The judge held that, by seeking to remove the landlords' guarantee rights against PowerHouse's solvent parent company, the CVA had 'unfairly prejudiced' those landlords.
Landlords Prudential, Land Securities, Hammerson, Derwent London and Legal & General challenged the CVA, arguing that valuable guarantees could not be stripped away in this way when a tenant runs into financial difficulties.
Mr Justice Etherton said the CVA's treatment of the landlords 'places no value on the very rights that were intended to benefit the Guaranteed Landlords on the insolvent liquidation of PowerHouse'.
PruPim head of asset management Peter Best said: 'We are extremely pleased that Mr Justice Etherton has confirmed our view of the PowerHouse CVA, which unfairly prejudiced the interests of landlords that held parent guarantees.
'In recognising that the guarantee stripping approach adopted in this CVA was unfair, this case avoids the potentially significant repercussions for the property sector that would have followed if the utility and value of guarantees had been undermined.
'We are pleased that this judgment brings clarity to an important aspect of the law and ensures that landlords will be treated fairly when a tenant becomes insolvent or financially distressed and comes to consider appropriate restructuring steps.'
PowerHouse, owned by PRG, revealed it was closing 35 stores in February last year and proposed a CVA that was subsequently approved at a creditors' meeting, despite objections from landlords. Despite the CVA, PowerHouse went into administration in August, at which point, the landlords commenced proceedings to challenge the CVA.