A case that is widely reported so quickly after it has been made is normally either very good news, or very bad news for those on the ground. Thankfully, in the case of Pillar Denton & Others v Jervis & Others [2014] EWCA Civ 180 it is good news, and a blow for common sense.

The High Court decisions in the cases of Goldacre (Office) Ltd v Nortel Networks UK Ltd [2009] EWHC 3389 (Ch and Leisure (Norwich (II)) Ltd v Luminar Lava Ignite Ltd [2012] EWCH 951) caused widespread concern amongst landlords particularly in the current economic climate. These were high profile cases concerning whether rent payable under a lease held by a company in administration was payable as an expense of the administration. In Goldacre, the High Court held that rent was payable for the entire quarter where the company had gone into administration prior to the quarter day, even though the property had been vacated prior to the end of the quarter. The Court went further in Luminar holding that where rent was payable in advance and the tenant company went into administration after the quarter day, the administrator would not have to pay that quarter’s rent as an expense. An administrator would only have to pay rent as an expense if, upon the next quarter’s rent falling due, the property was being occupied for the benefit of the administration. The decision was not well received by landlords who were understandably concerned that administrators would time the administration so that it occurred the day after a quarter day which would allow the administrator plenty of time to consider what to do with the property whilst not paying rent as an expense.

The Court of Appeal overruled both decisions and found that the law had been left in a very unsatisfactory state. The legal arguments were fairly technical, but the net result was a practical decision that is fair to both administrators and landlords. The Court held that an administrator must pay rent, as an expense, for the duration of the period which he retains possession of the property for the benefit of the administration. The rent would accrue on a day to day basis and whether the administrator was in occupation was a question of fact. They agreed with the decision

in Shackell & Co v Chorlton & Sons [1895] 1 Ch 378 that, where rent was to be paid in advance, the “wait and see” approach was correct and there was no requirement for the administrator to pay the whole quarter’s rent in advance. Helpfully, the Court also confirmed that the position would be the same for a company in liquidation.
The Courts are often criticised for making impractical decisions that do not lead to a fair result for those bound by them, but this decision will silence those critics, if only for a short time.

However, a word of warning:  this decision does not prevent arguments about when an administrator is in actual occupation, and the decision itself might yet be appealed to the Supreme Court.

If you would like to discuss any of the issues raised in this article in more detail, please contact Michael Clark