In the continuing uncertainty of the current economic climate, and with a tough financial regime introduced by the new government, landlords may still find themselves faced with an insolvent tenant.

The appointment of an administrator over the Connaught Group is expected any day. Many housing associations will have employed Connaught to carry out maintenance services under the JCT measured term contract or similar. These contracts contain specific provisions for the steps to follow if an administrator is appointed over the contractor (or some other form of insolvency).

Introduction

Case considering whether rent which accrued during an administration was payable in full as an expense of the administration or whether payment was a matter of discretion for the court.

In our e-update of 20 January 2010, we looked at a decision of the English courts from December 2009 in which it was decided that, in England, 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 used in connection with the administration, and that the rent is to be paid as an expense of the administration.

The past eighteen months have seen a marked increase in the use of the Company Voluntary Arrangement (“CVA”) by retailers to reduce their lease liabilities and win the release of onerous parent company guarantees, with several high street names going through the process. Although this practice received cautious support from landlords, real concern continues to be voiced over the practice of “guarantee stripping”.

In June 2007 we reported on the decision in Prudential Assurance Company Ltd v PRG Powerhouse Limited. Although the case has given rise to a great deal of debate, until now there has been no subsequent reported case in which the court has had to consider whether and how a company voluntary arrangement (CVA) might fairly effect a compromise of a landlord's claim against a guarantor of its tenant.

Last week the High Court of England and Wales revoked a company voluntary arrangement (CVA) promoted by retailer Miss Sixty in a damning judgment that called into question the conduct of the practitioners involved. The case of Mourant & Co Trustees Limited v Sixty UK Limited (in administration) [2010] could end so-called guarantee stripping – where the CVA purports to discharge guarantees given by a third party – and provide powerful ammunition to landlords seeking to negotiate future CVAs with tenant companies.

We first reported on The Trustee in Bankruptcy of Louise St John Poulton v Ministry of Justice in the October 2009 banking update. In short, the Court Service had failed to give notice of a bankruptcy petition to the Chief Land Registrar. As a result, no pending action had been registered against the name of the debtor and no notice had been registered against the debtor's property.

Re Johnson Machine and Tool Co 6

The company was the subject of a “pre-pack” administration, whereby it was placed into administration and its assets immediately transferred to a new company controlled by the directors and owners of the existing company.