Re Game Station; Pillar Denton v Jervis  EWCA Civ 180;  BPIR forthcoming
(Court of Appeal, Patten, Lewison and Sharp
LJJ, 24 February 2014)
Administrators must pay the rent under the lease
as an expense of the administration for the period during which they retain the
leasehold property for the benefit of the administration (the rent being
treated as accruing from day to day.
The tenant company was the lessee of hundreds of
retail premises, paying rent quarterly in advance. It went into administration
the day after £10 million in rent had become due. The issue, at first instance
and on appeal, was whether that rent was no more than a provable debt or
whether it was an expense in the administration.
At first instance the judge held that the rent
was only a provable debt, following Goldacre
v Nortel Networks  Ch 455 (when rent payable in advance accrued
during the administration the whole of that rent was payable as an expense of
the administration whether or not the administrators actually used the property
for the whole period for which the rent was due) and Re Luminar Lava Ignite  Ch 165 (where rent payable in advance
had accrued before the start of the administration none of it was capable of
being an expense of the administration even if the administrators retained
possession for the purposes of the administration).
The Court of Appeal
reviewed at length the authorities on which the salvage principle was based and
Lewison LJ (with whom Patton and Sharp LJJ agreed) held, overruling Goldacre and Luminar, that the Salvage principle (in Re Lundy Granite Co; Ex p Heavan (1871) LR 6 Ch App 462) compelled
the conclusion that where administrators or other officer holders retained
possession of property for the purposes of the administration they were liable
to pay the landlord the full value of the property during that period. Since
the principle was an equitable one, common law rules regarding the
apportionment of rent did not apply. The duration of the period is a question
of fact and it is not to be determined by reference to which rent days occur
before, during or after that period.