Stuck with the bill—are administrators responsible for utility costs?

Stuck with the bill—are administrators responsible for utility costs?

Restructuring & Insolvency analysis: Mathew Ditchburn, partner at Hogan Lovells, and Ed Boyle, director at KPMG, consider the decision in Laverty v British Gas Trading. They say the decision clarifies how the principle established by the Supreme Court in Nortel should apply to certain property and other liabilities arising following an administration appointment.

Original news

Laverty and others v British Gas Trading Ltd [2014] EWHC 2721 (Ch), [2014] All ER (D) 76 (Aug)

The trial of a preliminary issue was ordered, concerning the priority to be given to the payment of certain charges owed to the respondent company for gas and electricity supplied to retail premises after companies in liquidation had entered into administration and after they had been vacated by the companies. The Companies Court held that liability under the deemed contracts was provable, pursuant to the Insolvency Rules 1986, SI 1986/1925, r 13.12(1)(b) as a liability to which the companies had become subject after the date of administration by reason of an obligation incurred before that date.

What were the facts in this case?

British Gas supplied utilities to stores owned and operated by the Peacocks group of companies. The companies went into administration in 2012. Relying on a break right they had in the event of insolvency, British Gas terminated their supply contracts with the companies, but continued to supply gas and electricity to the Peacocks stores. As the utilities were supplied other than pursuant to express contracts, contracts were deemed to arise under the Gas Act 1986 and the Electricity Act 1989.

Following administration, a number of the Peacocks stores were sold and others vacated. However, the deemed contracts endured and charges continued to accrue on the 177 vacant Peacocks stores still being supplied gas and electricity by British Gas.

What were the main legal arguments arising?

The administrators accepted that utilities costs for gas and electricity supplied to the Peacocks stores

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About the author:
Kathy specialises in restructuring and cross-border insolvency. She qualified as a solicitor in 1995 and has since worked for Weil Gotshal & Manges and Freshfields. Kathy has worked on some of the largest restructuring cases in the last decade, including Worldcom, Parmalat, Enron and Eurotunnel.