The Court of Appeal has today handed down judgment in the hugely anticipated litigation involving the Game group of companies, deciding that, where a company goes into administration and continues to trade from property, rent will be payable on a daily basis for the period during which the company actually occupies the premises.

Michael John Andrew Jervis v Pillar Denton Limited (Game Station) and others [2013] EWHC 2171 (Ch) (“Game”)

Game has come to the courts against the background of two previous High Court decisions on the treatment of lease rents in administration. Recent decisions on this point have arisen out of cases where landlords made claims for rent in the administration of tenant companies.

Costs are the price that creditors pay for an insolvency practitioner’s (“IP”) expertise and time in dealing with a trading bankrupt or insolvent business. However, where the assets are insufficient to meet the existing debts, the imposition of a practitioner’s fees and expenses being paid out in priority can send some “over the edge” and all practitioners have the scars to prove it. This article explores the developing general principles and major pitfalls and how to avoid them.

Judgment in the Court of Appeal case of Pillar Denton v Game Retail- about rent due during the administration of Game was handed down yesterday. It is a landmark ruling for administrators, on the thorny issue of the payment of rent during the period of the tenant’s administration.

The Court of Appeal has handed down an important judgment for landlords and insolvency practitioners, in the case of Jervis v Pillar Denton; re Games Station (“Game”).

The Court of Appeal has changed the law relating to the liability of administrators and liquidators to pay rent as an expense of the administration or liquidation.

Landlords often ask for a rent deposit when they grant a new lease, or consent to an assignment, especially if the incoming tenant is of shaky covenant strength. This provides security against possible future default.

If a tenant becomes insolvent then this is exactly the sort of situation where a landlord would want to make use of a deposit. Where it is in the “commingling” form (i.e. paid to the landlord so that it becomes a debt in favour of the tenant) then that is unproblematic: no restrictions are imposed by the moratorium which arises on the tenant’s insolvency.

In the case of B v IB [2013] EWHC 3755 (Fam) the High Court has determined the status of an application made under s.423 of the Insolvency Act 1986 issued during divorce proceedings where the husband had died during the process and the wife intended to commence new proceedings under s.10 of the Inheritance (Provision for Family and Dependants) Act 1975.

Background

Where an Administrator makes employees redundant ahead of a sale of the business, will it always be a dismissal connected with a transfer (and therefore automatically unfair), or can it ever be for "economic, technical or organisational" (ETO) reasons (and therefore potentially fair)? In Crystal Palace FC Ltd –v- Kavanagh & ors [2013] EWCA Civ 1410, the Court of Appeal found for the latter, a more pragmatic, approach. Motivation, it appears, is everything in such cases. 

In the recent decision of Topland Portfolio No.1 Limited v Smiths News Trading Limited [2014] EWCA Civ 18, the Court of Appeal has given a timely reminder of the need for landlords to tread carefully when dealing with leases to ensure that a tenant guarantee remains effective.