Jervis v Pillar Denton Ltd (Game Station) & Ors

Where rent is payable in advance under a lease, the date on which it falls due determines whether it is provable in an administration or payable as an administration expense. Rent falling due before the administrator’s appointment remains a provable debt, even if the premises are retained afterwards. Rent falling due during the administration, while the premises are used for the administration’s benefit, is payable in full as an expense, even if use ends before the relevant period expires. A first-instance judge will ordinarily follow a coordinate first-instance decision on a difficult statutory issue unless satisfied that it is wrong. Permission to appeal may be granted where the proposed appeal has reasonable prospects of success or there is another compelling reason for it to be heard.

The administrators of companies in the Game Group sought directions concerning rent, service charge and insurance payable under five leases. Quarterly payments fell due on 25 March 2012, one day before the administrators were appointed. Four premises were subsequently used for the benefit of the administration through a licence granted to Game Retail Limited. The fifth premises was occupied only while goods were removed.

The parties agreed the consequences of Goldacre (Offices) Ltd v Nortel Networks UK Ltd [2010] Ch 455 and Leisure (Norwich) II Ltd v Luminar Lava Ignite Ltd [2012] BCC 497, but the landlords wished to challenge those decisions in the Court of Appeal. The central issue was whether the agreed directions should be made and whether permission to appeal should be granted.

1. The court made the directions sought. Rent and service charge falling due before the administrators’ appointment were not payable as expenses of the administration, even where the relevant premises were retained afterwards.

2. Rent, service charge and insurance falling due after the appointment, while the premises were being used for the benefit of the administration, were payable in full as administration expenses. This remained so even if the administrators later ceased using the premises before the end of the period covered by the payment.

3. The deputy judge accepted that Goldacre (Offices) Ltd v Nortel Networks UK Ltd [2010] Ch 455 and Leisure (Norwich) II Ltd v Luminar Lava Ignite Ltd [2012] BCC 497 were correctly decided. Applying the principle of judicial comity, a first-instance judge will ordinarily follow a coordinate first-instance decision on a difficult enactment unless convinced that it is wrong. The approach had recently been applied in Lornamead Acquisitions Ltd v Kaupthing Bank HF [2013] 1 BCLC 73.

4. Permission to appeal against the directions concerning the pre-appointment rent and service charge was granted to the landlords, and permission to cross-appeal against the direction concerning post-appointment liabilities was granted to Game Retail Limited. The proposed appeal had reasonable prospects of success, and the issue was of general importance involving substantial sums.

5. The possible liability for the fifth premises during the period when goods were removed was hypothetical at this stage and was not decided.