Tenant insolvency – Debenhams – CVA challenges – Debt – Future rent – Right to forfeit – Material irregularity

Discovery (Northampton) Ltd and Others v Debenhams Retail Ltd (1), James Robert Tucker (2), Edward Boyle (3) and Gals Trust Corporation (4) [2019] EWHC 2441 (Ch) (Norris J) (19 September 2019)

This case is of significance to commercial landlords in the retail and casual dining sector. It is one of the latest in a line of Company Voluntary Arrangements (CVAs) where the prime objective is to reduce the contractual rents payable to landlords, and in some cases to bring leases to a premature end. Since 2009 there have been about 40 CVAs of this type. In most cases tenants with large portfolios cited long leases with upwards-only rent reviews and without a tenant’s break clause as contributing to their financial difficulties. The argument was that in many cases the rents payable were above market levels. In the majority of such CVAs the unsecured trade creditors have been paid in full with the result that landlords have borne the brunt of the financial restructuring burden. In the Debenhams case in the main only landlords were affected, but some local authorities entitled to business rates also suffered.