Game On - Court of Appeal to Make Next Move in Administrators Case

Hearings have begun today in the Game case, with the Court of Appeal considering whether the administrators of an insolvent retailer should be held liable for rent on stores that they continue to trade from.

At stake are millions of pounds in unpaid rent.

In the High Court last year, deputy judge Nicholas Lavender QC ruled that the quarter's rent at stake across a portfolio of stores was not an administration expense because it fell due before the group went into administration.

However, the case was fast-tracked to the Court of Appeal as quickly as possible.

In an earlier case in 2012 the High Court had ruled that where a company goes into administration, unpaid rent which fell due before the appointment of the administrators will be an unsecured claim against the company and not an expense of the administration, even if the administrators continue to use the property.

So whether by accident or design - the timing of the administrators' appointment can be critical.

As things currently stand, if the rent is paid quarterly and administrators are appointed the day after the quarter day, then no rent is payable as an expense of the administration until the next quarter day – effectively giving the administrators a free quarter’s trading.

Ironically, there's a reduced risk if the tenant pays its rent monthly.

However, the flip-side is that if the administrator goes in the day before the quarter day and leaves two days later, he has to pay the full quarter - which seems unfair too.

A "pay as you go" approach would seem more equitable, although you could equally argue a rent free bonanza gives administrators more chance to turn things around.

Game sank into administration in 2012, but the new Game that rose from the ashes is in much better shape and, now out of administration, it's reportedly considering a £300m flotation. That's after nearly 300 stores were closed by the administrators.

Watch this space to see which way the Court of Appeal decides to go.

UPDATE 19/2/14

Squire Sanders have been following this and after the hearing said:  "Unsurprisingly, the court has decided to reserve judgment and so far there has been no indication as to which route the decision might follow or when it will be available."

UPDATE 25/2/14

Judgment has now been given - see which way the Court of Appeal ruled here.