Kiko UK Limited v Jamino Limited (in liquidation) & Anor

An indemnity covering costs and liabilities arising from an authorised guarantee agreement applied only where those costs and liabilities also arose from the assignee’s failure to perform the lease. A liquidator’s disclaimer of the lease was not itself a failure by the tenant to perform its covenants. The indemnity therefore did not cover the assignor’s obligation to accept a replacement lease or liabilities arising under it.

A settlement agreement reducing an admitted debt was unenforceable for want of consideration where the creditor received no new legal benefit. Payment of existing liabilities by instalments and an alleged practical advantage were insufficient. Promissory estoppel and waiver also failed on the evidence.

The claimant had assigned a commercial lease to the first defendant and entered into an authorised guarantee agreement. The second defendant, the first defendant’s parent, gave a parent company guarantee and indemnity in favour of the claimant.

The first defendant later entered liquidation and its lease was disclaimed. The landlord required the claimant to accept a new lease. The claimant sought indemnification for sums paid under the authorised guarantee agreement, the loss of a contractual discount under a settlement agreement, liabilities under the new lease, legal expenses and interest.

The court determined the extent of the indemnity, the enforceability and effect of the settlement agreement, and whether disclaimer and the replacement lease fell within the indemnity.

1. Construction of the indemnity. The parent company guarantee was construed as indemnifying the claimant against costs and liabilities, including those arising under the authorised guarantee agreement, only where they arose from the first defendant’s failure to pay rent or perform tenant covenants. The wording did not extend to every liability arising under the authorised guarantee agreement.
2. Settlement discount. The settlement agreement was unenforceable because it was not made by deed and the alleged consideration consisted only of payment of existing liabilities. The rule in Foakes v Beer, following Pinnel’s Case, applied. The suggested practical benefit was insufficient, and no arguable defence to the original debt had been shown to have been surrendered. The claimant was entitled to recover the discount.
3. Estoppel and waiver. The evidence did not establish any clear promise or representation that the discount would remain available. Payment of an existing liability did not establish detrimental reliance, and the claimant had expressly reserved its rights. Waiver was also unsustainable.
4. Replacement lease. The obligation to accept the new lease arose under the authorised guarantee agreement following disclaimer. However, disclaimer was not a breach, failure to perform, or sufficiently analogous failure by the tenant to perform its lease covenants. The resulting liabilities therefore fell outside the indemnity.
5. Loss and orders. The claims for rent, other payments, property expenses and related legal costs under the new lease failed. The court awarded £419,394.53 for reimbursement of payments and £23,000 for prospective litigation expenses. Interest and costs were reserved for a consequential hearing.

First-instance decision. No prior appellate decision is stated in the judgment.