Prudential Assurance Co Ltd and Others v PRG Powerhouse Limited and Others [2007] EWHC 1002 (Ch).

The High Court has delivered its judgment in the eagerly awaited Powerhouse case. The judge has decided that the company voluntary arrangement (CVA) put forward by Powerhouse was unfairly prejudicial to the landlords, under section 6 of the Insolvency Act 1986, in the way it proposed removing the landlords' rights against Powerhouse's parent company, which had guaranteed Powerhouse's lease obligations. To release the parent company from the guarantees that had been freely negotiated between the parties at the time Powerhouse took the relevant leases, would be "illogical as well as unfair".

The decision will be a relief to landlords and will set the tone for the matters that a CVA can legitimately address. A CVA cannot be used indiscriminately to "strip away" the rights of a group of creditors, with the benefit of parent company guarantees, even though it improves the position of a larger group of unsecured creditors.