Cineworld to fight against £1m unpaid rent order

Tuesday 22 November 2022

Cineworld is seeking to fight an order to make it pay £1m in unpaid rent and insurance costs racked up while it was closed due to covid restrictions - arguing that the government, which ordered it should shut, is "essentially" its landlord.

The cinema company lost a battle to prove it should have to pay in the Royal Court last month, but is now looking to appeal the ruling.

Appearing at an appeal hearing in the Royal Court on Monday for the cinema company, Advocate Justin Harvey-Hills said: "Cineworld has been in some financial difficulty since the pandemic. They had no revenue at all in that period." He added that it had so far failed to bounce back to pre-lockdown levels owing to the shortage of films made during the period.

Cineworld shut on 17 March 2020 and did not fully reopen until 21 May 2021. The company was told to pay the outstanding costs at a previous hearing in October.

A recently published judgment on Waterfront Ltd's application for summary judgment against Cineworld last month explained that the cinema had previously argued: "WF Ltd is owned by the government, with its sole shareholder being JDC. As a result, WF Ltd is essentially the government as landlord to a business tenant, in relation to which the ministerial update was intended to address.

"Accordingly, a greater expectation and requirement existed that WF Ltd would consider and act in accordance with the guidance, ministerial update and updated guidance than if it had been a private landlord wholly unconnected to the government.

"This is particularly the case given it was the government which made the operation of the cinema unlawful (and later commercially unviable) and thereby clearly and directly adversely impacted Cineworld's ability to generate the revenue to meet the obligations which would otherwise arise under the lease.

"WF Ltd's failure to offer anything other than a deferral of rent throughout the duration of the Restrictions Period and its subsequent issuance of proceedings are actions against the clear purpose and terms of the guidance, ministerial update and updated guidance."

Pictured: Cineworld did not succeed in convincing the Royal Court that it should not have to pay up in October, and launched an appeal bid yesterday.

Cineworld continued: "Clearly, Cineworld will have been one of the worst affected businesses by the Covid-19 trading restrictions, it being unable to operate its business as usual for just under a year and a half. Accordingly, Cineworld should have been offered a complete or, at the very least, a partial waiver of rent."

But at yesterday's hearing, Waterfront Ltd argued that the company was still liable for the rent and insurance costs during the period of lockdown, which runs to around £1.05 million.

Waterfront's lawyers have highlighted a number of cases in England and Wales where landlords had successfully claimed for rent arrears during periods where their tenants' businesses had had to remain closed as a result of Covid.

Advocate John Kelleher, representing Waterfront Ltd, said Cineworld had also been told to pay legal costs at a previous hearing, and argued: "If you avail yourself of the court you should also obey the order of the court. They have plainly not done that."

Deputy Bailiff Robert Mac- Rae ruled that Cineworld should not have to pay any legal costs at this stage.

However, he also turned down a suggestion from Cineworld for a 'stay' delaying proceedings for the moment.

The next hearing will take place on 9 December.

Cinemas were hit hard by lockdown and the downturn in filmmaking and Cineworld – the second-largest cinema chain in the world – has filed for bankruptcy protection in the United States.

But it is continuing to operate as usual in the eight European countries where it has cinemas and said last week that no jobs were at risk.