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In our eNews of last week (email me if you wish to receive this monthly newsletter) regarding the Miss Sixty UK Ltd - CVA. See a copy below in italics"Another section 6 application this time not by HMRC but by a disgruntled landlord, called Mourant & Co Trustees.The s6 application is a bid to have the decision of creditors approving the CVA revoked, because the parental guarantor was unfairly prejudiced against.Mourant owns the Liverpool shopping Centre known as the Metquarter, where Miss Sixty and sister brand Energie had stores which were both were on 10-year leases. Crucially each lease was in turn guaranteed by Miss Sixty UK's Italian parent company, Sixty SPA.However, under the CVA proposed by Sixty UK to determine the shop leases, the landlord also lost the parental guarantee. Had the company gone into liquidation, the guarantor's obligations under the lease, ie to pay the rent and charges would have continued. The CVA, however, allowed Sixty SPA to walk away.Similar to the Powerhouse case the court is likely to find that the CVA was not able to unilaterally determine another contract i.e. the parental guarantee, without bilateral concurrence. Watch this case!Our views on CVAs are well known - always ensure that there is concurrence and consensus as much as possible.So, whilst Powerhouse indicates that a parental guarantee cannot be determined by a subsidiary CVA and the Miss Sixty case may vindicate the Powerhouse decision, this determination of a parental guarantee using the CVA as a tool is still possible if done with consensus and an appropriate payment to the landlord by the guarantor."Well it seems I was right on both issues; the court DID find for the plaintiff and the CVA was rejected because it was unfairly prejudicial against the landlords. Interestingly though, the judge stated that the compromise of a landlord's claim against the guarantor of a tenant debtor - also known as the Powerhouse principle - IS a valid legal mechanism within a CVA, as long as the compromise is not unfairly prejudicial.In a judgement that was critical of the nominees and supervisors of the Miss Sixty CVA, Hollis and Nick O'Reilly, then of Vantis PLC, who proposed a CVA as administrators of Sixty UK Limited, Justice Henderson found that a landlord could have been crammed down in this way, but was in fact unfairly prejudiced (Mourant & Co Limited Trustees and another v Sixty UK Limited (in administration) and others). The CVA was set aside.The judgement concludes: "I am conscious, of course, that I have not heard the administrators' side of the story, because of their decision not to participate in the trial. Nevertheless, I am satisfied that there is a prima facie case of misconduct on their part which ought to be considered by the professional bodies to which they are answerable. I therefore propose to direct that copies of my judgment should be sent to the appropriate bodies by which they are licensed to act as insolvency practitioners."This is something that the IP's regulator will have to consider carefully.However, the main point for landlords is that the case yet again underlines that CVAs are an enormously powerful tool that can compromise a lease and indeed, if properly prepared, may compromise personal and parental guarantees.