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

An authorised guarantee agreement is construed as a whole. Clear words are required before it is treated as ending the original tenant’s liability upon disclaimer of the lease. A statutory disclaimer determines the insolvent company’s rights and liabilities, but ordinarily leaves the liabilities of the original tenant and any surety unaffected. The commercial purpose of a guarantee, including allocating insolvency risk to the guarantor, is relevant to construction.

Summary judgment may be refused where a defendant shows a real, rather than fanciful, prospect of establishing a defence at trial. The court may consider evidence reasonably expected to become available and whether fuller investigation could alter the outcome.

The claimant had assigned a commercial lease to the first defendant and entered into an authorised guarantee agreement with the landlord. It also obtained a parent company guarantee from the second defendant. After the first defendant entered liquidation, its liquidator disclaimed the lease under Insolvency Act 1986, section 178.

The claimant sought summary judgment against the second defendant for sums paid or payable under the guarantees. The principal issue was whether clause 6.2 of the authorised guarantee agreement ended the claimant’s liability, and therefore the second defendant’s indemnity obligation, after disclaimer. A subsidiary issue concerned alleged double recovery through a rent deposit and a later cash payment.

1. The court granted summary judgment on the construction issue. The authorised guarantee agreement did not terminate the claimant’s liability upon disclaimer.

2. Under section 178(4)(b) of the Insolvency Act 1986, disclaimer determines the insolvent company’s rights, interests and liabilities in the disclaimed property, but does not otherwise affect another person’s rights or liabilities. That principle was established in Hindcastle v Barbara Attenborough [1997] AC 70 and confirmed after the Landlord and Tenant (Covenants) Act 1995 in Shaw v Doleman [2009] EWCA Civ 283; [2009] BCC 730.

3. An authorised guarantee agreement is the statutory mechanism by which an original tenant may remain liable after assignment. Its scope depends on its wording. Clause 3 expressly provided that the claimant’s liability was not discharged or affected by disclaimer. Clause 6.2 did not contain the very clear words required to overcome the statutory effect of disclaimer. Reading clause 6.2 as ending liability would also create an unexplained contradiction with clause 3 and would be commercially improbable, because the guarantee would cease to operate when the assignee’s insolvency made it most valuable.

4. The court declined to enter judgment for the disputed monetary sums. Applying the principles summarised in Easyair Ltd v Opal Telecom Ltd [2009] EWHC Civ 339 (Ch), the alleged rent-deposit deductions and the £40,000 payment raised realistically arguable accounting issues. Fuller information from the lessor’s solicitors might affect the evidence and outcome at trial.

5. The accounting issues were left for trial. Costs of the summary judgment application and the amendment were reserved to the trial judge. Permission was granted to re-re-amend the Particulars of Claim, and the second defendant was directed to file its defence within ten days.

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