Berwin Leighton Paisner (BLP) has overturned a precedent at the Court of Appeal which will see collapsed company Game forced to hand over £3m in unpaid rent when it went into administration.
Six of the UK’s largest landlord entities including Capital Shopping Centres triumphed at the appeal after turning to a South Square team comprising Antony Zacaroli QC and Hannah Thornley, instructed by BLP partner Michael Metliss.
The action will be seen as a test case as it closes a legal loophole set by Goldacre v Nortel. In that case administrators avoided having to pay the company’s rent because it went into administration a day after the rental payment was due.
Administrators pay rent as an expense when taking over an insolvent company. However in Game’s case the two administrators avoided paying rent because the company had filed for administration a day after quarterly rent was due on 26 March 2013.
PricewaterhouseCoopers partners Stuart Maddison and Michael Jervis, who were appointed as Game’s administrators, turned to Linklaters partners Katie Bradford and Richard Hodgson, who instructed South Square Chambers’ Daniel Bayfield for the appeal.
Macfarlanes partner Doug Wass instructed Maitland Chambers’ John McGhee QC and Catherine Addy for Game.
Bayfield had won the case for Jervis at the High Court in July 2013, when Nicholas Lavender QC ruled in line with Goldacre v Nortel for the administrator.
However Lavender granted the landlords the right to appeal and the 24 February judgment handed down by Lord Justice Patten, Lord Justice Lewison and Lady Justice Sharp reversed his decision.
Giving the leading judgment Lewison LJ said: “The result of Goldacre and Luminar has left the law in a very unsatisfactory state.”
He added: “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).”
“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,” he added.
The decision will mean rents and service charges will now be payable on a ‘pay as you trade’ basis, as administration expenses, regardless of when the retailer filed for administration.
The legal line up
For the appellants (1) Pillar Denton Ltd (2) Highcross (No.1) Ltd (3) Highcross (No.2) Ltd (4) CSC (Eldon Square) Ltf (5) CSC Lakeside Ltd (6) Ravenscroft Properties Ltd
South Square Chambers’ Antony Zacaroli QC and Hannah Thornley; Berwin Leighton Paisner partner Michael Metliss
For the respondents (1) Michael John Andrew Jervis (2) Stuart David Maddison
South Square Chambers’ Daniel Bayfield; Linklaters partners Katie Bradford and Richard Hodgson
For the respondent (3) Game Retail Ltd
Maitland Chambers’ John McGhee QC and Catherine Addy; Macfarlanes partner Doug Wass