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.
Following the Court of Appeal’s decision in Game it is necessary to consider the effect of the court’s decision on the treatment of rents in administration and by analogy liquidation – and the potential consequences of that change.
What types of insolvency does the decision affect?
The Court of Appeal’s decision explicitly states that it is applicable as to the treatment of rents in both administration and liquidation.
What about existing cases?
In Re Parmeko Holdings Limited the Court had to consider whether to give directions to Administrators where creditors had failed to vote on their proposals. The Court also considered the terms of Administrators’ standard proposals.
In Re Parmeko the proposals provided for the Administrators to:-
- Continue to manage the company’s business and affairs in accordance with the statutory purposes;
- Make payments to secured / preferential creditors;
- Seek one of various exit routes;
And for
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:
In our e-updates of 20 January 2010 and 16 August 2010, we looked at decisions of the English and Scottish courts from December 2009 and August 2010 in which it was decided that, in England and Scotland respectively, the Administrators of a tenant company are bound to account to the landlord of premises for rent due in relation to the period during which those premises are being u
The Court of Appeal today overturned existing rules on when administrators have to pay rents falling due before their appointment. The Court ruled that rent payable in advance can be treated as an administration expense such that administrators cannot avoid paying rent payable in advance that falls due before the date on which the administrator is appointed.
The case concerning the Game group of companies' administration has now been played out in the Court of Appeal and the eagerly anticipated judgment has been handed down.
The issue at stake concerned a landlord's ability to recover rent as an expense of administration (and therefore payable before other creditors) where such rent is payable in advance but where the tenant's administration occurs immediately before a quarter day's rent falling due.