By Paige Long

Law360, London (December 2, 2020, 6:36 PM GMT) -- A challenge brought by New Look's landlords over the retailer's debt restructuring due to COVID-19 will head to court by March, after a London judge agreed Wednesday to expedite the dispute over plans to reduce rent payments.

Judge Clive Jones said that a speedy timetable to trial over the fairness of the company voluntary arrangement, or CVA, is justified, and that the parties should aim for a 10-day hearing in early March 2021.

"There is no doubt that this needs to be decided as quickly as possible and therefore that expedition be ordered with a tight timetable," Judge Jones said at a remote hearing.

The judge said that the parties need to know whether the CVA will go ahead in its current form or whether it should be set aside, as the decision will have an impact on the company, its creditors and future trading, as well as the landlords' business planning. Any uncertainty over its status has the potential to stir up financial "chaos," he said.

He also indicated that, depending on how the parties present their cases at the next case management hearing, he could order a split trial with the legal issues being dealt with first in January, then the factual dispute following in March.

Adam Al-Attar, counsel for New Look, said a quick resolution was necessary because of the "debilitating" effects the challenges are having on the company, including by undermining its financial stability and reputation.

The challenges, which are being heard together, have been brought by Lazari Properties 2 Ltd., Trafford Centre Ltd., 21 landlords connected with British Land PLC, and 11 landlords connected with the Land Securities Group PLC.

The landlords say that the CVA, which was approved at a creditors' meeting on Sept. 15, is unfair, unjustified, and passed with a number of irregularities that should make it void. At the heart of the dispute is New Look's decision to reduce the rent it pays on the commercial properties it occupies, in addition to making other substantial modifications to the terms of its leases, according to court documents.

Without expedition, the dispute was not likely to have been heard until October 2021 at the earliest, New Look said.

Peter Arden QC, counsel for Trafford, British Land and Land Securities, agreed that the court should set aside at least 10 days for trial.

He said the judge will need more time than the originally envisaged four days to grapple with the comparators his clients will put forward to try prove their claim that New Look's CVA is unfair. The trial will also deal with evidence on rent and lease terms that could be reasonably negotiated in the current market, he said.

A test case on the use of CVAs and reduction of rental obligations involving Regis UK Ltd., a hairdressing and salon business, is also heading to trial in March, according to Arden. The challenge in that case was first brought by a group of landlords in December 2018.

Arden said in written submissions that New Look's CVA contains "highly controversial features," including by impairing the claims of landlords over the claims of other creditors in respect of legacy debt.

He said there was an "urgent need for judicial guidance" on retail and hospitality CVAs, particularly as the number of companies implementing them has risen due to COVID-19 and the subsequent business disruption it has caused. Travelodge, The Restaurant Group, Select, Pizza Express and Pizza Hut, for example, have all recently undergone restructuring.

"From our perspective there is a need for clarification," Arden told Judge Jones. "There are many of these CVAs going through at the moment and we expect more over the course of weeks and months."

The case comes as Arcadia Group announced Monday that it is facing collapse. The retail giant, which is run by businessman Philip Green and includes high street store Topshop, secured a CVA in 2019 to help plug a £500 million hole in the company's pension pot, but has now entered administration, citing the impact of the COVID-19 pandemic and forced closure of its stores.

Debenhams UK also entered administration for a second time in April, after furloughing its workers, and announced this week that its rescue efforts have so far failed.

New Look is represented by Tom Smith QC and Adam Al-Attar of South Square, instructed by Latham & Watkins LLP.

Lazari is represented by James Hannant of Guildhall Chambers, instructed by Freeths LLP.

Trafford, BL and LS are represented by Peter Arden QC and Ben Shaw of Erskine Chambers, instructed by Hogan Lovells LLP.

The case is New Look Retailers Ltd., case number CR-2020-003558, in the Insolvency and Companies Court of the High Court of Justice of England and Wales.

--Editing by Rebecca Flanagan.

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