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.

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.

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.

The Court of Appeal in Pillar Denton Ltd & Others v (1) Jervis (2) Maddison and (3) Game Retail Ltd ([2014] EWCA Civ 180) yesterday overruled previous High Court authority, deciding that rent should be treated as an expense of the administration based on actual usage and not on when the rent falls due. What does this mean for practitioners?

The background

Pillar Denton Ltd & others v Jervis & others [2014] EWCA 180 (“Game Station”)

The outcome of this appeal has been awaited with a high degree of interest.  The issue was the extent to which rent should be payable as an expense of an administration or liquidation; if it is payable as an expense, it sits near the top of the priority order for the distribution of the tenant’s assets, and will usually be paid in full.  Otherwise, it is among the unsecured debts, and the landlord will have to wait for whatever dividend is ultimately payable.

This week will hopefully see the end of a long running battle between Britain’s biggest landlords and the restructuring profession. On 12 February, the Court of Appeal will start to hear an appeal relating to the administration of Game Station (Jervis v Pillar Denton). It will consider whether the administrators should pay rent for the properties which they occupied during the administration as an administration expense, so ensuring the landlords receive their rent in priority to payments  made to other creditors.

Background