London Resort Company Holdings Limited, Re

A company voluntary arrangement is a statutory contract. It must be construed by ordinary contractual principles, but the court cannot vary or stay it by procedural means. A challenge to the arrangement does not suspend its operation. Where the arrangement provides that an unremedied breach becomes irremediable after a specified period, the supervisor must comply with the stipulated consequences, including termination and presentation of a winding-up petition. Failure to issue the agreed consideration within the arrangement period, disposal of essential business assets without consent or notice, and cessation of required trading may each constitute such a breach.

Paramount Licensing Inc., a creditor of London Resort Company Holdings Limited, applied under section 7(3) of the Insolvency Act 1986 for directions concerning the supervisor’s failure to terminate a company voluntary arrangement and petition for winding up. The Company cross-applied for a stay or variation pending determination of its separate section 6 challenge to the CVA.

The issues included whether the cross-application was competent, whether the CVA could be stayed or varied, and whether failures to issue shares, restrictions on dealing with the Company’s land, and cessation of trading constituted irremediable breaches.

1. Disposition. The Company’s cross-application was dismissed. The court declared that the Company was in irremediable breach of the CVA and directed the supervisor to issue a certificate of termination by midday on 11 October 2024. The supervisor was also obliged to petition for the Company’s winding up.
2. Cross-application. The Company lacked locus under section 7(3) because it had not identified an act, omission or decision of the supervisor of which it was dissatisfied. It also had no locus under section 7(4), which permits an application by a supervisor. In any event, the CVA was a statutory contract and the court had no power to vary it. A proposed stay was merely a variation by another route and could not be granted.
3. Operation of the CVA. A section 6 challenge did not stay the CVA. The arrangement took effect on approval. Ordinary contractual principles applied to its construction, with a practical approach where drafting was clumsy. Paragraph 56 prevailed over inconsistent standard terms and provided that a breach not remedied within 30 days became irremediable, requiring termination and a winding-up petition without further recourse to creditors.
4. Breaches. It was an implied term that shares, which formed the consideration for unsecured creditors’ debts, would be issued within the 12-month arrangement period. Their non-issue was an unremedied breach. The transfer of essential development land without the supervisor’s written consent or notice was a material change to the Company’s business and breached conditions 45 and 48. The Company’s cessation of trading also breached paragraph 73 and condition 50. Each breach engaged paragraph 56.
5. The court observed that the supervisor’s primary duty was to implement the CVA lawfully, reasonably and for its proper purpose. His failure to act despite repeated warnings made the section 7(3) application necessary.