High Court decision on payment of rent by administrators
On 7 December 2009, HHJ Purle QC, sitting as a High Court judge, gave judgment in Re Nortel Networks (UK) Limited (In Administration). Stephen Jourdan QC, leading Blair Leahy, appeared for the successful applicant landlord. HHJ Purle QC held that, so long as the administrators retain possession of or use any part of premises demised by a lease for the purposes of the administration, the administrators must pay the full rent as an expense of the administration under rule 2.67(1) of the Insolvency Rules 1986. There is no discretion as to whether the rent should be paid, it is a matter of obligation. Rule 2.67(1) is to be interpreted by reference to the “salvage” or Lundy Granite principle, which requires the payment of the full rent where a company in liquidation uses leasehold premises for the benefit of the winding up: see Re Toshoku Finance UK plc [2002] 1 WLR 671. HHJ Purle QC also held that, if a quarter’s rent accrues due while the premises are being used by a company in administration, it must be paid in full, even if the company ceases to use the premises during the quarter. He held that the decision to the contrary in Shackell & Co. v. Chorlton & Sons [1895] 1 Ch 378 was incorrect. This issue was the subject of an article earlier this year by Mark Sefton, co-written with Cameron Lawes: Rent in administration (2009) 159 NLJ 661 (see http://www.newlawjournal.co.uk/nlj/content/rent-administration) and was also the subject of a paper presented by Jonathan Small QC to the PLA on 27 March 2009 “L & T issues in the property downturn”: www.pla.org.uk/library/conference_papers
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