Lazari GP Ltd & Anor v Jervis & Ors

When administrators have substantially achieved the purpose of the administration through a business sale, the court may permit a landlord to exercise proprietary forfeiture rights where doing so will not impede that purpose. If an impediment exists, the court must exercise judgment by balancing the effect on the administration against the landlord’s prejudice. The exercise is not mechanical. Any conditions imposed on permission must serve the purposes of the administration, rather than reflect general convenience or utility. Where no administrative purpose would be served by restricting the remedy, permission may extend to peaceful re-entry.

The applicants were landlords of premises leased to a company in administration. Following a pre-packaged business sale, the purchaser occupied the premises under a licence while accepting the risk of occupation without the landlords’ consent. The landlords sought permission to commence or exercise forfeiture rights during the administration moratorium. The administrators sought an adjournment and, alternatively, sought to restrict permission to forfeiture by proceedings. The issues were whether forfeiture would impede the purposes of the administration and whether any condition limiting the method of forfeiture was justified.

1. Permission to forfeit. The application was granted. The court applied the principles stated by Nicholls LJ in Re Atlantic Computer Systems [1992] Ch 505, at pp. 542–544. Where the landlord’s proprietary rights would not impede the purpose of the administration, permission should normally be given.
2. The business sale had substantially achieved the administration’s purpose. The purchaser had taken occupation under a licence while accepting the risk of the landlord exercising its rights. There was no evidence that recovery of possession would reduce the sale consideration or otherwise prejudice the administration. Immediate forfeiture therefore presented no relevant impediment.
3. Even if some impediment existed, the balancing exercise would favour permission. The landlords faced a real prospect of financial loss from delay, including prejudice to negotiations for a new lease at a higher rent. No countervailing prejudice to the administration was identified. The balancing exercise required judicial judgment and was not mechanical.
4. The court declined to limit permission to forfeiture by legal proceedings. Conditions imposed under the administration jurisdiction must serve the purposes of the administration. General concerns about changing locks or the convenience of proceeding by counterclaim did not justify a condition. Peaceful re-entry was not shown to be unlawful or inconsistent with any administrative purpose.