Retail Chain’s Collapse Left £1.2 Million in Unpaid Utility Bills

28/08/2014


In a significant case for insolvency practitioners, the High Court has ruled that a utilities company, which was left £1.2 million out of pocket following the demise of a major High Street retailing chain, will have to wait in line with unsecured creditors.

British Gas Trading Limited had cancelled its contract with the chain after the latter went into administration, but had continued to provide gas and electricity to hundreds of stores on a daily basis under contracts deemed to have arisen under the Gas Act 1986.

Some of the stores were sold as going concerns but many others were vacated after the chain – which subsequently went into compulsory liquidation and was wound up – ceased trading. However, use of electricity and gas had continued, possibly because landlords had re-let premises informally or because squatters had moved in.

After all the remaining shop leases were disclaimed by the liquidators, British Gas was left holding £1.2 million in unpaid bills. The liquidators did not dispute liability to pay those bills; however, a disagreement arose as to whether British Gas was entitled to be paid before the chain’s unsecured creditors.

British Gas argued that it should be granted priority and that the unpaid bills should be treated as an expense of the administration. However, the Court found that, on a correct interpretation of the relevant legislation, they were properly viewed as post-trading liabilities which were provable as ordinary unsecured debts.

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