The tenant company went into liquidation, the receiver disclaimed the lease, and the landlord claimed compensation under the Act. The question concerned how the compensation was to be calculated.
Held: Where a solvent tenant under an onerous lease goes into voluntary liquidation, and the liquidator disclaims the lease, the right to payment of rent disappears, and the landlord is entitled to compensation only, by payment discounted for acceleration.
The court had to calculate the compensation according to general principles. It was a statutory right where any common law or contractual rights were extinguished by the disclaimer. The right replaced any rights which would have arisen under the lease. The receiver said that the damages should be reduced to allow for the fact of the acceleration of the receipts. He was correct. The Court of Appeal had been wrong to treat the freeholder as a secured creditor making a voluntary proof. His claim was for the statutory right of compensation, not any made under the lease itself. The common law right to damages was lost on the disclaimer. Appeal allowed, but with a discount of 5.5% to the accelerated rent.
Judges:
Lord Slynn of Hadley, Lord Lloyd of Berwick, Lord Hope of Craighead Lord Hobhouse of Woodborough, Lord Millett
Citations:
Times 05-Feb-1999, [1999] UKHL 2, [2000] 2 AC 172, [1999] 1 All ER 673, [1999] 2 WLR 396, [2000] ANZ Conv R 174, [1999] 1 EGLR 1, [1999] 1 BCLC 155
Links:
Statutes:
Insolvency Act 1986 178(6), Insolvency Act 1986 178, Insolvency Rules 1986 4.88(2)
Jurisdiction:
England and Wales
Citing:
Cited – Hindcastle Ltd v Barbara Attenborough Associates Ltd and Others HL 22-Feb-1996
The guarantor of an original tenant under the lease remains liable after the disclaimer the lease on insolvency. The disclaimer operates to determine the lease altogether with the result that the landlord’s reversion is accelerated. ‘In order to . .
Appeal from – Park Air Services Plc; Christopher Moran Holdings Limited v Bairstow and Ruddock CA 1-May-1997
If a lease is determined or treated as determined in a winding up or in a bankruptcy, the landlord is entitled to prove in principle for all the rent and other payments which he would have been entitled to recover from the tenant for the residue of . .
Cited – Ex parte Llynvi Coal and Iron Co; In re Hide 1871
The trustee in bankruptcy disclaimed an agreement for a lease under Section 23. The landlord claimed to prove as creditor under the section.
Held: Where one party has repudiated a contract and the other party has accepted that repudiation as . .
Cited – Photo Production Ltd v Securicor Transport Ltd HL 14-Feb-1980
Interpretation of Exclusion Clauses
The plaintiffs had contracted with the defendants for the provision of a night patrol service for their factory. The perils the parties had in mind were fire and theft. A patrol man deliberately lit a fire which burned down the factory. It was an . .
Cited – Overstone Ltd v Shipway 1962
Where a claimed loss will be suffered over a period in the future, the computation will have to make allowance for any advancement that has occurred. . .
Cited – In re London and Colonial Co.; Horsey’s claim 1868
. .
Cited – In re New Oriental Bank Corporation (No.2) 1895
Where a tenancy continues after the insolvency of the tenant, the landlord is entitled (i) to prove for all the arrears of rent; (ii) to enter a claim for all future rent; and (iii) as rent accrues due, to submit proofs in the liquidation from time . .
Cited – Hardy v Fothergill 1888
Rent falling due after a winding up of the tenant was a future debt for which the landlord could have proved in the tenant’s liquidation. . .
Cited – In re Metropolis Estates Co Ltd CA 1940
. .
Cited – Oppenheimer v British and Foreign Exchange and Investment Bank 1877
A court can give a liquidator leave to distribute, thus protecting him from any risk of personal liability, but only if he retained a sum sufficient when invested at compound interest to fund future liabilities. . .
Lists of cited by and citing cases may be incomplete.
Landlord and Tenant, Damages, Insolvency
Updated: 19 May 2022; Ref: scu.82112