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Victory for MacDonald Oates in the Court of Appeal
Shaw v Doleman [2009] EWCA Civ 283
On April 1, 2009, the Court of Appeal gave judgment in Shaw v Doleman [2009] EWCA Civ 283, in which MacDonald Oates acted for the successful respondent.
In dismissing the appeal, the Court of Appeal held that by virtue of the Insolvency Act 1986 s.178(4)(b) a former tenant was not released from liability under an AGA by a disclaimer of the lease. The AGA expressed the period of the guarantee as being limited to “the period during which the Assignee is bound by the tenant covenants of the Lease”, whilst it also gave the landlord a ‘put option’ to require the former tenant to take a new lease in the event of termination of the lease by disclaimer. Although the assignee company ceased to be bound by the tenant covenants of the lease upon disclaimer, for the purposes of liability under the AGA the assignee was deemed to remain bound by them (applying the House of Lords case of Hindcastle v Barbara Attenborough Associates Ltd (1996)), so that the former tenant’s liability under the AGA continued. The Court of Appeal also found that the existence of the put option was not inconsistent with such continuing liability.
This important decision by the Court of Appeal provides clarification of the law in this area and is especially relevant in the current economic climate, where landlords of commercial premises are increasingly faced with the insolvency of a tenant company and look to rely upon guarantees given.
Timothy Fancourt QC and Edward Peters, both of Falcon Chambers were instructed by MacDonald Oates to represent the respondent.
For more information on the case please contact Patrick Jenkins in the firm’s Litigation Department.
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