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Liability under GAGAs clarified (EMI Group v Prudential Assurance)

In this article, Maxim Cardew analyses the recent decision in EMI Group Ltd v Prudential Assurance Co Ltd [2020] EWHC 2061 (Ch) in which he and John McGhee QC appeared successfully on behalf of Prudential (the landlord) against EMI (the guarantor). The court held that a guarantee (GAGA) of an authorised guarantee agreement (AGA) was valid and enforceable, despite the dissolution of the original tenant that had provided the AGA, and clarified the principles of severance applicable in the context of guarantees that would otherwise fail to comply with the Landlord and Tenant (Covenants) Act 1995 (LT(C)A 1995) as a result of either purporting to guarantee the liabilities of subsequent tenants or allowing such a liability to revive at some point in the future after a first assignment (eg on an assignment back). The court also considered what conditions needed to be satisfied for a guarantor to be released from its obligations ‘to the same extent’ as a tenant, as required by LT(C)A 1995. 

This article was first published by Lexis®PSL on 10/08/2020.

Source: Lexis®PSL

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