Landlord issues winding up petition against Pizza Express for unpaid rent

It has been widely reported that Pizza Express, the pizza dining chain that employs 14,000 people in the UK, has a reported debt pile of £1.1 billion and its financial difficulties continue as it is now facing a winding up order by the Court.

We previously reported on the debts and financial difficulties faced by Pizza Express, now a landlord is taking legal action against the restaurant chain over unpaid debts. Grainrent, whose parent company is London and Cambridge Properties, has issued a winding up petition against Pizza Express.

What does a petition mean for Pizza Express?

Unless Pizza Express pays the debt it owes to Grainrent, the petition has been listed for a hearing in June to determine whether the company should be wound up. It can be argued by the landlord that the company is insolvent and is unable to pay its debts as they fall due and if the Court is satisfied of this fact, it can make a winding up order.

The consequences for a company of the presentation of a winding up petition against it can be extremely serious including dispositions of property becoming void and damage to reputation.

The company, which already has £655 million worth of debt, has 450 restaurants in the UK and 150 internationally. This outcome will put 14,000 jobs within the business at risk.

Can a petition be issued during COVID-19?

On 23 April 2020, the government announced that it will be introducing a temporary ban on winding up petitions with effect from 27 April 2020 if a company cannot pay rent due to coronavirus to protect high street businesses from aggressive rent collection and closure.

This petition against Pizza Express however was issued before the temporary ban came into effect. It is not clear whether this petition will be permitted to continue in light of the government’s recent measures to protect companies during this uncertain, difficult time and this will be determined by the Court in due course.

How can Pizza Express oppose the winding-up petition?

Where grounds to challenge the petition exist it would be sensible to oppose the winding up petition.  A winding up petition may be challenged by a company on the following grounds:

  1. The debt alleged to be owed in the petition is genuinely disputed on substantial grounds by the company;
  2. The company has a genuine right of set-off against the creditor which exceeds the amount claimed in the demand; or
  3. In certain other limited circumstances (for example such as jurisdiction, Company likely to become insolvent, technical or procedural error or delay).

The procedure to oppose a winding up petition is to file a witness statement in opposition in court not less than five business days before the date of the hearing of the petition (rule 7.16, Insolvency Rules). A copy of the evidence must also be sent to the petitioning creditor.

The company is entitled to appear at the hearing (and must give notice under rule 7.14) of the petition and to oppose the making of a winding up order. It is usual for a company to instruct solicitors and/or counsel to appear on its behalf at the hearing.

If the company chooses not to instruct legal representatives, any director is entitled to appear at the hearing on the company’s behalf, but other agents (such as the company’s accountant) cannot.

Where a company requires time to pay the debt, it can seek an adjournment at the hearing.

Can Pizza Express come to an agreement with the Petitioner?

Houlihan Lokey Inc has been recently appointed to help with talks between Pizza Express and creditors and it may be that the parties can agree a time to pay arrangement and for the petition to be withdrawn or dismissed.

In order to improve their cash position during this pandemic, the company would do well to try to get rent concessions from landlords.

How we can help you:

As a leading law firm with a track record of success, you can be assured your matter is in safe hands. Our success rate is a result of the dedication of our lawyers whom will diligently review your matter so it has the best possible chance of success from the outset when it matters the most. Whether you are a:

  • A creditor seeking to recover your debts that have been overdue particularly prior to COVID-19
  • A debtor defending debt recovery action including a winding up petition
  • A landlord seeking to recover unpaid rent
  • A tenant who is unable to pay rent

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