We have an interesting AGA/insolvency/1995 Act case to look at in Shaw v Doleman [2009] EWCA Civ 283 (not yet available on free-to-view legal information services). It is a Court of Appeal case on the enforceability of an AGA after the disclaimer of a lease by the liquidator of the current tenant. It seems from the case report that the AGA was drafted by making use of a common precedent to be found in the Encyclopaedia of Forms and Precedents. The EFP form of AGA states that the former tenant remains liable under the AGA for the “Liability Period” which is defined as “the period during which the Assignee is bound by the tenant covenants of the Lease.” So, argued the former tenant, as the disclaimer of the lease by the assignee’s liquidator had brought the assignee’s liability to an end, the Liability Period had ended too, and so the liability of the former tenant under the AGA must have come to an end. Not a bad argument, really. Thankfully, for all of those who have used the EFP form, the Court of Appeal disagreed, and interpreted the Liability Period (and the AGA as a whole) in the light of the continuation of liability created by section 178(4) Insolvency Act 1986 and Hindcastle Ltd v. Barbara Attenborough Ltd [1997] AC 70. The former tenant therefore remained liable under the terms of the AGA for the assignee’s default. One cannot help thinking that this was a narrow escape for the landlord. Courts are traditionally gentle in their treatment of guarantors.
Property PSL