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Blair Leahy, barrister at 20 Essex Street Chambers, explores the decision in Re SSRL Realisations Ltd and the lessons for administrators when faced with a dispute over a lease in the context of administration.
Re SSRL Realisations Ltd (In Administration)  EWHC 2590 (Ch),  All ER (D) 74 (Sep)
The applicant landlord applied for permission to forfeit the lease held by the fourth respondent tenant, which was in administration, by peaceable re-entry. The Companies Court, in allowing the application, held that the purpose of the administration would not be impeded by granting the landlord permission to pursue its proprietary rights and that there was no identifiable purpose of the administration which would be served by limiting the landlord to seeking forfeiture by legal proceedings, rather than by peaceable re-entry.
The case involved an application by a landlord relating to a lease of a prime Brunswick Centre property where the tenant, SSRL Realisations Limited (SSRL), has been in administration since September 2014.
The administrators had sold the business and assets of SSRL to a third party (Newco) and had also given Newco a licence to occupy, and trade from the property pending an application for consent to assign.
The administrators applied for consent to assign to Newco in October and November 2014, and those requests were refused on the basis that Newco was a newly-formed company with no covenant strength.
When the administrators nonetheless refused the landlord consent to forfeit, the landlord issued an application for permission to forfeit under the paragraph 43 of Schedule B1 to the Insolvency Act 1986 (IA 1986).
Shortly before the final hearing of the application, the administrators said that they needed more time to:
They also said that the lease was worth around £650,000 and that they had very recently identified a potential assignee.
The landlord’s application was made under IA 1986, Sch B1, para 43 for permission to forfeit, and the issue was whether permission should be given. It was a relatively short point requiring the application of the principles laid down in Re Atlantic Computer Systems plc  1 All ER 476 to the facts, ie:
The administrators argued that the purpose of the administration would be impeded by forfeiture. The applicable statutory objective of the administration was to achieve a better result for SSRL’s creditors as a whole than would be likely if SSRL was wound up (without first being in administration). In particular, they said forfeiture of the lease would result in a loss to SSRL’s creditors of a sum in the region of £650,000. The administrators also said that if the Atlantic Computers’ balancing exercise had to be undertaken, there had been no loss to the landlord as a result of the administration or the temporary occupation of Newco, because the landlord has accepted full payment of the rent due pursuant to the lease. They argued that the landlord was in fact seeking to obtain a windfall from the administration by granting a new lease at a higher rent rather than assigning the lease to Newco (or another third party).
The judge granted the landlord’s application and gave permission to forfeit by peaceable re-entry. He held that:
There are a number of respects in which this judgment is helpful in clarifying the law in this area. In particular:
Administrators must take care to ensure that they have robust evidence that the lease has value, and that the value is not de minimis in the context of the administration as a whole. Administrators should also be very careful to engage with the landlord, and not leave negotiations about the assignment solely to the would-be assignee.
Blair Leahy acted for the applicant landlord in this case.
Interviewed by Tracey Clarkson-Donnelly.
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
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First published on LexisPSL Restructuring and Insolvency
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