Game’s appeal against a landmark ruling that meant it had to pay rent owed during its 2012 administration has been rejected.
Landlords Land Securities, Hammerson, Intu and British Land went to the Court of Appeal to argue that they unfairly missed out on unpaid rent when Game collapsed in March 2012.
In February the court ruled in their favour, meaning Game would have to pay £3m in unpaid rent.
The games specialist, which floated on the stock exchange this year, had contested the case, but today the Supreme Court rejected its appeal.
The ruling is seen as a test case and this latest development will have ramifications for the whole retail sector, making it harder for retailers and their appointed administrators to avoid paying rent while insolvent and giving greater priority to landlords.
The Supreme Court Order ruled: “The court ordered that permission to appeal be refused because the application does not raise an arguable point of law of general public importance which ought to be considered by the Supreme Court at this time bearing in mind that the case has already been the subject of judicial decision and reviewed on appeal.”
As a result of the test case, from now on, throughout an administration process, rent must be paid on a ‘pay as you trade’ basis, regardless of when the retailer filed for administration.
‘The right decision’
British Property Federation director of policy Ian Fletcher said: “This confirms that the decision made by the Court of Appeal in February was the correct one, and it is a relief to see that there is no more uncertainty surrounding the case.
“Had the appeal been allowed, the property industry would have been stuck in a state of flux with a longer wait for an answer to this critical question. As it is, common sense has prevailed and those administrators who had been holding back on paying rent due to landlords will now have to accept the inevitable.
“The decision has paved the way for a much fairer and sensible system and we would like to see the Insolvency Service take steps to ensure that this case is used as best practice for all future retail insolvencies, to ensure that landlords’ interests are safeguarded in the future.”
Mathew Ditchburn, partner in Hogan Lovells real estate disputes team, said: “This is the right decision by the Supreme Court. Yes, it’s an important issue and deserves consideration by the highest courts in the land, but at the same time the Court of Appeal’s judgment was clear, well considered and compelling.
“It ends the limbo period created by the threatened appeal with landlords waiting to receive unpaid back rents and administrators not sure whether to pay when the law was still up in the air.
“It would be in everyone’s interests now for the “pay as you go” principle to be enshrined in statute as part of the ongoing rewrite of the insolvency rules so it is clear how administrators should deal with lease liabilities and avoid more dust-ups in future”.
Game said in February that it “strongly argued” against the law being changed on legal and commercial grounds.
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