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*Re Cotswold Co Ltd

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*Re Cotswold Co Ltd

Written by Calum Haswell

Tuesday, 14 April 2009

Citation [2009] All ER (D) 97 (Apr)

Hearing Date 7 April 2009

Court Chancery Division

Judge Jules Sher QC sitting as a deputy judge of the High Court (Judgment delivered extempore)

Representation Stuart Hornett (instructed by Addleshaw Goddard) for the applicant. Raquel Agnello QC (instructed by Salans) for the respondent.

Abstract

Company – Insolvency. Chancery Division: On an application by the applicant under s 7(3) of the Insolvency Act 1986 to set aside the decision of the supervisor on the basis that his initial claim for future rent under a Company Voluntary Agreement had been preserved in a deed of surrender, the order of the supervisor was reversed.

Catchwords

Company – Insolvency – Voluntary arrangement – Future or contingently payable debt – Applicant having claims against respondent company for accrued rent and future rent payable on unexpired term of lease – Respondent entering into company voluntary arrangement (CVA) – Applicant and respondent subsequently entering into deed of surrender – Supervisor appointed under CVA claiming deed of surrender preventing claim for future rent – Whether applicant entitled to future rent under terms of deed of surrender.

Summary

The applicant had leased commercial premises to the respondent company for fifteen years from March 2003. The lease had contained standard obligations to pay rent and other service charges. In 2006, the respondent put forward for a Company Voluntary Agreement (CVA) under Pt 1 of the Insolvency Act 1986, under which determination was vested in the landlord. Soon after, the respondent ceased trading and vacated the premises during which time rent and service charges built up. On 15 January 2009, the CVA was approved subject to the Act and a supervisor was appointed. It was decided that 100 per cent of the share capital would be purchased by a public company, and £1.4m made available for creditors as dividends for full and final settlement of claims against the respondent. The applicant submitted a claim under the CVA for the rent and service charges owing under the lease. By a letter dated 21 July 2009, he submitted a figure of £572,000 for past and future rent including a dilapidation's claim. Having received no response from the supervisor, the applicant informed him of his intention to litigate. As a result of that, the applicant and respondent agreed to enter into a deed of surrender (the deed) which was sent to the supervisor's office on 29 May 2007. After the surrender, the applicant entered into discussions with a possible tenant in order to mitigate his claim under the CVA. However nothing came of this and the premises remained empty. The supervisor was not a party to the deed and had played no part in its formation or considered its contents. He sought legal advice. Subsequently the supervisor wrote to the applicant informing him that the claim would not be allowed in full, as the deed had extinguished the lease. He allowed a total of £176,000 in respect of dilapidation, rent and service charges before the date of surrender. Subsequently, the applicant issued proceedings under s 7(3) of the Act to set aside the decision of the supervisor on the basis that his initial claim for future rent under the CVA had been preserved in the deed.

The court ruled:

On the evidence, the CVA was meant to include the entirety of the applicant's claims in respect of the lease down to its ultimate termination, and as a matter of construction, the entire future rental stream and any other obligations. The purpose of the CVA had been to bring into being a binding compromise for the claim for future rent, for whatever figure that claim might have been assessed at in the future. All that had been left to do was to quantify the figure the applicant had been entitled to under the claim. There was nothing to show that the surrender of the lease meant the applicant could not claim for future rent. He had more than adequately reserved his right under the deed to claim under the CVA, which in turn, had encompassed all obligations owed to him under the lease. The whole purpose of the deed had been to allow quantification of the applicant's claim to be made. The applicant's acceptance of the deed had been to mitigate his claim in respect of future rents under the CVA. Above all, cl 3 of the deed had expressly preserved the applicant's right to claim under the CVA. There had been no ambiguity at all in the terms of the deed.

The order of the supervisor would be reversed and appropriate orders would be made.

Cancol Ltd, Re [1996] 1 All ER 37 considered; Doorbar v Alltime Securities Ltd [1996] 2 All ER 948 considered; Thomas v Ken Thomas Ltd [2006] All ER (D) 100 (Oct) considered.