Company owning leasehold premises – Creditor of company petitioning for administration order – Landlord forfeiting lease by peaceable re-entry – Whether measures taken by landlord invalidated by Insolvency Act 1986 – Judgment for landlord
A company held a long lease of premises that it had intended to operate as a nightclub. On 7 April 1999 a creditor of the company applied for an administration order under the Insolvency Act 1986. Some six days afterwards, the landlord purported to forfeit the lease by effecting a peaceable re-entry. The issue before the court was whether the purported forfeiture was invalidated by the moratorium imposed by section 10(1) of the 1986 Act. The creditor, while accepting that a peaceable re-entry did not amount to a “proceeding” or “legal process” within the meaning of para (c), nevertheless claimed that such a mode of enforcement was precluded by para (b), which requires the consent of the court before any steps are taken “to enforce any security”, over the company’s property. The landlord contended that his right of re-entry could not be regarded as a “security”, which, as defined in section 248(b) of the 1986 Act, included “any mortgage, charge, lien or other security”.
Held: The landlord had effectively forfeited the lease.
1. Despite the anomalous advantage given to a landlord who resorted to self-help rather than judicial proceedings, and notwithstanding some judicial support for the creditor’s contention, the court was persuaded by the reasoning in Razzaq v Pala [1997] 2 EGLR 53, citing Ezekiel v Orakpo [1977] QB 260, that, properly analysed, a right of re-entry could not be legally equated with a security.
2. Re Park Air Services plc [1999] 1 All ER 673, Exchange Travel Agency Ltd v Triton Property Trust plc [1991] BCLC 396, Re Olympia & York Canary Wharf Ltd [1993] BCLC 453, Doorbar v Alltime Securities Ltd [1996] 1 WLR 456, Re Atlantic Computer Systems plc [1992] Ch 505, Re AGB Research plc [1995] BCC 1091, March Estates plc v Gunmark Ltd [1996] 2 EGLR 38, Bristol Airport plcv Powdrill [1990] Ch 744 considered.
AG Bompas QC and Peter Shaw (instructed by Penningtons) appeared for the creditor; Jane Giret (instructed by Paulley & Co) appeared for the landlord.
Alan Cooklin, barrister
