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England and Wales High Court (Commercial Court) Decisions
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Kiko UK Ltd v Jamino Limited (in liquidation) & Anor [2025] EWHC 1510 (Comm) (20 June 2025)
URL: http://www.bailii.org/ew/cases/EWHC/Comm/2025/1510.html
Cite as:
[2025] EWHC 1510 (Comm)
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Neutral Citation Number: [2025] EWHC 1510 (Comm) |
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Case No: LM-2024-000013 |
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
LONDON CIRCUIT COMMERCIAL COURT (KBD)
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Royal Courts of Justice, Rolls Building Fetter Lane, London, EC4A 1NL |
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20/06/2025 |
B e f o r e :
HIS HONOUR JUDGE CADWALLADER
Between :
KIKO UK LIMITED
- and -
(1) JAMINO LIMITED (in liquidation)
(2) PIANOFORTE HOLDINGS S.p.A.
____________________
Between:
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KIKO UK LIMITED
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Claimant
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- and -
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(1) JAMINO LIMITED (in liquidation) (2) PIANOFORTE HOLDINGS S.p.A.
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Defendants
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John Robb (instructed by Bermans Limited) for the Claimant
Ben Walker-Nolan (instructed by William Sturges LLP) for the Second Defendant
Hearing date: 8, 9 April 2025
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HTML VERSION OF JUDGMENT
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Crown Copyright ©
Judge Cadwallader:
Introduction
- This is a claim by the assignor of a lease ("Kiko") against its assignee, the first defendant ("Jamino"), and against the assignee's parent company and guarantor, the second defendant ("Pianoforte"), a company registered in Italy.
- By a lease dated 2 November 2016 ("the Lease"), Kiko took the part of the ground and first floors of premises at 48 Oxford St, London W1 for a term of 10 years commencing on that date at an initial rent of £525,000 per annum for the first five years, and then subject to review, together with an insurance rent and service charge. The right to set off other liabilities against those obligations was excluded. There was a qualified covenant against assignment.
- On or about 30 September 2019 Kiko assigned its interest in the Lease to Jamino, the 100% subsidiary of Pianoforte, and entered into an authorised guarantee agreement ("the AGA") with Jamino and the landlord, Pontegadea UK Ltd ("Pontegadea"), by which Kiko promised Pontegadea that Jamino would duly perform the obligations of the tenant under the Lease.
- At about the same time Kiko, Jamino and Pianoforte entered into a guarantee and indemnity agreement by deed (the parent company guarantee or "the PCG"). By the PCG, Pianoforte guaranteed to Kiko (by clause 3.1):
(1) that Jamino "shall pay the rents reserved by the Lease and any interim rent determined under the LTA 1954 (if applicable) and observe and perform the tenant covenants of the Lease"; and
(2) "that if [Jamino] fails to pay any of those rents or to observe or perform any of those tenant covenants, [it, Pianoforte] shall pay or observe and perform them."
Pianoforte promised Kiko (by clause 3.2) as principal obligor and as a separate and independent obligation and liability "to indemnify and keep indemnified [Kiko] (including for the avoidance of doubt any costs and liabilities of [Kiko] arising under any Authorised Guarantee Agreement)" arising from any failure of Jamino either (i) to pay any of the rents reserved by the Old Lease and any interim rent determined under the LTA 1954 (if applicable) or (ii) to observe or perform any of the tenant covenants of the Old Lease.
- Thereafter, Jamino began to experience financial difficulties and to default on payment of rent under the Lease.
- On 21 July 2022 Pianoforte, Jamino and Kiko entered into a settlement agreement ("the Settlement Agreement") in relation to Kiko's liability under the AGA and Pianoforte's resulting liability to Kiko. It provided for a reduction in the liability of Pianoforte by £170,492.18, referred to as "the Discount".
- These proceedings were commenced on 17 January 2024. On 22 May 2024 Jamino entered into creditors' voluntary liquidation and on 28 June 2024 its liquidator gave notice disclaiming Jamino's interest in the Lease. As between Kiko, Pianoforte and Pontegadea it was deemed to continue to subsist, however, pursuant to section 178(4)(b) of the Insolvency Act 1986.
- On or about 26 July 2024 Pontegadea required Kiko to enter into a new lease agreement. The parties agree that it was entitled to do so. On 15 November 2024, Kiko entered into that agreement ("the New Lease"), so that the Lease is to be regarded, even as between Kiko, Pianoforte and Pontegadea, as having come to an end on 14 November 2024. Kiko has sought to enter in to a sub-lease of the premises but by the date upon which the evidence was closed had not succeeded in doing so.
- Jamino has not filed a defence and the proceedings against Jamino were stayed with effect from 18 November 2024.
- The claim against Pianoforte is brought under clause 3.2 of the PCG for indemnification against losses which Kiko claims to have suffered, alternatively for damages for failing to prevent those losses. On 11 October 2024 Kiko applied for summary judgment against Pianoforte in respect of part of its claim, and at the hearing of that application on 20 January 2025 summary judgment was granted in the sum of £969,380.12 plus £71,333.99 in pre-judgment interest. The rest of the claim came on for trial on 8 April 2025 before me.
The issues
Matters not in issue
- Pianoforte accepts that it is liable under the PCG to indemnify Kiko for payments made by Kiko to Pontegadea prior to 14 November 2024, to the extent that those payments were properly due under the AGA.
- Kiko paid a further £1,298,282.47 to Pontegadea under the AGA over the period between 23 January 2023 and 14 November 2024:
Date |
Amount |
31 May 2023 |
£120,586.35 |
8 September 2023 |
£166,124.65 |
6 November 2023 |
£160,998.65 |
22 February 2024 |
£162,499.74 |
28 May 2024 |
£164,368.75 |
16 September 2024 |
£164,283.89 |
14 November 2024 |
£83,831.13 |
TOTAL |
£1,298,282.47 |
- Jamino reimbursed Kiko for £80,000 of that £1,298,282.47, by two payments, one of £30,000 on 27 March 2023 and one of £50,000 on 7 August 2023.
- Kiko was granted summary judgment on 20 January 2025 in the amount of £969,380.12 (plus pre-judgment interest of £71,333.99), corresponding to part of its claim for reimbursement of sums paid to Pontegadea pursuant to the AGA. Pianoforte has not satisfied that summary judgment debt.
Matters in dispute
Reimbursement of Payments to Pontegadea
- The following matters were in dispute. The list is taken from the list of matters in dispute prepared by the claimant. A later version with minor amendments was subsequently filed.
1. Is Pianoforte liable to pay Kiko:
1.1. £83,831.13 by way of reimbursement of the sum paid by Kiko to Pontegadea on or around 14 November 2024:
1.2. £165,071.22 by way of reimbursement of amounts paid by Kiko to Pontegadea over the period between 23 January 2023 and 16 September 2024, but stood over to trial at the 17 January 2025 summary judgment in case Pianoforte might be able to establish "double counting" by Pontegadea?
2. Does Pianoforte remain liable to pay the £170,492.18 discount? As to this:
2.1. Is the Settlement Agreement unenforceable for want of consideration, in
accordance with the rule in Pinnel's Case (1602) 5 Co. Rep. 117; or is it enforceable on the basis that Kiko obtained as consideration the (alleged) practical benefit of an increased likelihood that Pianoforte would pay off some part of the debt and/or that Pianoforte would promptly pay any sums due going forward?
2.2. If the Settlement Agreement is unenforceable as a contract, is Kiko nevertheless estopped by the doctrine of promissory estoppel from resiling from its terms because Pianoforte (allegedly) relied on Kiko's promise of a £170,492.18 discount under the terms of the Settlement Agreement by making the payments stipulated by clause 3.3 thereof and set out at Schedule 1 to the Defence? What would be the effect of any such estoppel; and would it be suspensory or permanent?
2.3. Did Kiko (by its alleged conduct) waive any delay in Pianoforte making the payments required by clause 3.3 of the Settlement Agreement?
Costs Arising from Kiko's obligation to enter into the New Lease
3. Did Pianoforte breach Clause 3.2 of the PCG on 24 July 2024 when Kiko came under an obligation to Pontegadea to enter into a new lease? Is Kiko entitled to damages to compensate it for that breach?
4. If so:
4.1. What loss has Kiko suffered (as at the time of trial) as a result of that breach, and is Kiko entitled to damages and/or an indemnity in that amount?
4.2. What loss does Kiko stand to suffer in future (between the date of trial and the expiry of the New Lease on 2 November 2026); and what remedy should it be granted in respect of that loss?
Legal Costs
5. As to Kiko's legal costs:
5.1. What legal costs has Kiko incurred (and will Kiko incur in future) as a result of Jamino's and Pianoforte's defaults under the Lease and the PCG?
5.2. Is Kiko entitled to an indemnity (or compensatory damages) in respect of
those costs?
5.3. Alternatively, is Kiko entitled to a costs order in respect of the litigation costs element of those legal costs, under CPR 44?
5.4. Is Pianoforte entitled to a detailed assessment of Kiko's costs under s.70 of
the Solicitors' Act 1974 or at common law?
Ancillary matters
6. Is Kiko entitled interest at a rate of 2% over Bank of England Base Rate as it applied from time to time on all outstanding sums, from the respective date(s) of Kiko's payments to Pontegadea until the date of judgment or earlier payment, under Section 35A of the Senior Courts Act 1981? If so, what is the total?
7. Is Pianoforte entitled to a declaration that Pianoforte is only required to indemnify Kiko to the extent that any sums paid by Kiko under the AGA were properly due from Kiko?
The obligation to indemnify
- Clause 2.2 of the PCG provided
"2.2. The provisions of this agreement… shall continue until the end of the term of the Lease (however it may end) … or until the Assignor [Kiko] is fully released from all liability under the Authorised Guarantee Agreement if earlier."
Kiko relies on the indemnity obligation of Pianoforte under clause 3.2 of the PCG. So far as relevant, it reads as follows.
"The Assignee's Guarantor [Pianoforte] covenants with the Assignor [Kiko] as principal obligor and as a separate and independent obligation and liability from its obligations and liabilities under clause 3.1 to indemnify and keep indemnified the Assignor [Kiko] (including for the avoidance of doubt any costs and liabilities of [Kiko] arising under any Authorised Guarantee Agreement) arising from any failure by the Assignee [Jamino] either:
3.2.1 to pay any of the rents reserved by the Lease and any interim rent determined under the LTA 1954 (if applicable); or
3.2.2 to observe or perform any of the tenant covenants of the Lease."
- The usual principles of contractual construction apply. I accept, too, that "an indemnity clause like an exemption clause, or perhaps even a fortiori an exemption clause, needs to be considered carefully to see whether it embraces the case under consideration": Campbell v Connoco [2002] EWCA Civ 704, per Tuckey LJ at [14].
- Clause 3.2 of the PCG is ungrammatical and evidently some words are missing. There is no ambiguity, however. In my judgment, the sense of the provision is clear, and may be expressed as follows.
"The Assignee's Guarantor [Pianoforte] covenants with the Assignor [Kiko] as principal obligor and as a separate and independent obligation and liability from its obligations and liabilities under clause 3.1 to indemnify and keep indemnified the Assignor [Kiko] from [or against or in respect of] all [or any] costs and liabilities (including for the avoidance of doubt any costs and liabilities of [Kiko] arising under any Authorised Guarantee Agreement) arising from any failure by the Assignee [Jamino] either:
3.2.1 to pay any of the rents reserved by the Lease and any interim rent determined under the LTA 1954 (if applicable); or
3.2.2 to observe or perform any of the tenant covenants of the Lease."
- It was argued on behalf of Kiko, however, that the provision should be read
"The Assignee's Guarantor [Pianoforte] covenants with the Assignor [Kiko] as principal obligor and as a separate and independent obligation and liability from its obligations and liabilities under clause 3.1 to indemnify and keep indemnified the Assignor [Kiko] in respect of any costs and liabilities arising from any failure by the Assignee either:
3.2.1 to pay any of the rents reserved by the Lease and any interim rent determined under the LTA 1954 (if applicable); or
3.2.2 to observe or perform any of the tenant covenants of the Lease
(including for the avoidance of doubt any costs and liabilities of [Kiko] arising under any Authorised Guarantee Agreement)"
This was in support of the proposition that, whether or not the costs and liabilities in question arose from any such failure on the part of Jamino, they would be caught by the indemnity if they arose under the AGA.
- I do not accept that this is the correct reading. It involves re-writing the provision by moving the words "arising from any failure by the Assignee etc" to a position before the reference to the AGA, when they actually appear after it; and thus removing those words from the qualification by reference to the AGA appearing in the passage in round brackets. I accept Pianoforte's argument that the indemnity is against all costs and liabilities (including those arising under the AGA) which arise from any failure by Jamino to perform the Lease. It was submitted on behalf Kiko that the distinction did not much matter in any event because it was clear that there was an indemnity in respect of any costs and liabilities of the assignor arising under any authorised guarantee agreement. That is a point to which I will return.
Reimbursement of Payments to Pontegadea
- In Pianoforte's written opening, it was accepted that it is liable to pay Kiko £83,831.13 by way of reimbursement of the sum paid by Kiko to Pontegadea on or around 14 November 2024 under the Lease for the period ending on that date; and further that it is liable for the sum of £165,071.22 (being the sum of £195,071.22 stood over to trial in case Pianoforte might be able to establish "double counting" by Pontegadea, less a previously uncredited payment by Jamino to Kiko of £30,000). Judgment in those sums will therefore be entered.
The £170,492.18 Discount
- The Settlement Agreement between Kiko and Pianoforte recited the AGA, Jamino's admitted failure to meet its payment obligations under the Lease, Pontegadea's having served a series of notices on Kiko pursuant to Section 17 of the Landlord and Tenant (Covenants) Act 1995, Kiko's having paid a total of £829.494.87 (therein described as "the Total Debt") to Pontegadea, and its intention to sue Pianoforte to recover the Total Debt. It went on to recite that the parties had reached an agreement whereby Kiko would agree to accept payment of the Total Debt less the Discount of £170,492.18 in lieu of payment of the Total Debt and refrain from pursuing the action against Pianoforte, which was conditional (only) upon Pianoforte's satisfaction of its obligations in that agreement.
- The parties expressly agreed that on completion the Settlement Agreement should immediately be fully and effectively binding upon them: Clause 3.1. It provided that Pianoforte should make three payments totalling £659,002.68: (i) £144,908 by the date of the Agreement; (ii) £257,047.34 by 31 August 2022; and (ii) £257,047.34 by 30 September 2022. By clause 3.4, Pianoforte agreed to pay, on demand (by Kiko or Pontegadea), any future sums owed by Jamino under the Lease. Clause 3.5 provided for "immediate payment" of the Discount in the event of any default under Clauses 3.3 or 3.4, together with contractual interest.
- Pianoforte contended that the Settlement Agreement was enforceable and relied on it to assert that it was entitled to the Discount. It is not in dispute, however, that Pianoforte did not meet the payment dates specified by clause 3.3 of the Settlement Agreement and that further rent payments to Pontegadea (and reimbursement to Kiko) were limited to those particularised at Schedules 2 and 3 of the Reply and Amended Defence and Counterclaim, albeit the full sum due under the Settlement Agreement (£659,002.68) was paid by 28 October 2022. On the face of things, that meant that the Discount was no longer available to Pianoforte under the terms of the Settlement Agreement.
- Pianoforte sought to meet this difficulty by asserting that that Kiko was estopped from claiming the Discount, or that Kiko had waived its rights under clause 3.5 of the Settlement Agreement. Kiko averred that the Settlement Agreement was not enforceable in any event because Pianoforte had given no consideration for the promise to forgo the Discount, and denied the estoppel and waiver arguments. Pianoforte averred that the Settlement Agreement was supported by consideration, in that Kiko had acquired the practical benefit from it that Pianoforte was more likely to pay part of the debt or pay sums more promptly in future; or that by entering in to the Settlement Agreement Pianoforte had given up its right to dispute liability to indemnify Kiko for payments hitherto made by Kiko to Pontegadea purportedly pursuant to the AGA, including on the basis that Kiko had identified grounds for disputing the validity of the section 17 Notices served by Pontegadea, but ultimately conceded that issue, or had not pursued it.
Enforceability
- On the face of things, the Settlement Agreement (which was not made by deed) is indeed unenforceable for lack of consideration. Part payment of a debt is not good consideration for the extinguishment of that debt: Foakes v Beer (1884) 9 App Cas 605 following Pinnel's Case (1602) 5 Co. Rep. 117; and see D & C Builders Ltd v Rees [1966] 2 QB 617.
- The suggestion that a debtor's promise to pay existing liabilities by instalments and future liabilities when they fell due constituted good consideration was rejected in Re Selectmove [1995] 1 WLR 474, notwithstanding the submission that the creditor had acquired the practical advantage that it was likely to recover more that way than by putting the debtor into liquidation. Pontegadea's submission in the present case is not in substance any different, and I have no hesitation in rejecting it as a matter of law. It was expressly abandoned in closing.
- As to the submission that, by entering in to the Settlement Agreement, Pianoforte had given up its right to dispute liability to indemnify Kiko for payments hitherto made by Kiko to Pontegadea purportedly pursuant to the AGA, it is common ground that Pianoforte would need to show that by entering into the settlement agreement it gave up an at least arguable defence to Kiko's then claim for reimbursement of £829,000 approximately owed to it e.g. Simantob v Shavleyan [2019] EWCA Civ 1105. However, Pianoforte never articulated any such defence. In the present proceedings, paragraph 22 of Pianoforte's Defence and Counterclaim actually admits that Kiko was entitled to reimbursement of that sum under the PCG. Counsel for Pianoforte accepted in closing that he could point to no document from Pianoforte predating the settlement agreement setting out the grounds of challenge to that liability. He sought to rely, however, on letters from Lester Aldridge on behalf of Kiko dated 10 September 2021 and 22 October 2021 explaining to Pianoforte that Kiko had disputed, or had sought to dispute, the validity of the s.17 notices. He submitted that there must have been some reasonable basis for disputing them, although he did not identify it.
- That is not, in my judgment, sufficient to show that there was a potential defence at all, or that it was arguable or that Pianoforte gave it up. In any event, it seems likely that all that had happened was resistance to an initial section 17 notice including sums more than 6 months old, following which Pontegadea reimbursed itself instead from Jamino's rent deposit and served valid and indisputable (and undisputed) section 17 notices thereafter. I therefore reject the proposition that the Settlement Agreement was supported by consideration. That being the case, Pianoforte is not entitled to the benefit of the Discount and Kiko's claim to reimbursement of £170,492.18 succeeds.
- On that basis, Pianoforte's arguments that Kiko was estopped from claiming the Discount pursuant to the terms of the Settlement Agreement, or that Kiko had waived its rights under clause 3.5 of the Settlement Agreement, do not arise. But Pianoforte sought to run at least the estoppel argument on the footing that it applied even if the Settlement Agreement were unenforceable. I should therefore consider them both.
Estoppel
- The way in which the estoppel argument was put appears in Pianoforte's written opening as follows (omitting the footnotes).
"As to estoppel:
a. The Promise. Pianoforte does not allege an express representation but says that the whole of Kiko's conduct in (i) agreeing the Discount; (ii) agreeing to meet and listen to Pianoforte's representations on 13 October 2022; (iii) not giving any indication at that meeting or thereafter, that the Discount had been or would be revoked; and (iv) accepting Pianoforte's final payments under the Settlement Agreement thereafter, constituted a clear or unequivocal promise that, if Kiko paid the final instalments of the £659,002.68, Kiko would not rely on Clause 3.5 or claim the Discount. Further, thereafter, Kiko did not positively claim the Discount in the letter of 12 December 2022.
b. Reliance and detriment. Pianoforte relied on Kiko's promise in making the final payment on 28 October 2022, which it would not otherwise have done. As to detriment. Pianoforte therefore altered its position on the basis of the promise. See: Chitty at 7-044.
c. Inequitable. It would now be inequitable for Kiko to resile from the promise and /or enforce clause 3.5. As to conduct of a debtor in reliance on a promise, see: Chitty at 7-046."
- In closing, it was submitted for Pianoforte that Kiko was representing by the fact and form of the Settlement Agreement, a formal document prepared by lawyers, that it intended to be bound by it. I find the idea that, by entering into a formal but unenforceable contract, one is making a promise that one will be bound by it regardless, to be a startling one, and I do not accept it. But in any case, I heard evidence from Mrs Alessandro Colpo, an accountant and the chief of administration of a company associated with Pianoforte, who attended the video meeting on 13 October 2022 between Mr Steve Faye and representatives of Pianoforte, including herself, upon which Pianoforte relies. Her evidence was that at no stage during the meeting was it suggested that Pianoforte would lose or had already lost the Discount, or that Kiko no longer considered itself bound to give the Discount, so that the representatives of Pianoforte were left believing that the Discount would remain, and that was the understanding upon which Pianoforte made its final payment. At no point in her witness statement, however, did she refer to any mention of clause 3.5 of the Settlement Agreement. In her oral evidence she explicitly confirmed either that the parties did not speak about that point, or that she did not remember whether they specifically had. She accepted that it was just her assumption that Pianoforte would retain the Discount (which in fact, of course, it had already lost under the terms of that Agreement). Mrs Anna Vernillo, a lawyer assisting Pianoforte in the present dispute, also gave evidence about her understanding of what had taken place at the meeting, but had not attended it; and in any event her evidence on this point went no further than that of Mrs Colpo.
- On the basis of that evidence, I am unable to accept that in all the circumstances Kiko made a representation or promise of any kind in relation to the Discount.
- Moreover, I accept that Pianoforte's making a further payment on 28 October 2022 of £217,047.34 could not amount to the detrimental reliance required for a promissory estoppel. By making that payment, Pianoforte pro tanto discharged a liability which it owed. That cannot have made it worse off. But in any case, Pianoforte offered no evidence that it would not have made the payment if it had not thought it still had the benefit of the Discount.
- Finally, it is hard to see how after 12 December 2022 Pianoforte can have believed that Kiko was not reserving the right to reclaim the Deposit in view of the letter of that date from Kiko's solicitors, Aberdein Considine, explicitly reserving the right to do so in the event of further breach of the Settlement Agreement.
- Accordingly, I reject Pianoforte's estoppel argument.
Waiver
- The alternative argument was that it is to be inferred from Kiko's acceptance of the payments listed in Schedule 1 of the Re-amended Defence and Counterclaim, its failure to object promptly to any failure by Pianoforte to make timely payment as required by clause 3.3 of the Settlement Agreement, and the absence of a claim for payment of the Discount in the letter of Aberdein Considine dated 12 December 2022, written to Pianoforte on behalf of Kiko, that Kiko waived any delay in Pianoforte making the payments required by clause 3.3 of the Settlement Agreement. This argument therefore depends upon the enforceability of the Settlement Agreement, which I have found to be unenforceable. But the waiver argument is in any event unsustainable: while Kiko accepted the payments made, it did in fact object to Pianoforte's failures to make timely payment, threatening enforcement in its email of 16 September 2024 in seeking a meeting, and expressly reserving its rights in relation to the Discount, which it specifically mentioned in, for example, the letter dated 12 December 2022. That is the opposite of a waiver.
- So far it is as relevant, therefore, I reject Pianoforte's waiver argument.
- Accordingly, I conclude that the £170,492.18 by way of Discount is unavailable to Pianoforte.
Costs Arising from Kiko's obligation to enter into the New Lease
- Kiko's case is that Pianoforte breached clause 3.2 of the PCG on 24 July 2024 when Kiko came under an obligation to Pontegadea to enter into the New Lease, a breach for which Kiko is entitled to claim damages.
- A distinction is to be drawn between contracts of guarantee under which the guarantor undertakes that if the creditor suffers a loss, he will make it good, on the one hand and, on the other, contracts of guarantee under which the guarantor undertakes that the principal obligor will carry out his contract, so that if the principal obligor breaches his contract, the indemnifier is in breach of his contract as well, and is liable for damages: see, in the context of a discussion of guarantees, Moschi v Lep Air Services Ltd [1973] AC 331, 344-345. It is a matter of construction which kind of agreement it is, though Lord Reid at least considered that most contracts of guarantee were of the latter nature (345F); and while Lord Diplock considered (349C-D) that every case turned on the construction of the agreement, he seemed to regard the concept of guarantee (which he contrasted with that of an indemnity) as involving an obligation of the latter kind.
- Here I am dealing with a contract of indemnity. Kiko's case was that the contract of indemnity was also of the latter kind, which I accept, and did not understand to be controversial: at any rate, the point was not argued. Accordingly, if Pianoforte breached Clause 3.2 of the PCG on 24 July 2024 when Kiko came under an obligation to Pontegadea to enter into a new lease, Kiko is entitled to damages to compensate it for that breach.
- Paragraph 4 of the AGA provided that
"…if … the Lease is disclaimed, then the Landlord [Pontegadea] may within three months after any such disclaimer by notice in writing require the Tenant [Kiko] to accept a new lease of the demised premises for a term equivalent to the residue which if there had been no disclaimer would have remained of the Term granted at the same rent and subject to the like covenants and conditions as are reserved and contained in the Lease… and in such case [Kiko] shall pay the Landlord's costs of the preparation and granting of such new lease and shall accept such new lease accordingly and will execute and deliver to the Landlord a counterpart of it."
Accordingly, it was said, Kiko's liability to take the New Lease arose from Jamino's failure to comply with its obligations under the Lease. In particular, the disclaimer of the Lease, so that Jamino would no longer be performing its obligations as a tenant, amounted to a failure to perform the Lease, even if it was not strictly speaking a breach of contract. If there had been no disclaimer, Pontegadea would not have been able to require Kiko to take the New Lease. In failing to prevent Kiko from coming under that obligation, Pianoforte breached its indemnity obligations, and Kiko is entitled to damages to compensate for that. It follows, it is argued, that Pianoforte must compensate Kiko for its costs incurred in entering into the New Lease (principally Kiko's and Pontegadea's legal expenses) and the costs and expenses which it has had to incur under the New Lease, including the payments made pursuant to it, and the costs of attempting to mitigate loss by finding a sub-tenant.
- Pianoforte argued that the trigger for the New Lease was the disclaimer, not Jamino's failure to perform the terms of the Lease; alternatively, that even if the liability to enter into the New Lease was captured by the PCG, the liabilities arising under the New Lease were not.
- I have found this a difficult question.
- I accept that Kiko's obligation to take the New Lease arose under the AGA. Under the AGA the disclaimer of the Lease gave rise to the obligation to take the New Lease.
- I accept, too, that the obligations arising under the New Lease arose under the AGA: the requirement under the AGA to take a new lease was a requirement to undertake the obligations contained in such a lease. It would be an odd construction, commercially, to exclude those. There is nothing in the wording to have that effect.
- Merely because the obligations under the New Lease arose from the New Lease itself, as well as the from AGA, is not a reason to read the language of the provision as excluding them. A thing may arise from more than one other thing, and one of those other things may be more proximate than another to the thing that arises from those other things, but there is nothing in the language here to limit the ambit of the obligation to the more proximate of the things from which it arose. I reject the argument raised by Pianoforte that the disclaimer was necessarily the sole trigger for the requirement to take the New Lease. Nor do I see it as relevant that Pontegadea's demand letter of 26 July 2024 relied exclusively on the disclaimer rather than breaches of covenant: the question is what arose from what, not how the demand was expressed.
- But whether or not the obligation to take the New Lease, or the obligations under the New Lease themselves, arose under the AGA, the question is whether Kiko's obligation to take the New Lease, and the obligations arising under the New Lease, arose from a failure or failures by Jamino to perform the Lease. I accept Pianoforte's argument that the indemnity is against all costs and liabilities (including those arising under the AGA) which arise from any failure by Jamino to perform the Lease. As noted above, it was submitted on behalf of Kiko that the distinction between the two readings contended for did not much matter in any event because it was clear that there was an indemnity in respect of any costs and liabilities of the assignor arising under any authorised guarantee agreement. I am unable to accept this: costs and liabilities arising under the AGA but not from any relevant failure are not within the ambit of the indemnity.
- The obligation to take the New Lease arose under the AGA from the disclaimer of the Lease, which in turn arose from Jamino's having gone into liquidation as the result of its financial difficulties. It may well be that Jamino's failure to pay the rents reserved by the Lease also arose from its financial difficulties, But I cannot see how it can be said that either Kiko's obligation to take the New Lease, or its obligations arising under the New Lease, arose from Jamino's failure to pay the rents or perform the obligations under the Lease, whether proximately or remotely.
- It was argued on behalf Kiko that Jamino's disclaimer of the Lease was a statement that it would no longer be performing its obligations under the Lease, and that this amounted to a failure to perform the Lease. I do not see, however, that the disclaimer was the act of Jamino rather than of its liquidator. Nor do I see that a disclaimer is or involves a failure to perform the ongoing liabilities, when its effect is to determine the ongoing liabilities. I accept that a repudiatory breach, if accepted, would also determine the ongoing liabilities, and that in such a case the repudiating party is nonetheless liable for the loss calculated by reference to the liabilities which have ceased; but the point here is that it is the repudiatory breach which, once accepted, entitles a claimant to damages for its loss.
- It might perhaps have been different, therefore, if Pianoforte had undertaken that Jamino would perform its obligations under the Lease, or had undertaken to indemnify against non-performance, rather than failure to perform – but it did not, and it was not argued that it had. Nor, obviously, was the disclaimer itself wrongful, and there was nothing in the Lease or any other document which required it to be treated it as such.
- It was argued on behalf of Kiko that if disclaimer is not a breach of contract on the part of Jamino, it is so closely analogous as to make no difference. Ex p Llynvi Coal and Iron Company (1871-72) L.R. 7 Ch. App. 28, 32, 33-34 was cited as a case in which disclaimer was analysed as being or entailing a breach of contract (albeit one in respect of which statute provides that the counterparty's only remedy is by way of proof against the bankruptcy estate). However, the point here was that creditors injured by the effect of a disclaimer might prove as creditors for that injury under the Bankruptcy Act 1869. The fact that the statute described it as an injury did not make it either a breach of contract or analogous to a breach of contract, and that was not what the case decided. Nor does it describe it as an injury inflicted by the bankrupt. It was conceded before me that the language of injury does not appear the current legislation. This authority does not assist Kiko, therefore.
- In re Park Air Services Plc. [2000] 2 AC 172 was also cited on this point, with particular reference to p.184, where Lord Millett explained that statutory compensation under s.178(6) is not strictly damages for breach of contract:
"…the subject matter of the landlord's proof is compensation for loss of his right, inter alia, to future rent, not the rent itself, to which he no longer has any claim."
It was suggested that he had held that this statutory right to damages is functionally identical to a claim to damages for repudiation of the contract:
"the right conferred by section 178(6) or its predecessors is a statutory right to compensation for the loss caused by the operation of the disclaimer, and that this must be assessed in the same way as damages (…) There is no justification for employing a different approach in the assessment of compensation for such damage than would be employed if the claimant were claiming damages for breach of a contract which had been wrongfully terminated."
But to say that a statutory right to compensation for loss caused by the operation of disclaimer must be assessed in the same way as damages is not to say that the compensation amount to damages, or that it is available to redress a wrong.
- Accordingly, I do not accept the proposition that disclaimer is a breach of contract, or a failure to perform, or is so closely analogous as to make no difference.
- In any event it is not so much the nature of disclaimer in itself which is the relevant point, but whether on the construction of the covenant in the present case it amounts to 'a failure to pay the rent or observe or perform any of the tenant covenants of the lease.' In my judgment, it does not.
- Accordingly, I conclude that Kiko's obligation to take the New Lease, and the obligations arising under the New Lease, did not arise from a failure or failures by Jamino to perform the Lease; and accordingly that Pianoforte was not in breach of obligation in failing to prevent that, and is not obliged to indemnify Kiko in respect of that or pay damages for not having done.
- It follows that Kiko is not entitled to damages for costs arising from Kiko's obligation to enter into the New Lease, and its claim for damages for rent and other payments made under the New Lease fails, as does its claim for damages for historic commercial real estate legal expenses in relation to the entry into the New lease, and mitigation costs; as does its claim for future costs of the New Lease. Its claim for past and future legal costs covered by the indemnity survives, but not its claim for past and future legal costs in relation to its claim to relief in which its claim has not succeeded.
- In case I am wrong, however, I should consider those heads of claim.
Alternatively
- Had Pianoforte been in breach of clause 3.2 of the PCG on 24 July 2024 when Kiko came under an obligation to Pontegadea to enter into the New Lease, it would have been liable in damages to Kiko for its loss. I turn, therefore, to consider that loss.
- Two points immediately arise. It is common ground that where a claimant takes action and succeeds in avoiding loss, the loss is irrecoverable, even where the claimant was under no duty to act to avoid it: British Westinghouse Co v Underground Railways [1912] AC 673. It is argued on behalf of Pianoforte that the principle is engaged where, by taking the New Lease, Kiko has obtained rights over the property, including the immediate right to possession at the property, and to operate a business there under the New Lease. I accept that the acquisition of such rights might in principle wholly or partly result in Kiko's having avoided the loss represented by the costs for which it is liable under the New Lease, but it seems to me that it is a question of fact whether it has actually done so. That is consistent with the approach in Nadreph v Willmet & Co [1978] 1 WLR 1537. I accept, too, that the market value of a benefit is not necessarily to be applied in extinguishment of the loss if, for example, the market value cannot readily be realised by the claimant, and does not represent the value to the claimant of the benefit supposedly received. I have not been taken to any authority for this last proposition in the context of damages, but it seems to me to follow from the requirement that damages should compensate the claimant for the loss it has suffered. I accept that in the context of the law of unjust enrichment the question of benefit depends in part on the circumstances and preferences of the defendant receiving it, not just the objective market value of that benefit: see Goff & Jones on Unjust Enrichment, 10th ed., at [4-25]-[4-29] and Burrows, Restatement of the English Law of Unjust Enrichment at §7(3), both referring inter alia to Sempra Metals Ltd v IRC [2007] UKHL 34. However, I am not sure that this is very directly supportive of the proposition in contract.
- I accept the evidence of Mr Paul Devin, Kiko's UK Country Director since 2023, that having considered whether the premises would be suitable, Kiko concluded that in view of the substantial full refit costs which would be necessary, the timescale to open, the requirement to obtain permits and the like, it was commercially unviable and unprofitable for Kiko to occupy the premises under the new lease itself, particularly since it has also secured a unit of the East End of Oxford Street which was under construction and due to open in the second quarter of 2025. In evidence which I accept, he described a process of internal evaluation, and confirmed that it included considering the right to renew at the end of the New Lease.
- Kiko is, of course, subject to a duty to take reasonable steps to avoid loss, but not to take steps which a reasonable and prudent man would not ordinarily take in the course of his business, nor to do anything other than in the ordinary course of business nor generally to risk litigation against a third party: see British Westinghouse Co v Underground Railways [1912] AC 673, 689; McGregor at [10-082], [10-091].
- I accept Mr Devin's evidence that it took advice from a specialist retail consultant and followed it, with the support of specialist commercial property solicitors, undertook the evaluation process mentioned above in relation to its own occupation of the premises, concluded that a sub tenancy was the way forward, undertook a marketing exercise which I am satisfied was reasonable, and instructed its solicitors to pursue completion of a sublease. I do not accept the suggestion made on behalf of Pianoforte that there was unreasonable delay in completing the New Lease or pursuing a prospective sub-tenancy. I therefore consider that the steps taken by Kiko in this process constituted reasonable mitigation of loss on its part. It was already pursuing sensible steps before loss arose on 26 July 2024. No clear case was ever advanced as to the reasons why it should not be regarded as reasonable mitigation, or what else it ought to have done. At the date of the close of evidence, those efforts were continuing, but had not reached a conclusion. Part of the difficulty has been securing the consent of Pontegadea to the proposed sub tenancy. But, consistently with the above, I do not consider that the requirement to mitigate loss imposes an obligation on Kiko to sue that company for a declaration that consent has been unreasonably withheld or delayed.
- Against that background, I consider the losses said to have been suffered.
Historic non-legal expenses
- Kiko claims rent and service charge to 24 June 2025 in the sum of £330,196.19, electricity to 30 November 2024 in the sum of £947.13, and rates to 31 March 2025 in the sum of £46,100.31, totalling £378,243.63. Those figures are not disputed, I accept that they have been incurred and, but for my conclusion above on the question of construction of clause 3.2 of the PCG, I would have held that they are recoverable as damages in full.
Historic commercial real estate legal expenses
- Kiko claims legal expenses incurred in relation to the cost of entering into the New Lease and attempts to conclude a sublease. I accept that these are recoverable in principle as flowing from Kiko's liability to enter into the New Lease and in pursuing reasonable mitigation.
- The sum claimed is £37,375 excluding VAT for work done by Aberdein Considine and Company plus the cost of Counsel's advice in the sum of £2,200 excluding VAT, totalling £39,575. I have the benefit of the invoices and fee sheet for that work, and I heard evidence from Mr Christopher Richardson a solicitor and partner in Aberdein Considine and Company, whose evidence I accept, describing the work undertaken. The hourly rates for various levels of fee earner were provided and are not unreasonable. They were at a discount from his team's usual hourly rates because the work was carried out pursuant to a global service legal agreement. I would not accept (and did not understand it to be suggested) that the court is not in a position to determine whether the costs are reasonable in amount in the absence of detailed timesheets, or at least a summary schedule setting out which fee earner did what work, at what billable hours. If I were in any serious doubt that the sums claimed were not reasonable in the circumstances, I would give the benefit of that doubt to Pianoforte; but I am not. I therefore assess these damages in the sum of £39,575.
- Kiko claims damages in respect of legal expenses incurred on real estate issues, that is, the entry into the New Lease and steps taken to conclude a sublease of the premises. I accept that such costs are recoverable in principle as resulting directly from Kiko's liability to enter into the New Lease and in reasonable efforts to mitigate loss
- I deal with the question of historic litigation expenses below.
Future losses
- I accept that damages are recoverable in respect of prospective loss, as well as past loss, flowing from Pianoforte's breaches.
"Damages for loss resulting from a single cause of action will include compensation not only for damage accruing between the time the cause of action arose and the time the action was commenced, but also for the future or prospective damage reasonably anticipated as the result of the defendant's wrong, whether such future damage is certain or contingent: McGregor on Damages, 22nd ed., [12-024].
- While there is a general greater preparedness today to postpone the assessment of items of loss which are in the future and cannot readily be quantified, it is still exceptional to do so: McGregor on Damages, 22nd ed., [12-033]. See also ibid., 11-029ff. At the start of this trial I ruled that since the uncertainty upon which Pianoforte relied in seeking to adjourn the assessment of damages was not of a very high degree, and the risk of severely over- or under-compensating the claimant was not a very large one, the assessment would proceed at trial.
Future New Lease losses
- I accept that there is little if any uncertainty over the costs that Kiko will incur over the remainder of the new lease from 12 March 2025 to 2 November 2026. The figures for rental and service charge, insurance, electricity, water, security costs, and rates total £1,163,121.81, a figure which is not disputed.
- Pianoforte contends that a substantial discount should be applied to that sum to reflect the high probability it asserts there to be of Kiko's being able to put in a sub tenant of the premises to pay the rent and defray the costs. Kiko submits that no discount should be applied because it has consistently asserted that it will try to conclude a sub tenancy, and will credit (in particular against any debts owed to it by Pianoforte) any net financial benefits to Pianoforte if it succeeds in doing so. I was not initially attracted by this submission. On reflection, however, given the substantial sum for which Pianoforte would be liable, if (contrary to my judgment above) it were liable, I can see that this might be a sensible approach, and one not contrary to principle. It also avoids the difficulty inherent in assessing the prospects that a sub tenancy will be achieved, and of the subtenant's meeting its own obligations. Had I concluded that Pianoforte was liable under this head, this is the route which I should have preferred, though I accept that it might require some further working out in detail.
- Were I required to make an assessment, I would have to consider the prospect that a sublease would complete and the effect of that on Kiko's position. I have formed the view that is more likely than not despite the difficulties experienced so far in obtaining the landlord's consent to the proposed subtenant and sublease, that a sub tenancy on approximately the terms proposed, whether or not to the subtenant now contemplated, will complete. Having heard the evidence, I would place those prospects at 60% (not the 50% contended for). In reaching that figure, I have not attempted to consider the different probabilities of completion at different times, but have subsumed the whole question under that one estimate. I have assumed that the sublease would be effectively upon the terms of the heads of terms dated 18 December 2024, including a term expiring on 1 October 2026, covering the whole of the premises, with an annual rent of £495,000, with a rolling break clause on 4 weeks' notice, a class E user clause, and a full service charge. I have assumed that while there is a tenant, everything except rent will be covered, and rent will not be covered at all for about the last month, and only at a lower rate than under the New Lease for the rest of the period. I estimate the potential benefit of the sub tenancy while there is a tenant fulfilling its terms at about £615,000. Applying 60% to it, that comes to £369,000. That needs to be further reduced to reflect the possibility of the sub-tenant's breaking the lease, or failing to perform its terms, so that no credit is available for some period or periods. On that account I would make a further reduction of 15%, producing a figure of £313,650. Subtracting that from the figure of £1,163,121.81, I assess the loss at £849, 471.81, say, £849,000.
Legal costs and interest
Incurred costs and interest
- Kiko claims its litigation costs, either pursuant to CPR 44 or as damages for breach of indemnity, on the indemnity basis, to be assessed after judgment. In view of the terms of this judgment, that will have to be approached in the usual way following hand down of this judgment, at a consequential hearing, if not agreed, together with pre-judgment interest.
Future legal costs
- Kiko claims as damages future legal costs in enforcing the summary judgment order and any other order made following this judgment. Doing the best I can, I accept Kiko's case that £23,000 is an appropriate figure for prospective litigation legal expenses, and I award damages in this sum.
- Kiko also claims damages in respect of future legal costs incurred in continuing efforts to enter into a sublease and that £15,000 would be an appropriate figure for continuing efforts to enter into a sublease. Since I have concluded that the costs arising in respect of the New lease are not recoverable, these damages are not recoverable either. If I am wrong then, doing the best I can, I would accept that £15,000 is an appropriate figure for this head of damage.
Conclusion
- Accordingly, I will award damages in the sums of
(1) £419,394.53 by way of reimbursement of sums paid by Kiko to Pontegadea
(2) £23,000 for prospective litigation legal expenses.
Interest and costs fall to be determined at a consequentials hearing unless agreed.