A High Court ruling in England today has provided a significant clarification of the law relating to payment of rent as an administration expense.

In Leisure (Norwich) II Limited v Luminar Lava Ignite Limited (in administration), the Court confirmed that rent payable in advance prior to the appointment of administrators is not payable as an expense of the administration, even if the administrators continue to use the property. This means that the rent would not be given priority over other unsecured debts.

After nearly two years of discussion and consultation, the Department for Business Skills and Innovation (BIS) announced on 26 January 2012 that it will not be seeking to introduce new legislative controls on pre-packs. These were to include a much heralded three-day notice period for creditors to challenge the sale. Many have been left surprised by the government’s apparent u-turn and dismayed that so much time and effort seems to have come to nothing.

In a keenly anticipated judgment, the Court of Appeal today handed down its verdict in four appeals¹ concerning the interpretation of various terms of the 1992 ISDA Master Agreement.

Recent European airline bankruptcies have highlighted the need to take care when formulating aircraft repossession and recovery strategies.

The Insolvency Service has recently published a helpful guide about the restrictions on the re-use of a name previously used by a company, which has gone into liquidation. Directors of companies in insolvent liquidation need to take special care, as the restriction applies to them personally and contravention is a criminal offence. The restriction lasts for five years from the date of liquidation and, save in limited circumstances, a director is not allowed to be a director of or take part in the promotion, formation or management of a limited company that uses a "prohibited name".

Landlords have lost round two in the ongoing battle as to whether rent should be paid as an expense of the administration. The decision of the Court last week in the X-Leisure / Luminar case was in favour of administrators.

Following the Goldacre case, if an administrator is using the property for the purposes of the administration on the quarter day then the full quarter’s rent is payable as an expense of the administration.  What was not clear, was whether if the administrator was appointed just after the quarter day rent was payable as an expense. 

Raithatha v Williamson (4 April 2012) and Blight and others v Brewster (9 February 2012)

Most pension schemes give the beneficiary an option as to when to start to draw the pension, and whether or not to draw a tax free lump sum. These two cases confirm that a trustee in bankruptcy and a judgment creditor are each entitled to compel a debtor to draw the maximum permitted by the scheme rules, so that the monies realised as a result are available to pay the debt.  

Pension schemes and bankruptcy

The High Court has recently considered whether a bankrupt individual of pensionable age can be forced to draw his pension to pay his creditors.

Raithatha v. Williamson [2012] EWHC 909 (Ch)

Background

A bankruptcy order was made against Mr Raithatha on 9 November 2010. Mr Raithatha's trustee in bankruptcy applied for an income payments order (IPO) against Mr Raithatha's pension shortly before he was due to be discharged from bankruptcy. Mr Raithatha was then aged 59 and his pension scheme allowed him to draw a pension from age 55.

The Court of Appeal has recently published its decision in the case of Woodcock v Cumbria PCT. This case has attracted a significant amount of attention in the media as the case looks at the extent to which employers can rely on cost considerations to justify discrimination. Although the case does not break new ground, it does show that economic factors can be taken into consideration by employers in some cases.

Background

Last week the Court of Appeal of England and Wales handed down its decision in four appeals which raise a number of questions of construction in relation to derivatives in the form of interest rate swaps and forward freight agreements documented under the International Swaps and Derivatives Association Inc. Master Agreement (the “ISDA Master Agreement”).¹ In particular, the decision focuses on the interpretation of section 2(a)(iii) of the ISDA Master Agreement.

Key Points