The High Court has recently considered the extent of the liability of a former tenant under an AGA and an assignee's parent company under the terms of a separate guarantee and indemnity agreement.
In November 2016 Kiko UK Ltd ('Kiko') entered into a lease of a commercial space on Oxford Street for a term 10 years (the Lease).
In September 2019 Kiko assigned the Lease to Jamino Limited (Jamino), a subsidiary of Pianoforte Holdings S.p.A (Pianoforte) and the tenant, assignee and landlord entered into an Authorised Guarantee Agreement (AGA) under which Kiko guaranteed to the landlord, Pontegadea UK Ltd (Pontegadea) that Jamino would perform the tenant obligations under the Lease.
At around the same time, Kiko, Jamino and Pianoforte entered into a guarantee and indemnity agreement which was in effect a parent company guarantee (the PCG) pursuant to which Pianoforte guaranteed to Kiko that Jamino would pay the rent and perform the tenant covenants in the Lease and that if Jamino failed to perform these then Pianoforte would pay or perform them. Pianoforte also provided a separate indemnity within the PCG in respect of those things which included any costs or liabilities for Kiko arising under the AGA.
So far so good for Kiko, they assigned the Lease and whilst they were required to enter into an AGA as a condition of the assignment, they mitigated their exposure by obtaining a separate indemnity from Pianoforte.
However, when Jamino suffered financial difficulties, Kiko was liable to Pontegadea for rent and other fees pursuant to its covenants in the AGA and Kiko then looked to Pianoforte to indemnify them under the terms of the PCG. Kiko, Jamino and Pianoforte entered into a settlement agreement documenting a reduction in the liability of Pianoforte pursuant to the PCG on the basis that Pianoforte would settlement the balance in instalments.
Jamino subsequently went into liquidation and the Lease was disclaimed. However, pursuant to section 178(4)(b) of the insolvency Act 1986 it was deemed to continue to subsist as between Kiko, Pianoforte and Pontegadea until Pontegadea compelled Kiko to enter into a new lease of the property and that new lease completed.
This case is the final part of Kiko's money claim against Pianoforte pursuant to the terms of the PCG, a substantial part of it having been dealt with it previously via an application for summary judgment.
A central matter for determination was whether Pianoforte was still entitled to the discount in the settlement agreement. The Court held that as Pianoforte had failed to make the payments due under the settlement agreement (which was not made by deed), it was unenforceable for lack of consideration and Pianoforte was no longer entitled to the discount that it had documented.
The Court also decided that the disclaimer of the Lease did not arise from Jamino's failures and so Kiko was not entitled to damages in respect of losses incurred in connection with entering into a new lease under the terms of the PCG.
However, when Jamino suffered financial difficulties, Kiko was liable to Pontegadea for rent and other fees pursuant to its covenants in the AGA and Kiko then looked to Pianoforte to indemnify them under the terms of the PCG. Kiko, Jamino and Pianoforte entered into a settlement agreement documenting a reduction in the liability of Pianoforte pursuant to the PCG on the basis that Pianoforte would settle the balance in instalments.
