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.

The recent English court decision in Goldacre (Offices) Limited v Nortel Networks UK Limited (in administration) [2009] EWCH 3389 (Ch) may be controversial and raises thorny practical issues, especially in relation to the restructurings of retail businesses.   

If an administration order is made and a pending winding-up petition is subsequently dismissed, the costs of that petition are payable as an expense of the administration.1

The Government has announced that it will shortly begin a consultation on important new measures designed to boost confidence in the ‘pre-pack’ administration procedure.

In the event of a tenant becoming insolvent, it is clearly important for a landlord to know where rent payable ranks in administration. A recent landmark decision handed down by the High Court strengthens the position of landlords by deciding that rent can now be more widely payable as an expense of the administrator.

Background

Simply, if rent is ranked as an expense of the administration1 then it is almost always discharged in full as a mandatory expense of the administrator, rather than being placed with lower priority creditors.

In December’s Real Estate Update, insolvency Partner Vivien Tyrell considered a landlord’s ability to forfeit a lease where the tenant is in administration. Closely linked to this is a landlord’s ability to recover rent from a tenant which is in administration and the recent decision in Goldacre (Offices) Limited v Nortel Networks UK Limited (in administration) will be welcomed by landlords everywhere.

On 7 December 2009, His Honour Judge Purle QC sitting as a high court judge, decided that where administrators were using, for the benefit of the company in administration, part of a site held by that company under two leases, the quarter's rent due under those leases falling due on the 25 December 2009 was payable in full from that date as one of the costs and expenses of the administration.

A commercial landlord should never assume that, if his tenant goes into administration or liquidation, he will not be able to obtain rent from the administrator or liquidator in respect of the period following appointment of the administrator or liquidator.

Nortel Networks UK Limited (the company) was a tenant under two leases. The company went into administration. The administrators occupied a small proportion of each of the premises to enable them to carry out the administration. Under the terms of both leases rent was payable quarterly in advance.

The landlord applied to the court for an order directing the administrators to pay the rent as an expense of the administration.