Kiko UK Limited v Jamino Limited & Anor

In construing a parent-company guarantee, the court must read the instrument objectively as a whole and against its commercial background. A liquidator’s disclaimer of an assignee’s lease can amount to a contractual failure to perform where it causes the assignor to incur liabilities under an authorised guarantee agreement. A guarantee does not end on disclaimer unless the deed contains very clear words to that effect. Where the disclaimer is the reason, and the contractual basis, for the landlord requiring the assignor to take a replacement lease, the resulting obligations can arise from the assignee’s failure. The statutory continuation of third-party rights and liabilities under section 178(4) of the Insolvency Act 1986 supports that construction.

Kiko assigned a commercial lease to Jamino, a subsidiary of Pianoforte. Kiko entered into an authorised guarantee agreement with the landlord and Pianoforte executed a parent-company guarantee and indemnity. After Jamino defaulted and entered liquidation, its liquidator disclaimed the lease. The landlord then required Kiko to accept a new lease, causing further costs and liabilities.

At trial, the London Circuit Commercial Court held that the disclaimer was not a failure within the parent-company guarantee and dismissed Kiko’s claim for the new-lease costs, although it awarded other sums. The decision was reported at [2025] EWHC 1510 (Comm). The appeal concerned whether the disclaimer was a contractual failure and whether the new-lease obligations arose from it.

Appeal allowed. Phillips LJ gave the judgment, with Newey and Cobb LJJ agreeing.

1. Objective construction. The contractual wording had to be interpreted objectively, asking what a reasonable person with the background knowledge reasonably available to the parties would have understood it to mean. The meaning of failure depended on clause 3.2 and the PCG as a whole, viewed against the commercial background. This reflected the approach in FCA v Arch Insurance (UK) Ltd [2021] UKSC 1.
2. Disclaimer as failure. The disclaimer determined Jamino’s liabilities under section 178(4)(a) of the Insolvency Act 1986, but section 178(4)(b) preserved the rights and liabilities of other persons. The reasoning in Hindcastle Ltd v Barbara Attenborough Associates Ltd [1997] AC 70 showed that the commercial purpose of a guarantee is generally to place the risk of the tenant’s insolvency on the guarantor. Clauses 2.2 and 4.1.8 reinforced that Pianoforte’s liability continued during statutory continuation and was unaffected by disclaimer. Very clear words would have been required to terminate the guarantee, and the PCG contained no such words.
3. Arising from. The expression did not require the disclaimer to be the immediate cause of the new-lease obligations. The disclaimer, Jamino’s rent failures, the breach of the PCG and Kiko’s obligation to accept the new lease were closely linked. The disclaimer was also the sole contractual basis on which the landlord could require Kiko to take the new lease under the authorised guarantee agreement. The obligations therefore arose from Jamino’s failure.
4. It was unnecessary to decide whether clause 3.2 independently indemnified all costs and liabilities arising under the authorised guarantee agreement, because the appeal succeeded on the first four grounds.

The parties were invited to agree the order, including the appropriate judgment sums and interest. Written submissions were to be provided on any dispute concerning those sums or costs.

• Court of Appeal (Civil Division): In [2026] EWCA Civ 513, the appeal was allowed. The court held that the lease disclaimer constituted a failure within the parent-company guarantee and that the new-lease obligations arose from that failure.
• London Circuit Commercial Court: In [2025] EWHC 1510 (Comm), the judge dismissed Kiko’s claim for compensation for the new-lease costs, while awarding other reimbursement and prospective litigation expenses.
• Earlier summary judgment: In [2025] EWHC 720 (Comm), Kiko obtained judgment for part of its reimbursement claim against Pianoforte.