The recent Court of Appeal decision in the Game Station case has established that administrators should pay rent on a daily basis while they are using the property. This overturns the earlier High Court decisions in the Luminar and Goldacre cases and is in keeping with the recent trend of flexibility and fairness in insolvency situations.

Leasehold property in an administration

Bristol Alliance Nominee No 1 Ltd v Bennett [2013] EWCA Civ 1626; [2013]PLSCS 316 (A/Wear UK Limited)

Background

The case relates to the insolvency of a women’s fashion retailer and their shops in Bristol and Leicester.

The Court of Appeal has decided that rent accruing during a period of administration should be treated as an expense of the administration, irrespective of the date on which it falls due for payment. Administration expenses are paid by administrators in priority to liabilities owed to holders of security.

The Court of Appeal delivered judgment on Monday morning in the much anticipated appeal in Jervis & Others v Pillar Denton & Others on the treatment of rent payable under a lease held by a corporate tenant that enters administration. The case involved the Game Administration.

Key points

Earlier this week, the English Court of Appeal overturned the recent decisions in Goldacre (Goldacre (Offices) Ltd v Nortel Networks UK Ltd [2009] EWCH 3389 (Ch);2011 Ch 455) and Luminar (Leisure (Norwich) II Ltd v Luminar Lava Ignite [2012] EWCH 951 (Ch)) regarding the treatment of rent in an administration.

21 November 2013

[2013] EWHC 3612 (Comm)

Commercial Court, Queen's Bench Division (Hamblen J)

Appointment of a receiver to bring protective claims against shareholder and former directors of a company by a potential creditor under an indemnity

18 December 2013

[2013] EWCA Civ 1629

Court of Appeal (Arden, Davis, Floyd LJJ)

Who pays the trustee's costs on an annulment?

The Court of Appeal considered the trustee’s recovery of costs following a successful application by bankrupts, Dr and Mr Oraki, for annulment of bankruptcy orders.  The Court approved Redbridge LBC v Mustafa [2010] EWHC (Ch) 1105), identifying four types of costs to be considered when a bankruptcy is annulled:

Landlords will be relieved that the Court of Appeal has closed a legal loophole in a test case arising out of the administration of the Game group of Companies – Pillar Denton Ltd & 5 others v (1) Jervis (2) Maddison (3) Game Retail Ltd [2014] EWCA Civ 180.

Snapshot

The Court of Appeal’s judgment in Jervis v Pillar Denton Limited (Game Station) [2014] EWCA Civ 180 on 24 February 2014 has brought welcome clarity to when rent qualifies as an administration expense.

The Court of Appeal has ruled that: