| Insolvency — Administration order — Expenses incurred by administrators — Non-domestic rates accruing on occupied business premises during administration — Claimant council seeking to recover rates — Whether rates payable as expenses of administration — Insolvency Rules 1986 (SI 1986/1925) (as substituted by Insolvency (Amendment) Rules 2003) (SI 2003/1730), r 2.67(1)
Exeter City Council v Bairstow and others
Chancery Division: David Richards J: 2 March 2007
Non-domestic rates which had accrued on occupied business premises during the course of an administration were payable as expenses of the administration under r 2.67(1) of the Insolvency Rules 1986.
David Richards J so held in the Chancery Division in determining an application for a declaration by Exeter City Council that non domestic rates which had accrued in respect of retail premises occupied by the third defendant, Trident Fashions plc (“the company”), whilst it was in administration, were payable by the first and second defendant administrators as expenses of the administration under r 2.67(1) of the 1986 Rules, either as (i) expenses properly incurred by the administrators in performing their functions in the administration of the company within r 2.67(1)(a), or as necessary disbursements by the administrators in the course of the administration of the company within r 2.67(1)(f).
The company leased a retail unit in Exeter. The claimant authority was responsible for levying and collecting non domestic rates for that unit. The company went into administration and the first and second defendants were appointed as administrators for a certain period, during which, they continued with the occupation of the premises and continued to carry on the business as the company’s agents. A year later, following the presentation of a winding up petition by a creditor, the court ordered that the administrators be discharged and that the company was to be wound up. The non domestic rates on the premises had accrued at approximately £136 per day. The claimant authority applied for a declaration that the rates were payable to it as expenses of the administration.
DAVID RICHARDS J said that neither occupied nor unoccupied property rates fell within r 2.67(1)(a), however, r 2.67(1)(f) was, for all material purposes, in identical terms to r 4.218(1)(m) of the 1986 Rules, which dealt with “necessary disbursements”in a liquidation. The reasonable inference was that, by adopting the same terms for r 2.67 as for r 4.218, the rule making authorities had made a policy decision and intended that r 2.67 should carry the same meaning as r 4.218 as regards expenses in a liquidation. Therefore, just as rates were payable in a liquidation as a necessary disbursement, so were they payable in an administration within r 2.67(1)(f).
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