Lease — Tenant in difficulties — Company voluntary arrangement — Voting rights — Whether arrangement bound landlord for future rent — Court holding that future rent capable of being included in voluntary arrangement — Landlord entitled to vote in respect of claim for future rents and bound by voluntary arrangement in respect of claim — Application for declaration to contrary dismissed
The applicant was landlord and freehold owner of premises at Victoria Wharf, Dragoon Road, London SE8. The respondent company was the tenant under a lease dated February 6, 1989 for a term of 20 years. The initial rent was £46,000 pa paid on commencement of the term with three rent reviews at five-year intervals in 1993, 1998, and 2003. The tenant company fell into financial difficulties and, in order to avoid liquidation, a voluntary arrangement was approved at a meeting of creditors on June 23 1995. At that date the landlord was entitled to the approximately £10,430 rent arrears.
The landlord sought a court order declaring that all moneys due to it on or after June 14 1995 under the terms of the lease was payable in full and not affected by the voluntary arrangement. Alternatively the approval of the voluntary arrangement given by the meeting of creditors should be revoked or suspended.
The basis on which the declaration was sought was that a voluntary arrangement, as opposed to an individual voluntary arrangement, under the Insolvency Act 1986 could not, as a matter of law, bind persons entitled to future or contingently payable debts such as future rents, but could only bind persons entitled to present liabilities.
Held The application was dismissed.
1. Future rent under a lease was not incapable of being included in a company as well as an individual voluntary arrangement: see Doorbar v Alltime Securities Ltd [1994] BCC 994; Burford Midland Properties Ltd v Marley Extrusions Ltd [1995] 30 EG 89.
2. The liability in question was an existing one, but payment was only due in future.
3. The purpose of a voluntary arrangement was to provide a cheaper and commercially more beneficial alternative to winding up or bankruptcy. It was undisputed that in a bankruptcy or winding-up claims to future rent were susceptible of being included as relevant claims.
4. Moreover, the term “creditor” was wide enough to include a landlord for this purpose as a person entitled to a right to a future payment under an existing valid instrument such as a lease.
5. The power of a company with the approval of the court to approve schemes of arrangement must extend to schemes of arrangements, which affected the rights of creditors with debts payable in the future as well as the present: see Re Midland Coal Coke & Iron Co (1895) 1 Ch 267.
6. In this case, the landlord did not attend the meeting having expressed in very forceful terms the view that its claim to future rent was outside the voluntary arrangement. It had been given an indication of how its claim was likely to be valued without further elaboration. The landlord was entitled to vote in respect of the claim for future rent and was bound by the voluntary arrangement: Re Cranley Mansions Ltd [1994] EGCS 95 was not followed.
Stephen Schaw-Miller (instructed by Abbott King & Troen) appeared for the landlord; Jonathan Nash (instructed by Lovell White Durrant) appeared for the tenant company and joint supervisors of the voluntary arrangement.
