Pay for what you use is reconfirmed.
The Court of Appeal has now overruled the decisions of Goldacre and Luminar, which have been the subject of much controversy and tension between Administrators and Landlords.
In our October 2013 article 'Court of Appeal to reconsider Goldacre decision', we set out the basis of the Goldacre and Luminar principles for the payment of rent as an expense of an Administration in priority to other claims in the Administration. The High Court had given leave to appeal the Goldacre and Luminar decisions in a case involving the computer games retailer Game and on 24 February 2014, the Court of Appeal overturned those rulings.
In a detailed judgment, Lord Justice Lewison gave his reasons for returning to the previously adopted principles of paying rent as an expense for days calculated on a pro-rata basis for such periods and such parts of the property as the office-holder is actively 'using' to either trade-on or sell the business as a going concern.
This overturns Goldacre where if the premises were being used for the administration and a quarter day fell in the administration period the whole quarter would fall due as an expense of thye Administration. Conversely, if the rent date had fallen due before administration then that rental period was not an expense.
This led to the timing of appointment become crucial and led to friction between institutional landlords and the Insolvency Profession.
The Court of Appeal have refused leave to appeal the decision and accordingly we consider that it is unlikely that this new decision will be reversed unless leave to appeal is sought directly from the Supreme Court. Again, this is considered unlikely but hlw Keeble Hawson will keep you notified of any further developments in this area.
We welcome this decision as it seems equitable that Administrators pay for what they use thereby recognising the expense but not prejudicing or benefit other creditors merely because of issues of timing.
For further information on this article or its implications please contact Richard Fergusson on 0113 399 3485 or firstname.lastname@example.org.