Oceanfill Limited v Nuffield Wellbeing Limited & Anor.

A restructuring plan under Part 26A of the Companies Act 2006 takes effect by operation of law, in the same way as a scheme under Part 26. Where it releases a tenant from liabilities under a lease, it does not thereby release third-party guarantors unless the relevant guarantee provides for that result. The lease remains subsisting as between the landlord and guarantors, and rent may continue to fall due even though the tenant is no longer required to pay it. Clear contractual provisions preserving a guarantor’s liability despite variations or other exonerating events will be enforced. Summary judgment is appropriate for a short point of law or construction where the court has the evidence necessary to decide it and a fuller trial offers no real prospect of altering the result.

Oceanfill, the freehold owner of commercial premises, sought summary judgment for rent and related arrears under a lease. The lease had been assigned to Virgin Active Limited, whose obligations were guaranteed by Nuffield and Cannons under a licence to assign and related guarantee provisions.

Virgin Active became subject to a restructuring plan sanctioned under Part 26A of the Companies Act 2006. The plan released the tenant from rent and other liabilities concerning the premises. The defendants argued that the plan either altered the lease so that no rent fell due or discharged their guarantee obligations. The central issues were the legal effect of the plan on third-party guarantors, the construction of the guarantee provisions, and whether the claim should proceed to trial.

1. Summary judgment. The application was suitable for summary determination. The defences raised short, novel points of law and construction. The court had the evidence necessary to decide them, and the possibility that the unavailable assignment might contain relevant terms was speculative. The court applied the approach in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) and considered ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725 and Multiplex Construction Europe Ltd v Dunne [2017] EWHC 3073 (TCC).
2. Legal effect of the restructuring plan. The parity of language between Part 26A and Part 26 of the Companies Act 2006 required the conclusion that a Part 26A restructuring plan operates by law, rather than by agreement. It therefore released or discharged Virgin Active from the liabilities expressly compromised by the plan. It did not rewrite the lease as against third-party guarantors. As between the landlord and those guarantors, the lease remained valid and subsisting, and the rent continued to fall due even though it was no longer payable by the tenant.
3. Guarantee provisions. The licence to assign expressly preserved the landlord’s rights and the guarantors’ obligations despite variations of the lease and other matters that would otherwise exonerate the tenant, subject only to a release under seal given by the landlord. Such provisions are effective: Samuels Finance Group plc v Beechmanor Ltd [1993] 67 P&CR 282. The plan’s provision deeming its terms to take effect as a deed did not constitute a release under seal given by Oceanfill to Nuffield or Cannons. The defendants’ construction was also inconsistent with the reasoning in Holmes v Brunskill [1878] 3 Q.B.D. 495, because the contractual terms here provided for the relevant contingency.
4. Other matters. The plan did not address possible claims by third-party guarantors against the tenant. Any such claims did not justify withholding judgment, and the court expressed no concluded view on whether they would succeed. The unpursued argument under section 25 of the Landlord and Tenant (Covenants) Act 1995 did not require determination.
5. Disposition. Oceanfill was entitled to judgment on the claim. The court would ensure that any payment received under the plan did not result in double recovery.