Riverside CREM 3 Ltd v Virgin Active Health Clubs Ltd

A court may stay a debt claim, or enforcement of judgment, where special circumstances make a stay appropriate. The discretion is highly fact-specific. Where a creditor’s enforcement would undermine a restructuring process under Companies Act 2006 Part 26A, the court should balance the creditor’s legitimate interests against the interests of the wider creditor class. Relevant factors include the restructuring’s reasonable prospect of approval, the risk of unequal treatment, the timetable, the duration of the stay and prejudice to affected persons. A short, protective stay may be justified where the restructuring process is underway and has fixed court dates. The court may stay the claim itself and record the claimant’s entitlement to judgment, with permission to apply.

The claimant landlord sought summary judgment under CPR 24.2 for undisputed rent arrears owed by its tenant. The defendant accepted liability but applied for a short stay of the claim, alternatively a stay of judgment or enforcement, while it pursued a restructuring plan under Companies Act 2006 Part 26A.

The proposed restructuring had reached the stage of a Practice Statement Letter, with convening, creditors’ meeting and sanction hearings fixed. The central issue was whether the court should prevent judgment or enforcement for approximately seven weeks so that the restructuring could proceed without unequal treatment of creditors.

1. The stay applications were granted. The court ordered a stay of the claim under CPR 3, included a recital recording the claimant’s entitlement to judgment, and granted permission to apply.
2. The jurisdiction under CPR 3.2(1)(f) and CPR 87.3(4)(a) involved substantially similar considerations. The discretion was highly fact-specific, and the court was unlikely to stay a claim absent special circumstances.
3. The court identified four material questions: whether the restructuring had a reasonable prospect of approval and sanction; whether judgment or enforcement would undermine the restructuring or produce unequal treatment; how long the stay would need to last; and whether the stay would prejudice legitimate interests, assessed through the balance of convenience.
4. The restructuring had a reasonable prospect of sanction. The defendant’s secured creditors were expected to approve it by the requisite majority, the process had formally commenced, and the relevant hearings were fixed. Enforcement by the claimant would give it substantially more than other landlords in the same class and would undermine the restructuring’s purpose.
5. The court relied on the approach in Sea Assets Ltd v PT Garuda Indonesia [2001] 6 WLUK 58 and the principle stated in Roberts Petroleum Ltd v Bernard Kenny Ltd [1982] 1 WLR 301, while recognising that the factual circumstances differed. The approach in Bluecrest Mercantile BV v Vietnam Shipbuilding Industry Group and Others [2013] EWHC 1146 (Comm) was followed, particularly in staying the claim rather than entering judgment and staying enforcement.
6. Balancing the claimant’s substantial debt and inability to enforce against the interests of the wider creditor class, the latter prevailed. The stay was limited and protective, and caused little additional prejudice because the claimant’s entitlement to judgment was recorded.