Oceanfill Limited v Nuffield Wellbeing Limited & Anor.

The court granted summary judgment for the landlord. The central legal principle was that a restructuring plan sanctioned under Part 26A of the Companies Act 2006 takes effect by operation of law in the same way as a Part 26 scheme of arrangement and does not, of itself, rewrite the lease so as to discharge third-party guarantors. The sanctioned Plan released the plan companies (the tenant) from liability by statutory operation, but did not operate as a contractual release of the guarantors. The Licence to Assign contained an express anti-release covenant (clause 10) preserving guarantors' liability except where there was a release under seal, and there was no such release. The court therefore held that sums continued to fall due under the Lease and remained recoverable from the guarantors.

Background and nature of proceedings:

• Oceanfill (landlord) applied for summary judgment for rent arrears and related sums said to be payable under a 1998 lease of gym premises.
• The tenant interest was vested in Virgin Active Limited (VAL) and the original tenant (Nuffield) and its parent (Cannons) had guaranteed/indemnified performance under a Licence to Assign.

Relief sought: summary judgment for arrears totalling £141,255.22.

Key issues:

1. Whether the VAL restructuring plan sanctioned under Part 26A (the Plan) effectively rewrote the Lease and released VAL from liability such that no sums fell due under the Lease; and
2. Whether any such effect of the Plan operated to discharge Nuffield and Cannons, who were guarantors/indemnifiers under the Licence to Assign.

Court's reasoning and findings:

• The court concluded that a Part 26A restructuring plan takes effect by operation of law in the same manner as a Part 26 scheme of arrangement, binding the plan companies and varying or discharging their liabilities by statutory operation rather than by consensual contractual variation.
• The effect of such a plan is to release the plan companies from liabilities under their leases by statutory operation; it does not amount to a contractual release by the landlord of third-party guarantors unless the plan expressly and properly effected such a release.
• The Licence to Assign contained clause 10 which preserved the landlord's rights against guarantors notwithstanding any variation of the Lease, except for a release under seal by the landlord. There was no release under seal in this case.
• A Plan provision deeming Schedule 2 to take effect "as having been made by deed" did not, in the court's view, operate as a contractual release under seal given by the landlord to the guarantors; it reflected the statutory operation of the Plan as to the plan companies only.
• The court rejected arguments that conceptual issues of "ricochet" claims or missing assignment documentation justified refusal of summary judgment; the legal issues were suitable for determination on the papers and there was no realistic prospect that further factual investigation would change the legal conclusion.

Subsidiary matters: the claimant's point under section 25 of the Landlord and Tenant (Covenants) Act 1995 was pleaded but not pursued. The court noted paragraph 7.4 of the Plan which might be construed as preserving landlords' rights against third parties but no submissions established that the Plan effected any such release.

The claim succeeded: the court gave judgment for Oceanfill. The court held that the Part 26A restructuring plan operated by statutory effect to release the plan companies but did not discharge third-party guarantors; the contractual provisions in the Licence to Assign preserved guarantors' liability save for a release under seal, which did not exist here. For these reasons summary judgment was appropriate and the claimant was entitled to judgment on the claim.