Creditors of Cafe Nero granted expedited trial to recover rents

Creditors of the Café Nero chain have been granted the right to an expedited trial to enable them to recover full compensation for unpaid rents.

The case involved several commercial landlords who were challenging the validity of the way Nero had entered into a Company Voluntary Arrangement (CVA) after being adversely affected by the Covid-19 pandemic.

Under the CVA drawn up in October 2020, landlords would receive 30p for every £1 of rent they were owed.

A potential buyer made an offer for Nero's shares on a debt-free basis. Under the offer, the landlords would have been paid in full for unpaid rents amassed during the pandemic.

In November 2020, Nero rejected the buyer’s offer and modified the proposed CVA to say that it would use its best endeavours to ensure that creditors would have their arrears paid in full if a sale to the potential buyer did occur within the next six months.

In December 2020, the landlords issued proceedings seeking to challenge the CVA under the Insolvency Act 1986 on the basis that it was unfairly prejudicial to their interests, and that Nero's directors had acted in breach of duty by refusing to accept the buyer’s offer.

The claim was at an early stage and was expected be heard between December 2021 and March 2022.

The landlords submitted that an expedited trial was necessary to resolve the ongoing commercial uncertainty. Nero was content to support an expedited timetable whilst maintaining that the challenge to the CVA was without merit.

The court granted the application. It held that until the validity of the CVA was resolved, the landlords were exposed to the risk of the buyer walking away from a sale, resulting in them being unable to recover satisfactory compensation.

That was just the sort of ongoing commercial uncertainly that qualified as a good reason for expedition.

Judge Adam Johnson said the Chancery Court was there to assist businesses in resolving issues with justice and fairness, and it should seek to accommodate commercial concerns.

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