Winckworth Sherwood

UK 200 2014 position: 81

Game Station: Court of Appeal rules on the treatment of rent as an administration expense

The Court of Appeal has handed down its judgment in Jervis v Pillar Denton; re Game Station.

In an important ruling for administrators and landlords alike, the Court of Appeal overruled the cases of Goldacre (Offices) Ltd v Nortel Networks UK Ltd [2011]Ch 455 and Leisure (Norwich) II Ltd v Luminar Lava Ignite Ltd [2013]3 WLR 1132 and clarified the true scope of thesalvage’ or ‘Lundy Granite’ principle. The decision represents a welcome return to the ‘pay for what you use’ principle and strikes a fairer balance between different creditor and expense groups.

In giving judgment, Lewison LJ held that: ‘The true extent of the principle, in my judgment, is that the office holder must make payments at the rate of the rent for the duration of any period during which he retains possession of the demised property for the benefit of the winding up or administration [as the case may be]. The rent will be treated as accruing from day to day. Those payments are payable as expenses of the winding up or administration. The duration of the period is a question of fact and is not determined merely by reference to which rent days occur before, during or after that period.’ …

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