Challenging CVAs – The Debenhams Decision

Judgment has been handed down regarding the challenge to the Debenhams CVA providing some long-awaited judicial guidance to certain aspects of retail CVAs.

In common with the recent trend, the Debenhams CVA sought to address what it identified as unsustainable property costs. It categorised landlords by reference to the financial performance and sustainability of the rent for each property. Essentially, the lower the performance, the lower the category of the property and the greater the impact of the CVA on that landlord.

A group of landlords (whose properties fell into the lower categories) brought the challenge on five grounds which, in brief, were as follows:

1. The CVA went beyond the jurisdiction of the Insolvency Act 1986 ("Act") in binding landlords as they were not creditors for future rent.