Company – Business premises – Liability for rates – Company in administration continuing to occupy retail premises through administrators acting as agents – Non-domestic rates accruing on business premises occupied during administration – Claimant council seeking to recover unpaid rates – Whether rates payable as expenses in administration – Declaration granted
The company (TF) was incorporated in March 2001 and traded from 98 retail units throughout the UK and Ireland. One of the units was in Exeter, which TF occupied as lessee. The claimant council were responsible for levying and collecting non-domestic rates in respect of the premises.
TF made profits until February 2002, but made a loss in the following year. In September 2003, an administration order was made and joint administrators were appointed. In December 2003, the creditors approved a creditors’ voluntary arrangement (CVA). The administrators resigned in April 2004 and were replaced by the defendants as joint administrators. During the administration, both sets of administrators had continued TF’s occupation of the Exeter property and continued to carry on its business there and elsewhere as agents. The administration was extended, but a winding-up petition was presented by a creditor on 21 March 2005. On 27 April, the administrators’ appointment was discharged and TF was ordered to be wound up.
The non-domestic business rates on the Exeter property accrued at a daily rate, totalling £73,846 from the commencement of the administration on 17 September 2003 to its termination on 17 March 2005. There were no unpaid arrears of rates at the start of the administration.
The claimants subsequently sought to recover unpaid business rates. They applied to the court for a declaration that non-domestic rates in respect of business premises that were occupied during an administration were expenses properly incurred by the administrators. Thus they were payable expenses of the administration under r 2.67(1) of the Insolvency Rules 1986, either as expenses properly incurred by the administrators in the performance of their functions within r 2.67(1)(a) or as necessary disbursements within r 2.67(1)(f).
Held: The declaration was granted.
Neither occupied nor unoccupied property rates fell within r 2.67(1)(a). The terms of the rule (“expenses properly incurred by the administrators”), were virtually identical to the words contained in section 19(4) of the Insolvency Act 1986, which had been construed to mean expenses for which the administrator had made himself personally liable. There was no sound reason for treating rates, for the purposes of r 2.67, as expenses incurred by the administrator rather than as necessary disbursements.
However, r 2.67(1)(f) had been introduced by the Insolvency (Amendment) Rules 2003 in substantially the same terms as r 4.218(1)(m). These provided that rates accruing on premises occupied by a company while in liquidation were payable as an expense of the liquidation as a “necessary disbursement by the liquidator in the course of his administration”.
The decision as to whether rates and other necessary disbursements were chargeable as an expense in an administration was a policy decision for the rule-making authorities in the exercise of their power under the 1986 Act. It involved balancing competing interests, including that of promoting corporate rescues. The reasonable inference was that, by adopting the same terms as r 4.218, the intention was that it should carry the same meaning, with the result that rates should rank as expenses in an administration within r 2.67(1)(f).
William Trower QC and Paul French (instructed by Stones, of Exeter) appeared for the claimants; Nicholas Briggs (instructed by the Treasury Solicitor) appeared as advocate to the court; the defendants did not appear and were not represented.
Eileen O’Grady, barrister
