In Kiko UK Ltd v Jamino Ltd (in liquidation) and another company [2026] the court looked at the proper interpretation of a deed of guarantee and indemnity (the Guarantee) that had been entered into upon the assignment of a commercial lease.
When assigning a tenancy, the involvement of the original tenant can continue beyond assignment where they are asked by the landlord to guarantee compliance by the incoming tenant with the tenant covenants in the lease. Whilst these so-called authorised guarantee agreements are commonly required by landlords to protect themselves from the financial risk of taking on a new tenant, in this case the original tenant (Kiko) sought to mitigate its exposure pursuant to the authorised guarantee agreement it was providing to the landlord (the AGA) by obtaining a separate deed of guarantee and indemnity for itself (from Pianoforte, the parent company of the assignee) (the Guarantee) to kick in if any demands were made pursuant to the AGA in the future.
Pursuant to the Guarantee, Pianoforte agreed to indemnify Kiko from all costs and liabilities (including those arising under the AGA) arising from any failure by the assignee to pay the lease rent or observe or perform any of the tenant covenants of the lease.
The High Court decision in 2025
We previously wrote about the High Court judgment in this case in our July 2025 article.
One element of that decision was that the disclaimer of the lease by the assignee's liquidator did not, the Court found, arise from a "failure" by the assignee to perform the tenant covenants in the lease because the disclaimer's effect was to determine the ongoing liabilities. On a proper interpretation of the Guarantee, Pianoforte was not therefore liable to indemnify Kiko in respect of the costs it incurred in connection with the request to enter into a new lease it had received from the landlord pursuant to the AGA.
Back to now – the recent appeal
An appeal to the Court of Appeal was subsequently allowed (involving principles of contractual interpretation and insolvency law) to look again at whether the costs of the new lease that Kiko had been required to enter into could be recovered by Kiko from Pianoforte pursuant to the terms of the Guarantee.
The Court of Appeal considered relevant case law and allowed the appeal, holding that:
- As set out in a recent case, a contract "must be interpreted objectively by asking what a reasonable person, with all the background knowledge which would reasonably have been available to the parties when they entered into the contract, would have understood the language of the contract to mean".
- It was clear in these circumstances that the disclaimer of the lease constituted a "failure" to comply with the lease covenants as envisaged by the terms of the Guarantee because it would render Kiko liable under the AGA as a result of the actions or inactions of the assignee in relation to the lease. It was also clear that Kiko's obligation to take a new lease did "arise from" that failure.
- Section 178 of the Insolvency Act makes clear that whilst a liquidator has the power to disclaim onerous property, that disclaimer does not affect the rights and liabilities of any other person, including any guarantor. Very clear words are required for a finding that the parties agreed that a guarantee should terminate on disclaimer because "insolvency or bankruptcy are precisely the circumstances when the guarantee is likely to become operative" and there were no such words in the Guarantee here.
While the importance of clear and well drafted indemnity and guarantee provisions remains paramount, the Court of Appeal applied a pragmatic approach to interpreting the Guarantee in this case, recognising that its commercial purpose must have included protecting Kiko in the event of the assignee's insolvency.
