blocked.

Acting for Kroll, Bond Pearce successfully argued that because the landlords
were unable to adequately provide the size of their claim against the school for
a sum owed, the chairman of creditors valued the sum at £1. This meant the
landlord could not vote down the CVA.

The landlords had argued that the chairman of creditors’ conduct was a
‘material irregularity’ as he had placed a value of just £1 on the value owed to
the landlords.

Chancellor of the High Court, Sir Andrew Morritt, said that as the value
could not be ascertained, rather than disputed, the application of rule 1.17(3)
of the Insolvency Act by the chairman was correct – therefore the chairman was
not obliged to put a higher value than £1 on the claim.

Newlands joint administrator and Kroll partner Alastair Beveridge said that
while the ruling helped to clarify one aspect of the issue of landlords’ rights
as a creditor, more court cases could ensue.

‘There are definitely some areas where landlords and CVAs meet that are not
clear,’ said Beveridge.

The school will reopen in Autumn, and the landlord’s future claims will be
paid in full.

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