One of Caffè Nero’s landlords has failed in their bid to overturn the coffee chain’s insolvency arrangement.
Ronald Young, who owned one of the cafe’s premises, challenged Nero Holdings’ company voluntary arrangement, agreed on 27 November,
According to the ruling, handed down today, the CVA arrangement paid landlords 30% of rent arrears. However, on 29 November, another company, EG Group, made an offer for Nero Group Limited that would give landlords all of their rent arrears. EG owns Asda and the Leon restaurant chain.
Nero Group Limited rejected the offer and didn’t postpone the CVA vote. Young argues there had been “material irregularities” in the process, and landlords suffered “unfair prejudice”.
However, in a ruing handed down this morning Mr Justice Michael Green disagreed.
“Mr Young’s case on unfair prejudice is dependent on vague and speculative scenarios of what might have happened,” he said in his ruling.
“There is no basis to conclude that the EG offer suddenly meant that if the CVA failed all the landlords’ rent arrears would be paid in full,” he said.
“I have rejected all of Mr Young’s allegations of material irregularity and unfair prejudice. Accordingly, the challenge application is dismissed. The CVA remains in force.”
According to the ruling, Young owns the Caffè Nero premises on Henley Street in Stratford-upon-Avon and is challenging the CVA with the financial support of EG, owned by billionaire Blackburn-based investors Mohsin and Zuber Issa.
Mathew Ditchburn, head of real estate disputes at Hogan Lovells, said that while the ruling could be seen as “another blow to landlord’s wishing to temper the use of CVAs by retail and hospitality tenants”, the facts of the case are “slightly unusual”.
“EG’s offer came very late in the day – described like someone throwing a grenade into a crowded room,” he said. “While it would have been better for Caffè Nero’s directors to engage with them on it, the fact that they didn’t wasn’t fatal. The court agreed that, in the circumstances, it was still preferable to go with the certainty of the existing CVA, which by then was only hours away from being approved.”
The judge said that many of the issues in the case were “a result of the inflexibility of the electronic voting procedure that is prescribed for in the insolvency rules”.
Electronic voting, he said, was normal before the Covid-19 pandemic, and does not allow creditors to change their vote.
“The rules do not really cater for a situation such as this when a major development occurs so late in the process,” said Mr Justice Green. “I am prepared to accept that it may be possible to adjourn or postpone an electronic voting procedure in some way but that it could not be done without a court order.
“In other words, neither the directors nor the nominees have the power themselves to adjourn or postpone an electronic voting procedure. I remain uncertain however whether the court could have done anything meaningful in relation to this CVA if an application had been made at some point during the day on 30 November 2020,” he said.
Ronald Young v (1) Nero Holdings Limited (2) William James Wright (3) David James Costley-Wood
Business and Property Courts (Mr Justice Michael Green) 29 September 2021
Robin Dicker QC and Adam Al-Attar (instructed by CMS Cameron McKenna Nabarro Olswang) for the applicant
Tom Smith QC and Henry Phillips (instructed by Linklaters) for the first respondent; Richard Fisher QC and Georgina Peters (instructed by Travers Smith) for the second and third respondents
