Clarion Solicitors LLP Blog

Living Apart Together - Recession Help for Leeds Couples

Wed, 01 Jul 2009 22:10:19 GMT

I am the Public Relations Officer for West Yorkshire committee of Resolution, an association of over 5700 family lawyers in England and Wales. Established 25 years ago, it promotes a non-confrontational, constructive approach to resolving family disputes. To find out more, visit http://www.resolution.org.uk/)

I set out below a press release issued today to provide assistance to couples who have to live apart but in the same household:

"Despite talk of an economic recovery, the recession is still making life hard for couples in Leeds wanting to move on after divorce, say local family lawyers as new online advice on living together post-divorce is unveiled.

Resolution, which represents 291 family lawyers in the Leeds area, says that continuing problems in the housing market are preventing divorcing couples from moving to separate accommodation after their divorce.

Family lawyer Rachel Spencer Robb of Leeds Resolution, said: "Selling the family home is often an important step for couples and their families making the transition from one home to two after divorce. But with limited mortgage deals, the increase in unemployment, and one in ten homeowners now in negative equity, selling up or moving on is easier said than done for many couples."

To help people in this situation, Resolution is today launching a series of online hints and tips for couples "living apart together" ahead of a national conference on the credit crunch and family law in London.

Rachel Spencer Robb continued: "Having made the difficult decision to split, it can be incredibly stressful for couples to then have to live together - and to not know when this property limbo will end.

"That's why we have launched these useful tips, available online or through your local Resolution solicitor, which outline some simple practical steps to dealing with debt, property issues and how to cope generally with living with your ex."

Here are some of the tips for couples "living apart together". For more tips, including those on dealing with debt and property, log onto http://www.resolution.org.uk/factsheets.

1. Try to agree some ‘ground rules' - especially around subjects that are likely to prompt argument. If you can't do this together - think about using a professional - such as a mediator - to help you to discuss and agree things calmly

2. Get short breaks from one another - a week-end with a friend, a day out - or even a short holiday will help you to see things from a fresh perspective.

3. If you can, try to stay cost efficient whilst you are still under the same roof. Continuing to share costs in regard to food, housekeeping items etc. will be better than doubling costs unnecessarily.

4. Play fair in regard to new partners or relationships - and don't expect to use your home as a base for entertaining! - this is particularly important if you are a parent.

5. Don't lose heart - no recession lasts forever - keep thinking creatively, get specialist advice in regard to finances, property and the lettings market."

Abuse of process to issue protective proceedings prior to assignment of the cause of action

Mon, 29 Jun 2009 10:35:25 GMT

The case of Pickthall v Hill Dickinson (1) and Martindale (2) [2009] EWCA Civ 543 was appealed by the appellant, Hill Dickinson Solicitors, on the question of whether a claim commenced against them by the respondent, Pickthall, should not be struck out as an abuse of process.

Background

Hill Dickinson had acted for Pickthall in the sale of his shares in a company. After completion of the transaction had taken place, an administration order was granted to the purchaser of the company and an injunction was granted against Pickthall preventing him from dealing with the completion monies. Various claims against Pickthall were upheld and he was ordered to pay a sum to the administrators.

Shortly before the expiry of the limitation period as set out under the Limitation Act 1980, Pickthall issued negligence proceedings against Hill Dickinson for the advice given to him in relation to the terms of the share agreement. However, at the time the claim form was issued, the cause of action was vested in the Official Receiver (as Pickthall had been made bankrupt) and it was only at a later stage that the claim was subsequently assigned to Pickthall.

Preliminary Issues

The judge determined that (i) at the date of assignment, the claim was statute barred; (ii) the claim should not be struck out as an abuse of process; (iii) it was, however, necessary to amend the claim form to plead the assignment; and (iv) the Court would exercise its discretion to allow the amendment. Pickthall accepted the limitation point and the necessity to amend to plead the assignment.

The issues which remained to be determined concerned the extent to which it was an abuse of process for a claimant to commence proceedings without having the relevant cause of action vested in him i.e. because at the time the claim form was issued, the cause of action was vested in the Official Receiver, and whether it would be right to allow him to amend his pleadings to plead a subsequent assignment of that cause of action when that assignment took place outside the relevant limitation period.

Result of Appeal

The Judge allowed the appeal on the grounds that Pickthall had started the proceedings at a time when he had no cause of action and had known that he had no cause of action. The Judge further ruled that where proceedings were started in the knowledge that the cause of action was vested in someone else, it was hard to see why those proceedings were not an abuse. Such a person had started proceedings in which, even if he proved all the facts he wanted to prove and established all the law he wanted to establish, he would still lose because he did not have a legal right to sue.

Only people who owned causes of action, or who had an appropriate interest in proceedings had any business asserting the cause of action or starting proceedings. Any other use of the Court's proceedings was improper. It made no difference that Pickthall had intended to get in the cause of action or had a prospect of doing so. He had still started someone else's cause of action in circumstances where that other person had not started it himself: his action was still technically flawed. Pickthall's claim was therefore an abuse and ought to be struck out as such.

This case effectively shows the importance of ensuring that, as a claimant, you have the legal right to sue a party. Without effective and accurate legal advice from the outset of a claim, a claimant may fall foul of a technicality and be prevented from bringing or pursuing what may otherwise be a legitimate claim.

If you are considering starting a claim or have already commenced proceedings and require further information or legal advice please contact one of the solicitors in the Commercial Dispute Resolution Department who will be more than happy to assist you with all aspects of your claim.

More Maintenance for McFarlane

Thu, 25 Jun 2009 09:14:14 GMT

A wife whose marriage was the subject of one of the landmark judicial decisions of recent times has succeeded in her bid for an increased level of maintenance payments from her former husband.

Julia McFarlane will now receive a minimum of £350,000.00 a year from Mr McFarlane, who is a partner at Deloitte. The maintenance will comprise 40% of his income up to £750,000.00, 20% of income between £750,000.00 and £1million, and 10% of income over £1million. Mr McFarlane's income has increased from £750,000.00 at the time of the divorce in 2006, to £1.1million. It is possible for parties who have already reached a financial settlement, or had an order made by the courts, to bring the matter back to court if their circumstances have changed, usually due to an increased or decreased level of income.

One of the factors that was taken into account in Mrs McFarlane's case was that although she would be able to live "comfortably" for the rest of her life if the maintenance stayed at the original level, looking at the circumstances of the parties' marriage it was clear that it had always been their intention that she would give up her career as a solicitor in order to look after the children, and that in doing so she would see the benefits of any increase in the husband's income position. The increased maintenance award therefore reflects the "plans and expectations" that the parties had during the marriage.

The maintenance will be reviewed again in 2015 when Mr McFarlane plans to retire.

The ruling will worry many former husbands, particularly the high earning City workers who already pay a significant proportion in tax, and they may feel that it would be better simply to retire early rather than risk having to pay even more over to their former wives. On the flip side, if Mr McFarlane's income drops below the level where he can afford Mrs McFarlane's basic needs then it is possible for him to return the matter to court and seek a downward variation of the maintenance payments.

Going, Going, Gone: Buying and Selling Property at Auction

Mon, 22 Jun 2009 14:22:47 GMT

According to the Council of Mortgage Lenders, there were 22,700 repossessions last year, with figures expected to top 30,000 in 2009.

Many buy to let landlords and struggling businesses are experiencing difficulties keeping up with mortgage payments and facing repossession. A large number of these properties, both commercial and residential, will end up in auction houses and we are increasingly seeing buyers with finances in place who are looking to boost their property holdings by picking up a bargain at auction.

The advantages of buying at auction are clear; bids are transparent, you will own the property relatively quickly (commonly completion is 28 working days from the date of the auction), and properties are usually offered at a competitive reserve price. However, there are pitfalls and we would recommend that the following steps are taken if you are considering purchasing a property at auction:

1. BUYER BEWARE

This legal principle will apply and it is therefore not only advisable to view any property you are interested in, but to also arrange a valuation and a survey to gauge the likely cost of any necessary repairs.

2. INFORMATION

The more information you have about the property and conditions of sale, the better equipped you will be to make an informed decision on how much you are prepared to pay. You should obtain details of the property from the auctioneers and pay special attention to the following:

2.1 General and Special Conditions of Sale

2.2 Important Notice to Bidders

2.3 Memorandum of Sale

2.4 Legal pack which will contain any Energy Performance Certificate, title information, searches and the Agreement for Sale. Ideally get your solicitor to cast their eye over this to avoid any nasty surprises as when the hammer falls you will be legally bound to comply with the terms of this contract.

2.5 Guide price (note this may change prior to the auction).

2.6 Any addendum which can be obtained on the day of the auction and sets out any additions or amendments to the catalogue.

3. FINANCE

It is highly advisable to have any finance required for the purchase arranged before the auction. As exchange of contracts will take place when the hammer falls, if your bid is successful you will be required to pay a 10% deposit on the day and the balance of the purchase price in 28 days.

Of course, there are also advantages to selling a property at auction and we are increasingly receiving instructions to act on property sales by auction, both by insolvency practitioners acting on distressed sales, and other sellers hoping to achieve the best possible market price. Again, it is the speed and certainty of auction sales which appeals to many discerning sellers.

The Benefit of an All Monies Guarantee

Fri, 12 Jun 2009 09:45:28 GMT

The recent unreported case of Bank of Scotland plc -v- (1) Constantine Makris (2) Ben O'Sullivan ChD, 2009 reaffirms the need for lenders to ensure that their standard form personal guarantees are for "all monies" rather than a specific liability.

General Principle

The liability of a guarantor under a personal guarantee is always contingent on the underlying obligation which it is actually guaranteeing.

If the parties to the underlying obligation decide to vary the obligations to the extent that the variation could be considered detrimental to the guarantor without first securing the guarantor's consent, then the guarantor may be able to argue their liability under the guarantee will be discharged. This general principle was established in the case of Holme -v- Brunskill [1877] 3-QBD495.

Background

In the above mentioned case, Constantine Makris, Ben O'Sullivan and Vicenzo Spano, set up a new company to operate a new bar. All three individuals were also directors of the company.

The Bank of Scotland plc (BoS) issued a proposed facility letter that offered the company an overdraft facility of up to £250,000.

Some of the conditions to the facility letter included:

A general debenture over the company along with a legal charge over the company's leasehold interest in the bar's premises;
An all monies guarantee by Mr Spano for £250,000 supported by a legal charge over his home;
An unsecured all monies guarantee from Mr Makris and Mr O'Sullivan for £50,000.

Each guarantee was signed and returned to BoS.

Whilst conducting legal due diligence BoS discovered that Mr Spano was not, as he had represented, the sole owner of his property. The property was in fact registered in the joint names of Mr Spano and Mr Spano's mother. Mr Spano's mother later offered BoS a joint guarantee and an indemnity and a charge over the property in favour of BoS along with her son. As a result of the change, BoS considered the security value of the property to be reduced and as a result BoS reduced the proposed overdraft facility to £230,000.

A new overdraft facility letter for £230,000 was issued and was duly accepted by the company.

Two years on, the company went into voluntary liquidation with estimated debts of £407,000.

BoS took action to recover the guaranteed amount from each of the guarantors.

As Mr Makris's personal guarantee was provided in respect of the original £250,000 facility, Mr Markis argued that his personal guarantee for £50,000 had been discharged by a material variation in the contract.

The Decision

The Court held that the change in the amount available for the overdraft facility was not a material variation of the contract.

The initial offer of an overdraft had been made subject to the condition that Mr Spano provide a charge over what had been represented as Mr Spano's property. The condition was not complied with because the property was jointly owned. The second facility letter was therefore not a variation of an existing contract but a fresh offer of a smaller amount on different conditions.

The guarantee Mr Makris provided was an all monies guarantee and it therefore covered the subsequent obligation entered into by the company.

Key Point for Personal Guarantees

This case should make all lenders aware that where a facility letter is negotiated and reissued it is important to have the benefit of an all monies guarantee rather than a specific liability guarantee and indemnity. This is essential as a specific liability guarantee and indemnity would not necessarily cover any variation to a facility letter.

If you would like to discuss this case in any more detail, then please do not hesitate to contact Jonathan Simms at Clarion Solicitors LLP on 0113 336 3387. Alternatively, Jonathan can be emailed at j.simms@clarionsolicitors.com

Redundancy pay rise

Tue, 09 Jun 2009 09:45:20 GMT

Further to my blog of 23 April 2009, the Government has now confirmed that the increase in the weekly limit used to calculate statutory redundancy payments from £350 to £380, will take place on 1 October 2009.

Statutory redundancy payments are calculated by using a formula that takes into account a person's age and length of service. This formula results in a number of weeks' pay, which is then multiplied by the employee's weekly pay subject to a maximum of, currently £350 per week. As of 1 October 2009, this figure will rise to £380.

The Government announced in the 2009 Budget that it would be making a one-off increase in the weekly limit, to provide more support to those individuals who are made redundant in the current economic climate. The weekly limit has been uprated annually since 1999, but the Government has stated that the limit will not rise again in February 2010, as it would usually do, instead remaining at £380 until February 2011.

Grandparents contact on relationship breakdown

Thu, 04 Jun 2009 10:03:23 GMT

When there are greater numbers of people in Great Britain over the age of 60 than there are under 16 years old, focus must turn to the older generation and their position and relationships within the family. In particular the situation that arises on the unfortunate breakdown of those relationships.

Many families in the country are touched in some way by divorce or separation but what happens if the children of the family are prevented from seeing their grandparents simply because one parent has fallen out with the other?

There may be other reasons why there might be a distancing of the child from his grandparents for example, as a result of divorce or separation of their parents, a death of a parent or a family feud.

The bond between child and grandparent is often very strong and loving and is often forgotten in the strains of resolving issues of contact between the child and the absent parent. It is sometimes seen to be difficult enough to ensure that a relationship continues between the child and it's parent without fitting in "extra" time for their grandparents. It is often the case that the parent's "time" with the child is eaten into as the days that they are allocated during the week, however many they may be, are taken up with visiting members of the family to ensure that those relationships continue.

Of course, there are only so many days during the week and the absent parent may be seen as the priority amongst the other family members. However, the relationship between the child and his or her grandparents is often on a different level and should be maintained as much as possible in addition to the child spending time with their parent. To retain those relationships with the older members of the family can only be in the child's best interests, ensuring the stability and a degree of normality when the child may be seeing his parent's relationship as far from this.

How does the Court provide for these relationships to continue? A Grandparent may make an application under s.8 of the Children Act 1989 for an order for contact, residence or other orders relating to the upbringing of a child in their own right, aside from whether the child has contact with their parent

It may be that as a result of a family feud that the parent does not wish the child to have contact with his grandparents despite the fact that the child may want to continue to see them. The Children Act must, in considering all applications hold the welfare of the child as paramount and should not be swayed by a parent's own personal view.

Technically, the Court requires a Grandparent to seek permission (leave) to make an application (unless the child has lived with his grandparents for at least three years within the 5 years preceding the application). In the writer's experience, no grandparent has yet been refused permission and the application for leave and the application for contact can be dealt with at the same time so no unnecessary delay occurs.

The Children Act 1989 highlights the importance to "promote contact between the child and his parents and other relatives or persons connected with the child". The Court would take into account all the circumstances of the case, the wishes and feelings of the child concerned (dependant upon their age and understanding) and the effect on the child of any change in their circumstances and how capable the applicants are of meeting the needs of the child or children.

The application would then proceed and the Court would be in a position to make an order provided to order contact between the child and his grandparents as is necessary and in the child's best interests.

The relationship between the child and his grandparents should be recognised and supported wherever possible, certainly the law provides for this. The grandparent's influence and support they can unconditionally give is often overlooked in the traumatic events of a relationship breakdown or death of a parent. In actual fact they may be the very people who can be looked to maintain the security and stability that the children require.

If you require any further advice in relation to this or any other family legal issue, please contact me on 0113 336 3349 or by email r.spencerrobb@clarionsolicitors.com.

A Stark Warning to Resolve Financial Matters Arising Out of the Breakdown of a Relationship

Thu, 28 May 2009 20:44:46 GMT

Headlines in the paper recently have told of Cherry Etherington who was evicted from her home, after her husband who left her 15 years ago to start up a new life in Bulgaria, claimed a share in the value of the former matrimonial home.

As far as Mrs Etherington knew her and her husband had a happy marriage until back in 1994 he told her, and their 2 sons, that he was going to live in Bulgaria. Although initially believing she would be going with him, it soon emerged that he had set up home with a second family. Divorce proceedings were issued based on his adultery but financial matters arising out of the divorce were not resolved. Over the past 15 years Mr Etherington has not contributed any money to the upkeep of the family home, school fees for the children or any form of maintenance. He did, however, still remain on the title deeds and the mortgage to the property, despite the fact that Mrs Etherington paid the mortgage contributions each and every month. This was somewhat difficult for her to do, given that she had the children to look after and was on low earnings. She decided that she wished to sell the property but because he was still on the mortgage and title deeds, she needed to trace him. She traced him and he put in a claim to one quarter of the value of the house.

The matter came to Court and a District Judge at the Southend County Court agreed with Mr Etherington's case and ordered the house to be sold, the mortgage paid and 25% of what was remaining to be paid over to Mr Etherington.

The result of this now is that Mrs Etherington has no home, no savings and little prospects of owing her own home again.

This is a harsh lesson to people, who have separated or even divorce their spouse, who do not get round to sorting out financial matters immediately. When we think of how much property prices have increased over the last 15 years, despite the recent dip in property prices, Mrs Etherington would have been better placed to sort the finances out at that stage. It may have been that she could have raised a small amount of money to buy out his interest or, depending on the level of equity in the property, he may not have got a significant amount from the house. Instead, because it was left, and property prices have increased significantly since the 1990's, she now has no home of her own.

At Clarion we always encourage people to resolve financial matters as soon as they feel able after separation. We have come across many cases where years down the line people try to sort out finances and find that as the Court value the assets as at the time of the hearing, they are giving away far more than perhaps they would have done had the finances been resolved at the date of separation. I dealt with a case whereby the parties had separated some 20 years ago and during that period my client, the husband, had received a number of promotions and was now a Senior Executive in the company he worked with, and had a Senior Executive's pension to go with it. Although they had purported to sort out financial matters by splitting the house, sorting out maintenance etc. the pension had not been dealt with. It was determined that the wife did have an interest in his pension and received a significant amount by way of a Pension Sharing Order. Had they finalised all matters at the time of separation, his pension would have remained largely intact, given that it was only in the last number of years that he had made significant contributions to it.

It is therefore a good idea to take legal advice at a very early stage when a relationship has broken down, to look at all the options available and get sensible advice.

Justine Osmotherley is a Senior Associate in the Family Team and is happy to discuss any aspect of this. She can be contacted on 0113 336 3323 or j.osmotherley@clarionsolicitors.com.

Reducing the risk of financial abuse of the elderly

Wed, 27 May 2009 08:05:43 GMT

A Bradford man has last week pleaded guilty to six offences of theft and fraud, crimes which can be said to be even more appalling because of the identity of the victim - a 85 year old woman. Mr Bhupinder Sahota is currently being tried at Bradford Crown Court for offences of stealing almost £185,000 from the elderly woman.

The reason that this sad case was drawn to my attention in the newspaper over the weekend was that Mr Sahota was acting for the victim under an Enduring Power of Attorney ("EPA"). In fact, he has admitted that he used this legal document in particular to defraud the elderly victim out of over £20,000.

An Enduring Power of Attorney was a legal document, which prior to October 2007 could be signed by an individual in order to place trust in another to deal with all their legal and financial affairs. The donor (the individual who signed the document appointing the attorney(s)) would sign the EPA knowing that should they lose mental capacity in the future, their attorney(s) could continue to manage their affairs on their behalf.

It meant however, that with only the signature of the donor and attorney(s), accompanied by independent witnesses, a person could nominate one or more attorneys to effectively step into their shoes immediately and do all what they could do. The main advantage of such a document was that if the paper work was becoming too much for an individual, typically the elderly, then they could nominate a family member or another person such as a legal professional who they trust to manage their finances on their behalf. They could sign cheques, deal with the bank accounts and sell property. The document never even had to be seen by a court until the donor was losing capacity. Only at that time did the Attorney's then have the legal obligation to notify certain family members and register the document with the Court at the Office of the Public Guardian.

Since October 2007, no new Enduring Powers of Attorneys can be created. Any existing EPA's can continue to be used and when the capacity of the donor falls into question, they must still be registered with the Court. At Clarion, we continue to act for many clients under Enduring Powers of Attorneys and assist other attorneys with the process of registration with the Court.

Given the potential for abuse under the old form Enduring Powers of Attorney, the government created the new Lasting Powers of Attorney. Now not only can a donor appoint a person they trust over their legal and financial affairs, but also over their personal welfare, something which was not possible under the previous Enduring Power's of Attorney. It also does not need to be the same Attorney(s) for both roles.

An Attorney under a Lasting Power of Attorney has the same powers as an Attorney under an Enduring Power of Attorney and is placed in the same position of trust, meaning it is still a very important decision a donor must think carefully about. There are however more safeguards, introduced by the Mental Capacity Act 2005 to hopefully reduce the number of cases of financial abuse particularly amongst the elderly and the vulnerable. These are as follows:

1. The Attorney (s) cannot begin to use the LPA until it has been registered with the Court. This process can take some time, something which the Court is working on, however there are various options Clarion can assist with to help in the interim period if funds are urgently needed, for example to pay for care fees. The main point is however that no bank or other company should accept an LPA unless it has now received the official stamp of the Office of the Public Guardian to show their approval of the appointment and to show that the LPA, according to their standards and checks, has been created legitimately.

2. The LPA is a much larger form compared to an EPA. The form must now not only be signed and witnessed by the donor and attorneys but also a Certificate Provider. A Certificate Provider is an independent person who must see the donor without the attorney(s) present. They must read through the LPA with the donor and certify that they have spoken to the donor alone and that they are happy that the donor is signing the LPA with the full understanding of the wide power the LPA entails and that there is no undue influence or pressure from anyone concerned. They are there to try and ensure as much as possible that the LPA is being created out of the donors own free will. Furthermore, not anyone can be a certificate provider. It must be either a person who has known the donor personally for at least 2 years or be a professional such as a GP or solicitor. A Certificate Provider must also not be in any way linked to the attorneys by family ties or through a business connection.

3. As part of the registration process with the Court, the donor must also nominate up to five "Named Persons" to be notified of the LPA and its registration. These people are typically family members and it gives them the opportunity to also object at this initial stage, before the document has begun to be used. Therefore adding another level of protection before an Attorney can gain access a donors funds.

4. The donor can also state clear restrictions and guidance to the attorney(s) on which assets they can and cannot deal with and how they wish for assets to be dealt with.

A lasting power of attorney is sometimes misconstrued as being only for the elderly. This is simply not the case. Unfortunately incapacity and mental illness can occur at any time, however once a lasting power of attorney has been created, worrying about the need to manage a loved ones funds when they may be needed for their care, can be avoided. One less problem to worry about in difficult times. We recommend to all our clients that they think about creating a lasting power of attorney typically when creating/updating their wills.

Should you require any further information about registering an existing Enduring Power of Attorney or making a new Lasting Power of Attorney, please do not hesitate to contact a member of the Private Client team.

Lease Disclaimers and Authorised Guarantee Agreements

Fri, 22 May 2009 16:37:39 GMT

The recent Court of Appeal case of Gabriella Shaw v Hazel Dolemand [2009] has further clarified the approach of the Courts when considering the continuing liability of a guarantor of a lease on the insolvency of the tenant.

The Insolvency Act 1986

Section 178 of the Insolvency Act 1986 (the "Act") gives the liquidator of an insolvent company the power to disclaim "Onerous Property". Section 178(3) of the Act defines Onerous Property and includes a lease.

Should the liquidator of an insolvent company choose to disclaim a lease, he is required to serve all interested parties with notice. If however, after 14 days of serving notice on all the relevant parties none of the parties has made an application to the Court objecting, the lease is considered disclaimed.

According to section 178(4) of the Act the effect of a disclaimer is to end any right, interest and liability of the insolvent company in the lease but does not, except so far as is necessary for the purpose of releasing the insolvent company from any liability, affect the rights or liabilities of any other person.

The Landlord and Tenants (Covenants) Act 1995 and Authorised Guarantee Agreements

It is well established that the disclaimer of a lease does not automatically bring a third party's guarantee of the tenant's obligations to the landlord to an end (Hindcastle Limited v Barbara Attenborough Associates Limited).

Under section 5 of the Landlord and Tenants (Covenants) Act 1995 (the "L&T Act") where a tenant of a lease granted after 1 January 1996, lawfully assigns that lease to a third party, the tenant is released from liability from that date. However, the L&T Act also created the concept of an authorised guarantee agreement ("AGA"). An AGA is a document by which the outgoing tenant is asked to guarantee the performance of the tenant's obligations in the lease by the new tenant.

AGAs are used by landlords on an assignment by the tenant of their lease to a new tenant to ensure that they are protected against the risk of the new tenant defaulting on rent payments or other lease obligations. If the new tenant defaults on the lease the AGA allows the landlord to claim any monies outstanding from the previous tenant.

The Facts of the Case

In March 2004 Ms Shaw entered into a 10 year lease of a ground floor lock up shop and basement. In August 2005 Ms Shaw assigned her tenancy to the Ceramic Café Limited ("Ceramic"). The landlord provided Ms Shaw with it's consent to assign the lease however, it was a term of the landlord's consent that when Ms Shaw assigned the lease she would have to enter into an AGA in respect of Ceramic's obligations.

Unfortunately, Ceramic started to have financial difficulties and went into liquidation in August 2007. As part of it's financial struggles Ceramic had neglected to pay some of it's rent. The liquidator disclaimed the lease on 31 October 2007 and the landlord sought to make Ms Shaw liable for the outstanding rent under the AGA.

Ms Shaw argued that the operation of the L&T Act had released her from liability as a tenant on her assignment of the lease to Ceramic. In addition, Ms Shaw argued that she was not liable for the outstanding rent as a result of entering into the AGA because the AGA stated that she would only be required to guarantee Ceramic's liability under the lease throughout the ‘Liability Period' as defined in the AGA.

Ms Shaw proposed that the Liability Period had come to an end when the liquidator disclaimed the lease because Ceramics obligations under the lease, as the current tenant, had terminated at that time. Ms Shaw argued that she could not be held to guarantee Ceramic's compliance with the terms of the lease if Ceramic was no longer liable itself.

The Court of Appeal held that Ms Shaw remained liable under the AGA despite the disclaimer of the lease by the liquidator. The Court suggested that if the parties to the AGA had intended the AGA to terminate at the same time as the tenant's liabilities under the lease they could have drafted clear provisions expressly stating this. The Court found that the definition of the Liability Period was not clear enough to show this intention.

Conclusion

The case emphasises that on an assignment of a lease and the signing of an AGA outgoing tenants should be extremely careful about the wording which is used to define their liability to guarantee the new tenants obligations in the event of the new tenant's insolvency. Should outgoing tenants wish to avoid liability for the rent arrears of the subsequent tenant more is required than simply to link the termination of their liability to the end of liability of an insolvent tenent.