Summary

The High Court has this week granted a consortium of landlords permission to appeal against previous decisions that rent falling due pre-administration is not payable as an expense of the administration.1

Game Group PLC went into administration immediately after the March 2012 quarter day. The administrators did not pay the March 2012 quarter's rent, relying on Goldacre2 and Luminar3. 

This has now been challenged by a consortium of landlords. At the Game Group hearing, the parties agreed that the Goldacre decision would have to be followed by the judge and that the matter should therefore go straight to the Court of Appeal. The judge agreed.  

The date for the appeal hearing will be set shortly. We expect that the Court of Appeal will be asked to overturn Goldacre and Luminar, in which it was decided that:

  • If rent is payable in advance and falls due before the date of administration, then rent for that quarter is not payable as an expense of the administration, even if the property is used for the benefit of the administration for the majority of the quarter.
  • If the property is used for the benefit of the administration, rent falling due during the administration is payable as an expense of the administration whether or not the whole or part of the premises is used for whole or part of the quarter.

Implications

  • Pending appeal, this does not overturn current authority that rent falling due pre-administration is not payable as an administration expense.
  • Administrators are likely to continue to delay putting a company into administration where a quarter day is imminent, to avoid liability for that quarter's rent being treated as an expense.

Footnotes

1Games Station Ltd (1 July 2013)

2Goldacre (Offices) Limited v Nortel Networks UK Limited (in administration) [2009] EWHC 3389 (Ch)

3Leisure (Norwich) II Ltd v Luminar Lava Ignite Ltd (in administration) [2012] EWHC 951 (Ch)

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