Tue, 3rd Sep 2019
Mike Ashley is funding a lawsuit to overturn the deal which helped to rescue the high street chain Debenhams.
Debenhams was granted rent cuts from its landlords thanks to a CVA earlier in the year, which helped to keep the company alive although there were still 50 stores set to close. Sports Direct is funding an effort to get the CVA overturned in the courts, which brings back the threat of administration.
Tom Smith QC, barrister for Debenhams, believes that Sports Direct is backing the court case in a bid to see Debenhams driven out of business. He thinks that Sports Direct wants to see Debenhams enter administration so that it can purchase the assets of the retailer cheaply, something which seems to be a familiar modus operandi for the company.
The landlords in the case are represented by Daniel Bayfield QC, who argues that the CVA goes beyond the jurisdiction set out in the insolvency act, and that the CVA unfairly prejudices the interests of the applicant. Many of the landlords that were applying to overturn the CVA are ones that hold properties on trust for a charity. Sorts Direct has agreed to fund the legal fees of those applicants. The landlords have a duty to secure the market rate in rent for their properties for the charities that they are holding them for, and while the CVA was approved by many landlords, those who did vote in favour of it were primarily ones that would not be affected by it being awarded.