Travers Smith LLP represents the joint nominees in relation to a company voluntary arrangement (CVA) that had been proposed by the directors of Caffè Nero's operating company, Nero Holdings Limited (the Company), on 12 November 2020.
The Applicant, Mr Ronald Young, a landlord of premises occupied by the Company, challenged the decision of the Company's creditors approving the CVA. The challenge application was made pursuant to section 6 of the Insolvency Act 1986 on the basis that:
- the voluntary arrangement unfairly prejudiced his interest, and/or
- there had been some 'material irregularity' at or in relation to the relevant qualifying decision procedure.
Today, Mr Justice Green dismissed Mr Young's challenge application and rejected all allegations of material irregularity and unfair prejudice.
Under the CVA, Mr Young would be paid 30p/£ in respect of the rent arrears owed to him by the Company up to 30 November 2020. He voted, reluctantly, in favour of the CVA on or around 27 November 2020. On the evening of Sunday 29 November 2020, EG Limited (EG) owned by the brothers Mohsin and Zuber Issa, made an offer for the shares in Nero Group Limited, including an indicative offer to pay all the Company's landlords' rent arrears in full (EG's Offer). EG claimed that it wanted the CVA to go through but with those enhanced terms to the landlords included and asked for the CVA vote to be postponed while its Offer could be properly explored and negotiated.
EG's Offer was ultimately rejected by the Company's shareholders and the CVA was approved by a creditors' electronic decision procedure that was deemed to take effect at 23:59 on 30 November 2020. Mr Young's challenge application turned on the events of 29 and 30 November and the various decisions that were made by the directors of the Company and the nominees on those days, in particular their decision not to postpone the CVA process in light of EG's Offer.
Mr Justice Green considered that the nominees "acted in good faith, in accordance with their professional duties and reached a perfectly reasonable decision that it was not in the best interests of the creditors to postpone the CVA Process…Balancing all the relevant factors and the risks involved, under considerable time pressure and without any clear route for postponing an electronic voting procedure, the conclusion that the nominees came to was well within the range of what a reasonable nominee could have come to in those circumstances" and came "nowhere near" to meeting the Trident Fashions test of irrationality or perversity in relation to the actions and decisions of nominees.
There is no express statutory provision dealing with postponements or adjournments of an electronic voting procedure (Mr Justice Green described this as a "lacuna" in the Rules). The only option available to the directors and nominees on 30 November 2020 was to apply to the court for a postponement or adjournment of the electronic decision procedure. Mr Justice Green stated that such an application would have been "novel and would carry risks". He held that, in the circumstances the nominees could not have sensibly decided to postpone the CVA.
The Travers Smith team acting on behalf of the nominees is led by Restructuring & Insolvency Partner Ed Smith and Dispute Resolution Partner Polly Richard.
Lead Counsel acting for the nominees is Richard Fisher QC, supported by Georgina Peters (both of South Square Chambers).
