Business premises — Tenancy – Administration – Defendant landlord opposing grant of new tenancy – Defendant intending to redevelop property – Defendant going into administration – Administrator seeking to defer application for new lease – Claimant applying for permission to continue with application – Whether balancing exercise in favour of granting permission – Application granted
The claimant was the tenant of a supermarket. The lease expired and the claimant wanted to apply for a new lease, pursuant to Part II of the Landlord and Tenant Act 1954. The defendant landlord company had gone went into administration in February 2009. Prior to the commencement of the administration, it had opposed the claimant’s application on the ground that it intended to redevelop the property under section 30(1)(f) of the Landlord and Tenant Act 1954 (ground f). Since the administrator did not consent to the claimant’s application, the latter applied to the court, pursuant to para 43.6 of Schedule B1 to the Insolvency Act 1986, for permission to continue its claim for a new lease. The defendant counter-claimed for possession.
The claimant argued that the question was whether the defendant should be granted an indefinite adjournment to its own claim to be entitled to possession. The tenancy, as a business tenancy, continued automatically under the 1954 Act and the claimant was entitled to a new tenancy unless the defendant could establish an intention to redevelop. The only remaining issue, if the defendant could not establish that intention, concerned the terms of the new tenancy, in particular, its length and the rent payable. If redevelopment was unlikely, the claimant would obtain the new lease. If the property might be redeveloped in the future, the court might take that into account when deciding the terms. If the landlord did not want to or could not prove its case, it should abandon its defence and counter-claim rather than hide behind para 43.6 of Schedule B1.
Under para 3(1) of that Schedule B1, the company administrator had to perform his function with the objective of rescuing the company as a going concern, or achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration), or realising property in order to make a distribution to one or more secured or preferential creditors. The defendant sought to defer the 1954 Act proceedings until such time as it could put together a scheme of redevelopment.
Held: The application was granted.
The issue on the 1954 Act application was whether the defendant intended to redevelop. However, the court also had to have in mind the objective of the administration as set out in para 3(1) of Schedule B1 to the 1954 Act.
The claimant was not a creditor but its right to a new tenancy equalled a proprietary right. It also had a right to have its application heard without undue delay which was the right of all applicants before the court in respect of whatever relief was sought. That could be shortenened where it was necessary to achieve the objective of administration, but improving the position of a secured creditor over the interests of a third party that had a right to a new tenancy was not, on the face of it, within the administration objective. The court had to strike a balance between the rights of the administrators to conduct an orderly administration in accordance with the administration objective and the right of the applicant to have its application heard and to be granted the lease to which as things stood it was entitled: Re Atlantic Computer Systems plc [1992] Ch 505 considered.
This was a clear case for granting the permission sought. The 1954 Act application had to be heard sooner or later. Section 31(2) of the 1954 Act presupposed that a 1954 Act application should be heard within 12 months. In addition, paragraph 4 of Schedule B1 of the 1986 Act required an administrator to perform his functions as quickly and efficiently as was reasonably practicable, and administrations were valid in the first instance only for 12 months, although that period could be extended.
The administrator sought to ensure that the proceedings were not heard until a ground of objection, which the defendant did not currently have, emerged. However, the onus was on the defendant to demonstrate that there was an intention to redevelop before ground (f) could be invoked, it would be wrong to withhold permission to continue the proceedings in circumstances where it was common ground that the company did not intend to redevelop. In addition, the interests of creditors were generally unaffected by the 1954 Act proceedings, and it was a matter of chance that these were in form the claimant’s proceedings, when in substance they were the defendant’s, on whom the onus of establishing ground (f) rested.
Mark Wonnacott (instructed by Hill Dickinson, of Liverpool) appeared for the claimant; Lisa Barge, of Eversheds LLP, of Birmingham, appeared for the defendant.
Eileen O’Grady, barrister
