Cineworld fights order to pay £1m in rent arrears

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CINEWORLD is appealing against an order to pay £1 million in unpaid rent and insurance costs incurred while the venue was shut during the pandemic – arguing that the government, which ordered the closure, is also the landlord.

The cinema chain is currently embroiled in a major legal dispute with its landlord, Waterfront Ltd, a subsidiary of the States-owned Jersey Development Company.

Cineworld has claimed it should not have to pay rent and insurance for the period when the cinema was forced to close.

Advocate Justin Harvey-Hills, appearing at an appeal hearing in the Royal Court yesterday for the cinema company, 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.

In that judgment it was reported that Cineworld had 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.’

The judgment also stated: ‘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 Waterfront Ltd argue 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 MacRae 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.

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