Lease — Assignee tenant in difficulties — Voluntary arrangement of creditors — Recovery of rent sought from original tenant and assignee — Refusal to pay — Forfeiture of lease — Whether rent and service charges payable after arrangement date — Court holding that only rent and service charges covered already due and owing at the scheme date
The first defendant, M, entered into a commercial lease for a floor of Tricorn House, Hagley Road, Edgbaston. The original reversioner W, second defendant, granted the lease to M for 25 years from December 25 1978. In 1986, M assigned the lease to the third defendant, Ch. Ch got into financial difficulties and an administration order was made in February 1991 under the Insolvency Act 1986. A voluntary arrangement was entered into with the creditors which, inter alia, was intended to create a full settlement of claims against Ch both “present and potential”. While the scheme was being prepared, W sold the reversion to the present plaintiffs, B. The plaintiffs sought to recover rent as it fell due for subsequent quarters both from Ch, as the present tenant by assignment, and from M as original tenant. They both refused and resisted the claim contending that the plaintiffs’ rights were only those which existed under the arrangement so as to inhibit recovery. The case was concerned with rent and service charges arising after the arrangement date and was argued as a preliminary matter. The lease had subsequently been forfeited.
Held Rent as at scheme date.
1. A debt was an obligation to pay that was no longer dependent on executory matters on either side, ie was fully crystallised.
2. A right for future rent under a lease was a right essentially of property. Therefore, arrears of rent related only to the landlord’s rights as creditor and did not affect property rights as landlord. There was thus a difference between a right to be paid something that had accrued and become a debt, and a right in respect of something that was an executory obligation relating to property.
3. In the present case, it was part of the factual matrix that the object of the arrangement was to enable Ch to trade for five years and to secure that its existing debts would be dealt with in a tightly structured way. There was considerable difficulty in saying that as at the scheme date the company had a liability (defined as liability at the scheme date) to its landlord for rent when that rent did not become due in any sense at that date, but was payable in the future in respect of future enjoyment of the estate created by the lease.
4. It did not make commercial sense that there should be the need to give continuing future credit for obligatory future services within what was meant to be a moratorium scheme, ie it was consistent with drawing a line at the scheme date. The arrangement only covered rent and service charges already actually due and owing at the scheme date.
Mark Warwick (instructed by Green David Conway & Co) appeared for B, the plaintiff reversioner; Jonathan Karas (instructed by Thomson Snell & Passmore, of Tunbridge Wells) appeared for the first defendant, M; Peter Sheridan QC (instructed by Rosling King) appeared for the second defendant, W; Rosalind Nicholson (instructed by D J Freeman) appeared for the third defendant, Ch.
