The repercussions of Bernard Madoff’s multi-billion-dollar Ponzi scheme are still being felt throughout the offshore and insolvency worlds, over 10 years after the fraud was exposed in 2008.

Its latest appearance came in an appeal to the Privy Council from the BVI courts in UBS AG New York v Fairfield Sentry Ltd (In Liquidation) [2019] UKPC 20. The judgment clarifies important points about BVI insolvency law in cross-border cases.

In But Ka Chon v Interactive Brokers LLC [2019] HKCA 873, the Hong Kong Court of Appeal upheld a lower court's decision to reject an application to set aside a statutory demand. The appellant had argued (among other things) that an arbitration clause in his agreement with the respondent required their dispute to be referred to arbitration.

The CVA challenge

The landlords’ claim against the Debenhams CVA was put forward on five grounds:

1. Future rent is not a “debt” and so the landlords are not creditors, such that the CVA cannot bind them

REJECTED: The definition of “debt” is broad enough to include pecuniary contingent liabilities, such as future rent.

2. A CVA cannot operate to reduce rent payable under leases: it is automatically unfairly prejudicial

Today (19 September), following an expedited trial, the High Court rejected the application brought by affected landlords to challenge the CVA entered into by Debenhams Retail Limited.

The landlord applicants sought to challenge the CVA which closed stores and imposed rent reductions on landlords according to different categories. 'Category 5' landlords took the biggest hit with rents halved and early termination dates imposed. The CVA proposal was approved by Debenhams' creditors on 9 May 2019.

Five grounds were advanced by the landlords during the hearing:

The recent case of Martin v McLaren Construction [2019] EWHC 2059 (Ch) reminds practitioners to make sure that the debt which forms the basis of a statutory demand pursuant to s268(1) of the Insolvency Act 1986, is due and payable.

You might assume that a statutory demand under s268(1) is a demand for payment and therefore monies payable under an “on demand” guarantee can be demand by a statutory demand. However, the Court in Martin v McLaren confirmed otherwise.

The Facts

The High Court gave its ruling yesterday in the case of Discover (Northampton) Limited and others v Debenhams Retail Limited and others [2019] EWHC 2441 (Ch), rejecting four of the five grounds on which the Applicants disputed the validity of the company's Creditors Voluntary Arrangement ("CVA"), which was approved by creditors in May 2019.

On 19 September 2019, Norris J handed downjudgment in the challenge brought by six landlords against the Debenhams Retail Limited (Debenhams) company voluntary arrangement (CVA) which was approved by 94.71% of Debenham’s unsecured creditors on 9 May 2019.

Before ICC Judge Barber In the Insolvency and Companies List

The facts

Following an expedited trial, the High Court has rejected an application brought by a group of landlords known as the Combined Property Control Group (“CPC”) to challenge the company voluntary arrangement (“CVA”) proposed by Debenhams Retail Limited (“Debenhams”).

CPC challenged the CVA on five grounds. The judge in the case, Mr Justice Norris, held that four of the five grounds failed and directed certain “Forfeiture Restraint Provisions” be removed from the CVA as a result of the fifth.

Can a CVA bind a landlord in respect of future rents? Is the landlord a creditor in respect of future rent? What about the right to forfeit; can a CVA modify that right? Is compromising rent under a CVA automatically unfair to landlords when other trade creditors are paid in full?

These were some of the points considered by the Court in determining whether the Debenhams’ CVA (which had been challenged by landlords) should fail.

One point of particular interest is whether reducing rents below market value in a CVA is automatically unfair to landlords?