Lessors' Priority Preserved: Implications For Post-Appointment Trading And DOCAs

In its recent judgment involving the PAS Group of companies¹, the Federal Court held that rent payable by the PAS Group during an extension of the period in which an administrator had been excused from personal liability (Standstill Period) is an expense properly incurred by a 'relevant authority in carrying on the company's business' and is therefore a priority debt under s 556(1)(a) of the Corporations Act 2001 (Cth) (Corporations Act). 

Background

The PAS Group is a fashion group with a large retail footprint of 161 stores. The administrators had successfully obtained an order for a Standstill Period of approximately three weeks. The administrators caused the PAS Group to continue to occupy and trade from all but eight of the retail stores during the Standstill Period and sought a declaration that the related rent was a merely unsecured debt or claim in the administration and was not entitled to priority under section 556(1)(a) of the Corporations Act.  These