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In The Matter of Games Station Ltd & Ors (2013)

Summary

On an application by administrators for directions the court gave permission to appeal to the Court of Appeal on the issue of the extent to which rent and service charges falling due both before and after the appointment of administrators were to be treated as expenses of the administration.

Facts

The applicant administrators of the Game group applied to the court for directions, relating in particular to the priority of rent and service charges in the administration.

The group was a High Street retailer. A subsidiary was the tenant of a number of stores. Typically the rent was payable in advance on the usual quarter days. The administrators had been appointed the day after the quarterly rent fell due under a number of leases. The landlords under a number of sample leases were the respondents to the application. The seventh respondent was the new owner of the Game business which it had acquired from the administrators, together with a licence to occupy some of the stores. It was accepted that the effect of Goldacre (Offices) Ltd v Nortel Networks UK Ltd (In Administration) [2009] EWHC 3389 (Ch), [2010] Ch. 455 and Leisure (Norwich) II Ltd v Luminar Lava Ignite Ltd (In Administration) [2012] EWHC 951 (Ch), [2012] 4 All E.R. 894 was that where rent was payable in advance and fell due for payment prior to the commencement of the administration, then it was not payable as an administration expense even though the administrator retained the property for the purposes of the administration for the whole or part of the period for which the payment in advance was payable; but where rent payable in advance became due during a period when the administrator was retaining the property for the purposes of the administration, then the whole sum was payable as an administration expense even though the administrator forfeited or vacated before expiry of the period for which the payment in advance was due. The landlords in the instant case wished to challenge the proposition that the rent and service charge that fell due the day before administrators' appointment was not an administration expense.

Held

The court would follow the decisions in Goldacre and Luminar, as it was required to do unless it was convinced that they were wrong, and make directions to the effect that the quarterly rent and service charge which fell due immediately before the administration were not administration expenses, and that rent and service charge falling due following the administrators' appointment would be payable in full even if they thereafter ceased to use the premises, Goldacre and Luminar considered. The court would also give permission to the landlords to appeal against the first direction, and permission to the seventh respondent to appeal contingently in respect of the second direction. It was common ground that the appeal had a real prospect of success. There was also in the circumstances some other compelling reason for giving permission to appeal so that the Court of Appeal could rule on the issues; the matter was of concern to administrators and landlords generally and the amounts involved in the instant case were significant.

Chancery Division
Nicholas Lavender QC
Judgment date
1 July 2013
References

LTL 3/7/2013

Practice areas