Home Information Cases Legends Surf Shops Plc (In Administrative Receivership) v Sun Life Assurance Society Plc (2005)

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Legends Surf Shops Plc (In Administrative Receivership) v Sun Life Assurance Society Plc (2005)

Summary

It was not appropriate to strike out a tenant's claim for relief from forfeiture where the trial judge might conclude that the landlord could not insist on an authorised guarantee agreement within the meaning of the Landlord and Tenant (Covenants) Act 1995 s.16, put forward so that the lease could be assigned, being executed personally by the administrative receivers of the tenant.

Facts

The appellant landlord (S) appealed against the decision refusing to strike out a claim for relief from forfeiture brought by the claimant tenant (L). L was the original tenant of a lease of shop premises in Kingston under an underlease. S was the landlord by assignment. L had gone into administrative receivership. The lease thereupon became liable to be forfeited. S had physically re-entered the premises and forfeited the lease. L had brought proceedings for relief against forfeiture so that it could assign the benefit of the term to another tenant. By clause 4.9.1 of the lease, prior to assigning the lease L had to execute and deliver to S an authorised guarantee agreement (AGA). The AGA was defined by clause 4.7.1.2 as being both an AGA within the meaning of the Landlord and Tenant (Covenants) Act 1995 s.16 and one in a form which the landlord reasonably required. S had sought an AGA from L in relation to the proposed assignee. S had been offered a guarantee not only from L but also from a third party whose financial standing was not questioned, and a rent deposit. S argued that it was entitled to insist that the relevant guarantee was given not only by L but by the administrative receivers personally. L argued that S was seeking to force the receivers to give a personal guarantee when they were unlikely to do so in order to leave S free to re-let the premises to a new tenant.

Held

If L had not gone into administrative receivership, the AGA it was willing to execute and deliver would fall within clause 4.9.1 and would also be an AGA within the meaning of s.16 of the 1995 Act. If S could object at all, it could only be to the form of the agreement and, even then, only if such objection was reasonable. It followed that, in such circumstances, had S forfeited the lease, L would have an arguable claim for relief against forfeiture. The administrative receivership did not alter that. The AGA, without personal guarantee from the administrative receivers, was still an AGA within the meaning of s.16 of the 1995 Act. It therefore fell within both the definition in clause 4.7.1.2 of the lease and met the requirements of clause 4.9.1. The only objection which could be taken to it was that it was not in "such form as the landlord reasonably required". Whether S's insistence on the provision of personal guarantees could be considered reasonable was a question of fact to be decided by the trial judge, Ashworth Frazer Ltd v Gloucester City Council (2001) UKHL 59 , (2001) 46 EG 180 (CS) applied. The trial judge might conclude that, in the context of the lease, the considerations which S could take into account in determining whether the form of the AGA was one which he reasonably required did not include the possibility of requiring the administrative receivers to offer personal guarantees. The lease required guarantees from the outgoing tenant and also on behalf of the incoming new tenant. It did not require any guarantees from the administrative receivers or any other third party. It was at least possible that the trial judge would consider that S's rejection of the AGA was not reasonable. In the circumstances it was not appropriate to strike out L's claim for relief from forfeiture.

Appeal dismissed.

Chancery Division
Laddie J
Judgment date
14 July 2005
References

​[2005] EWHC 1438 (Ch)

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