Eversheds has been successful in the Court of Appeal on behalf of two of Europe’s largest property companies, Hammerson plc and Land Securities.
On the 18th of December, Lord Justices Rimer, Kitchin & Christopher Clarke handed down judgement in the case of Re A/Wear UK Ltd (In Administration) [2013] EWCA Civ 1626 which relates to the insolvency of a women’s fashion retailer. The case related to their shops at two of the UK’s largest shopping centres, Cabot Circus in Bristol and Highcross Leicester.
In 2010 the Landlords had entered into an agreement for surrender and deed of variation with A-Wear on two shops, which gave them significant rent concessions in return for an option for the Landlords to call for surrenders of the respective Leases if the Landlords wanted the shops back in the future. Those surrenders would in turn entitle the Landlords to the release of £540,000 of escrow monies. In December 2011 the Landlords served notice calling for the surrenders but A-Wear went into Administration, disputed the Landlords’ right to call for the surrender and asked for the £540,000 to be released to the Administrators for distribution to its creditors. At first instance the High Court found for A-Wear (in administration) and refused specific performance of the surrenders. The Landlords appealed.
The court of appeal found for the Landlords, and ordered specific performance which allowed them to receive a combined £540,000. The Court of Appeal said that the court has a discretion whether to order specific performance, but that discretion has to be exercised in a way which is consistent with established principles. Based on those established principles, the Court of Appeal said that it is not a correct use of that discretion to say that because a party has entered administration or liquidation that specific performance ought not be given. The Court of Appeal did not accept the arguments on behalf of the Joint Administrators (later Liquidators) for A-Wear that because the completion of the surrender would allow monies to be released to the Landlords that ordering specific performance would offend the pari passu treatment of creditors upon insolvency.
Eversheds real estate litigation partner David Feist commented:
“This decision will be of some comfort to landlords and other property clients that insolvency should not in itself entitle a party to avoid its contractual obligations where those contractual obligations concern the disposal of an interest in land. The appointment of insolvency practitioners should not alone frustrate any entitlement to specific performance that a party would otherwise have, and nor should the fact that specific performance will entitle the Landlord to receive a sum of money.”
