Vol 17 (2020) - Issue 3

Article preview

In The Matter of Henry Shinners and Nicholas Myers (joint administrators of London Bridge Entertainment Partners LLP) and London Trocadero (2015) LLP [2019] EWHC 2932 (Ch)

Synopsis

The Court considered whether to extend the Lundy Granite principle (in terms of which liabilities incurred under pre-insolvency contracts can be elevated to expenses of the insolvency with the concomitant priority over other creditors) to include an obligation on a tenant company to replenish a rent deposit from which the landlord had withdrawn an amount to cover unpaid rent. The Court re-confirmed that the Lundy Granite principle is based in equity and that it will only apply to elevate pre-insolvency obligations to expense status where it has been established that there are equitable grounds to do so.
The obligation on the Company to replenish the Account under the Rent Deposit Deed did not constitute an expense of the administration by application of the Lundy Granite principle. Therefore requiring the Company to top-up the Rent Deposit would be contrary to the pari passu rule in the Company's administration and would contravene the statutory scheme for administration under Schedule B1 of the Act.
In reaching its decision, the Court confirmed that, in principle, the Lundy Granite principle could apply to non-provable debts and rejected the application of the 'adoption principle'.