EMI Group Ltd v The Prudential Assurance Company Ltd

This claim concerns a sublease of premises part of 360/366 Oxford Street/Stratford

The Claimant guaranteed the tenant’s liabilities under the Lease. HMV assigned the Lease to Forever21 (UK) Limited (“Forever21”) on 1^st April 2011. Licence to assign was granted prior to that on 17^th November 2010 (“the Licence”). Under that Licence, a guarantee of the tenant’s liabilities was provided by Forever 21 Inc, Forever21’s parent company. HMV also provided a guarantee and EMI in turn provided a guarantee of its liabilities although the validity of both guarantees is disputed in these proceedings. The guarantee provided by HMV was stated to be an authorised guarantee agreement ostensibly within section 16 of the Landlord and Tenant (Covenants) Act 1995 (“the 1995 Act”) commonly referred to as an AGA. The guarantee of the obligations under that AGA by EMI was by way of what is commonly referred to as a GAGA. Those terms will be used in this judgment.

On 15^th January 2013 HMV went into administration and was dissolved on 14^th October 2015. On 24^th June 2019 Forever21 failed to pay the rent and service charge under the Lease and on 29^th September 2019 Forever21 Inc (its guarantor) sought a chapter 11 Bankruptcy Protection Order in the State of Delaware. Forever21, the assignee, entered into administration the following day.

Prudential as the current landlord claimed the outstanding rent and service charges from EMI (by way of service of a notice under section 17 of the 1995 Act) and EMI responded by disputing it is bound by the guarantee.

By part 8 claim form EMI seeks declarations that:-

By order of Master Clark dated 4^th February 2020 Prudential was given permission to bring a counterclaim by which it seeks the following relief:-

The central issue is therefore whether EMI is liable under the GAGA contained in paragraph 5.1.1 of Schedule 1 to the Lease. To understand and answer that question it is necessary to have regard to the provisions of the 1995 Act.

The 1995 Act in its nearly quarter of a century of existence has been the subject of a number of cases as to its meaning and effect. Its purpose is clear. Following a Law

Section 5(2) of the 1995 Act provides:-

“If the tenant assigns the whole of the premises demised to him, he—

(a)

is released from the tenant covenants of the tenancy, and

(b)

ceases to be entitled to the benefit of the landlord covenants of the tenancy, as from the assignment”.

The 1995 Act recognises that if the tenant is to be properly released any guarantor had to be released too so that the guarantor could not seek an indemnity from the tenant. Therefore section 24 (2) of the 1995 Act provides:-

“Where—

(a)

by virtue of this Act a tenant is released from a tenant covenant of a tenancy, and

(b)

immediately before the release another person is bound by a covenant of the tenancy imposing any liability or penalty in the event of a failure to comply with that tenant covenant,

then, as from the release of the tenant, that other person is released from the covenant mentioned in paragraph (b) to the same extent as the tenant is released from that tenant covenant”.

Section 25 of the 1995 Act contains an anti-avoidance provision preventing landlords, tenants and guarantors from attempting to circumvent the provisions of the Act. It has been described as a “comprehensive anti-avoidance provision” (by Lord Nicholls in London Diocesan Fund v Pithwa [2005] 1 WLR 3956 at para 14) and as it is of central importance to this case merits it being set out in full:-

“(1)

Any agreement relating to a tenancy, is void to the extent that— (a) it would apart from this section have effect to exclude, modify or otherwise frustrate the operation of any provision of this Act, or (b) it provides for—

(i)

the termination or surrender of the tenancy, or

(ii)

the imposition on the tenant of any penalty, disability or liability, in the event of the operation of any provision of this Act, or

(c)

it provides for any of the matters referred to in paragraph (b)(i) or (ii) and does so (whether expressly or otherwise) in connection with, or in consequence of, the operation of any provision of this Act.

(2)

To the extent that an agreement relating to a tenancy constitutes a covenant (whether absolute or qualified) against the assignment, or parting with the possession, of the premises demised by the tenancy or any part of them—

(a)

the agreement is not void by virtue of subsection (1) by reason only of the fact that as such the covenant prohibits or restricts any such assignment or parting with possession; but

(b)

paragraph (a) above does not otherwise affect the operation of that subsection in relation to the agreement (and in particular does not preclude its application to the agreement to the extent that it purports to regulate the giving of, or the making of any application for, consent to any such assignment or parting with possession).

The reference in sub-section 25(3) to an AGA refers back to section 16 of the 1995 Act which provides that nothing will prevent a tenant released from a tenant covenant entering into an AGA provided that it complies with section 16 which provides:-

“(1)

Where on an assignment a tenant is to any extent released from a tenant

covenant of a tenancy by virtue of this Act (“the relevant covenant”), nothing in this Act (and in particular section 25) shall preclude him from entering into an authorised guarantee agreement with respect to the performance of that covenant by the assignee.

(2)

For the purposes of this section an agreement is an authorised guarantee agreement if—

(a)

under it the tenant guarantees the performance of the relevant covenant to any extent by the assignee; and

(b)

it is entered into in the circumstances set out in subsection (3); and (c) its provisions conform with subsections (4) and (5).

(3)

Those circumstances are as follows—

(a)

by virtue of a covenant against assignment (whether absolute or qualified) the assignment cannot be effected without the consent of the landlord under the tenancy or some other person;

(b)

any such consent is given subject to a condition (lawfully imposed) that the tenant is

to enter into an agreement guaranteeing the performance of the covenant by the assignee; and

(c)

the agreement is entered into by the tenant in pursuance of that condition.

(4)

An agreement is not an authorised guarantee agreement to the extent that it purports—

(a)

to impose on the tenant any requirement to guarantee in any way the performance of the relevant covenant by any person other than the assignee; or (b) to impose on the tenant any liability, restriction or other requirement (of whatever nature) in relation to any time after the assignee is released from that covenant by virtue of this Act.

(5)

Subject to subsection (4), an authorised guarantee agreement may—

(a)

impose on the tenant any liability as sole or principal debtor in respect of any obligation

Clause 9 of the Lease provides that EMI covenants with the Landlord by way of indemnity and guarantee in the terms set out in Schedule 1. There are two levels on which the guarantee operates. By paragraph 3 of Schedule 1 EMI covenants with the Landlord “that while the Principal is bound by the tenant covenants of this lease” it will pay the rents and comply with the tenant covenants and indemnify the Landlord against any costs or expenses etc arising as a result of the Principal’s failure to pay the rents and otherwise comply with the tenant’s covenants. By paragraph 5.2 of the First Schedule the Guarantor (EMI) covenants with the Landlord that the Principal will observe and perform his obligations under the AGA. Notably paragraph 6 provides that any provision of the Schedule which is rendered void by the 1995 Act shall be severed from all other provisions and those provisions will be preserved and paragraph 7 is to the effect that any provision which extends beyond the limits of section 25 of the 1995 Act will be “deemed varied” so as not to extend beyond those limits..

The AGA which the Guarantor is covenanting to guarantee arises from Clause 5.11 of the Lease which contains standard covenants against alienation preventing the tenant from assigning the whole of the Demised Premises without first obtaining the consent of the Landlord which shall not be unreasonably withheld and without complying with the conditions, specified for the purposes of section 19 (1A), of the Landlord and Tenant Act 1927 (a section introduced by the 1995 Act) set out in clause 5.11.4 of the Lease as the Landlord might reasonably impose.

The condition (contained in clause 5.11.4 of the Lease) is that the tenant before any assignment will enter into an AGA in the terms set out in schedule 2. The terms of Schedule 2 are important in terms of the arguments advanced in this case and I will refer to them in more detail below. Clause 5.4.2 contains the condition that if reasonably required by the Landlord, the assignee shall on or before the assignment procure one or more guarantors who are reasonably acceptable to the Landlord to covenant by way of indemnity and guarantee in the terms of Schedule 1 to the Lease.

The Licence comprised not just a licence to assign but also licence for change of use.

The primary argument on behalf of EMI is that the GAGA and the wider guarantor under the Lease are rendered void by s. 25 of the 1995 Act. That argument consists of three strands:-

The second argument which does not depend on the terms of the 1995 Act is that EMI is no longer bound as HMV is dissolved and therefore can no longer be bound by the covenants in the Lease.

Paragraph 1.1 reads: “Principal” means the person who is or is to become the Tenant and whose obligations under this lease and any authorised guarantee agreement the Guarantor has been required by the Landlord to guarantee but shall not include any successor in title”.

Mr. Seitler QC’s first point is that at the date of the Lease, the tenant was clearly

As for the concluding words of paragraph 1.1, those words would naturally seem to refer back to one person but Mr. Seitler’s argument is that they refer back to the person who is to become the tenant by assignment, that is T2. Therefore, EMI is required to guarantee not only the obligations of T1 but also impermissibly T2. The closing words of paragraph 1.1 mean that EMI is not, however, obliged to guarantee the liabilities of T3 and T4. Those closing words, Mr. Seitler argued, naturally refer back to the last person mentioned that is the person who is to become the tenant i.e.

If Mr. Seitler’ s arguments on construction are right, there is an embedded repeat guarantee in the Lease which is impermissible under the 1995 Act.

Mr. McGhee QC has three arguments against that construction. The first is that “is or is to become” means HMV only. He broke that argument down into four points. The first was that the words “is to become” have to be construed in the light of the alienation provisions in clause 5.11 of the Lease. These contemplate that the new guarantee if required as a condition of assignment would be given upon or before any assignment. It might be that the guarantee and the AGA would be given on the point of assignment or prior to the assignment, Mr. McGhee pointing out that licences to assign are often granted prior to the assignment itself taking place and indeed that happened in this case. Read against that background “Principal” means just one person, the tenant or if the AGA is being provided prior to the assignment the person who will become the tenant. He points to clause 9 of the Lease where Principal clearly means one person.

Mr. Seitler counters this by saying that this construction does not make sense at the date that the Lease was entered into because the tenant was HMV and the Guarantor was clearly EMI. Of course, paragraph 1.1 envisages EMI guaranteeing not just the tenant obligations of HMV but through a GAGA the obligations of a future tenant and that is how I understood Mr. McGhee’s submissions.

The second point made on behalf of Prudential is that the word “or” in paragraph 1.1 means either the tenant or in the alternative the person who is to become the tenant. In other words, although as Mr. Seitler rightly says “or” can mean “and” it does not always do so and the most natural reading here is that it really does mean “or” in a disjunctive sense. Mr. McGhee relies on the concluding words of paragraph 1.1 (“that person”) as supporting his construction that “Principal” only means one person; otherwise the clause would have concluded with “those persons”.

Mr. McGhee went on to argue that the use of the words “is to become” to refer to T2 are odd in circumstances where there is no certainty that the lease will be assigned; more natural would be use of the words “may become”. Further it would have been easier for the draftsman to exclude the words “or is to become” and instead make it clear that the first successor in title was included but not subsequent successors.

Finally, it was argued that if I consider there are two possible interpretations of these provisions in the Lease I should adopt the construction which is valid. That is based on the principle set out in the recent case of the Supreme Court in Egon Zehnder Ltd.

He further approved the formulation of this principle by Patten LJ in Tindall Cobham 1 Ltd. V. Adda Hotels [2015] P & CR 5 para/paras 30 and 32 that the principle will be engaged when there is a realistic rival construction.

In approaching the questions of construction, I have taken into account the authorities which have been cited in Mr. Seitler QC and Mr. Taggart’s skeleton argument. In particular it seems to me that the following principles can be derived from the authorities:-

Looking at the ordinary and natural meaning of the words in paragraph 1.1, I do not consider that Mr. Seitler’s construction is the natural one. First of all, it seems to me that only one person is being referred to in that paragraph. That follows if “or” is read in its natural way rather than as meaning “and”. It further follows from the concluding words of paragraph 1.1 which refer to “that person” rather than those persons. While it may be possible to interpret singular words as including the plural, to do so makes no sense in this clause. Further I accept Mr. McGhee’s arguments that “is to become” relates to the possibility of an assignee providing a guarantee before the assignment as acknowledged in the alienation provisions in the Lease. It is also an odd form of words to use if it is designed to refer to an assignee who might or might not come into existence whereas the wording implies that it is something which will come to pass.

I therefore do not consider that Mr. McGhee’s interpretation is just a realistic alternative but is the most obvious reading of the words in paragraph 1.1. I consider that the parties intended to refer only to T1 in their definition of “Principal”. I therefore do not have to express any views on the rest of the arguments which were raised on this specific point but will do so in case this matter goes further and in deference to the excellent written and oral arguments presented to me.

Mr. McGhee’s second point is that the effect of clause 8 of the Licence is that a valid stand-alone guarantee has been given in relation to HMV’s AGA and the effect of the words “until such time as EMI is released by law” refer to the effect of section 24(2) of the 1995 Act terminating EMI’s liability. That of course takes place on the assignment to Forever21 when the AGA ceases to have effect. Therefore, regardless of whether the clause 9 guarantee is too wide and has to be excised from the Lease, a perfect valid guarantee has been given in the Licence.

Mr. Seitler disputes that the Licence has that effect and relies on the use of the term “confirms” meaning that the parties are not entering into any new obligations (which are dealt with quite differently elsewhere in the Licence) but merely confirming the terms of the Lease and the guarantees contracted for in the Lease. I consider that this argument is right and I doubt whether clause 8 of the Licence provides a guarantee which is valid if the terms of the Lease from which it springs are not.

Mr. Seitler’s further answer to this point was that clause 8 in the Licence is in fact designed to get round the rule in Holme v Brunskill (1878) 3 QBD 495 to the effect that a material variation in the terms of a lease may release a guarantor and here the Licence was for change of use as well as to assign. That cannot be right as the Lease itself contains an anti-Holme v Brunskill clause (paragraph 2 of Schedule 1 to the Lease).

What, however, I think the terms of clause 8 of the Licence do indicate is the basis upon which the parties considered that they had contracted, namely that any guarantee would be discharged when the tenant was.

The third point made on behalf of Prudential is that if the guarantee purports to be more than a guarantee of HMV’s AGA, the effect of s. 25 of the 1995 Act is that it is invalid only to the extent of it being a guarantee for more than HMV’s AGA. I was referred to the decision of the Court of Appeal in Tindall Cobham Ltd. V. Adda Hotels [2015] 1 P & CR 5 where Lord Justice Patten at para 47 indicated that none of the parties in that case (which involved the construction of a covenant in a lease which offended s. 25 of the 1995 Act) had argued that the general rules of severance applied. That was on the basis that section 25 itself rendered an agreement void to the extent that it excluded, modified or otherwise frustrated the provisions of the 1995 Act. There was some debate before me as to the effect of that decision, particularly in the light of the recent examination of common law principles of severance by the Supreme Court in Egon Zehnder Ltd. V. Tillman [2020] AC 154 a case concerning whether covenants in an employment contract were in restraint of trade and whether the offending provisions could be severed. The first point made by the Supreme Court in respect of those common law rules is that a blue pencil can only ever be used to remove words and if what is required is the adding in of words, that cannot take place, however capricious that rule might be. The second point relevant for this judgment is that the removal of the unenforceable words must not generate a major change in the overall effect of the contract (paragraph 87).

It seems to me quite clear that in Tindall Cobham the Court did not find it necessary to have regard to the common law rules of severance because section 25 has its own test which applies to invalidate provisions to the extent that they offend provisions of the 1995 Act. I do not see anything in the Tillman case that suggests that the common law rules of severance have to apply if terms are struck out which offend section 25. However, it is clear from Tindall Cobham (to adopt the words used by Patten LJ at paragraph 46) what is left must not be emasculated by the removal of the offending words.

Mr. McGhee’s argument was that if the words “or is to become” are omitted, the clauses are not emasculated because a perfectly workable obligation rests on EMI to guarantee HMV’s obligations. He referred me to Inntrepreneur Estates GL v Boyes (1994)68 P & CR 77 which concerned the severability of unlawful beer ties contained in the lease of a public house. The Court there gave weight to a clause whereby the parties had agreed that any clauses rendered unenforceable should not invalidate the lease when deciding whether to sever. Mr. McGhee relies on paragraph

If I had considered that the words “or is to become” meant that EMI was required to guarantee not just the obligations of HMV but also those of T2, I would have had no difficulty omitting them because section 25 invalidates only to the extent that the provisions of the Act are offended and the guarantees in the Lease could have continued to operate limited to the obligation of EMI to guarantee HMV’s liabilities and its AGA. I do not see that the terms the parties had agreed as to the guaranteeing of obligations under this lease could be regarded as emasculated by removal of the offending words (if offending words they be).

Mr. Seitler’s argument was that if the words were removed, EMI would be in a different legal position because while it would have a right of indemnity against T2 if directly guaranteeing (albeit impermissibly) its liabilities, that would not be the case if guaranteeing under a GAGA. That might well be right but that could hardly be said to be emasculating the Lease and Guarantee provisions entered into. The authorities do not establish that the precise legal position has to apply before and after severance.

That view is reinforced by the terms of paragraph 6 of Schedule 1 whereby the parties have agreed that insofar as terms offend s. 25 of the 1995 Act they should be severed. Mr. Seitler has criticised paragraphs 6 and 7 of Schedule 1 as having no effect. I see the force in some of his criticisms of paragraph 7 as to how the Agreement would be varied to comply with the limits of the Act. However, what it seems to me that paragraph 6 in particular signifies is that the parties intended their agreement to comply with the 1995 Act. Insofar as it did not, their expressed agreement was that offending parts should be severed. Clearly there are circumstances where such a clause would not save matters, but that is not the position here.

I therefore prefer Prudential’s construction of paragraph 1.1 and do not consider that it has the effect of creating a void embedded guarantee under the 1995 Act. However, in any event, I would be prepared to omit the words“or is to become”.

The covenant contained in paragraph 3 of Schedule 1 provides that “the guarantor covenants with the Landlord that while the Principal is bound by the tenant covenants in his lease” (my emphasis) the Principal will pay the rents etc. The word “while” is also used in paragraph 5.1 of Schedule 1 in relation to the AGA and paragraph 3 of Schedule 2 setting out the terms of the AGA. Mr. Seitler’s argument is that what this clause should have said to avoid offending the 1995 Act was “until the Principal is released” rather than “while the Principal is bound”. His reasoning is that the use of the term “while” allows for the possibility that an AGA given by T1 could be extinguished when T2 assigns to T3 but then reignited if T3 reassigns the lease back to T2. In this situation a contingent liability would arise under the original AGA after T2 has been released. Similarly, in relation to paragraph 3 of Schedule 1, there remains the possibility of a reassignment to the Principal.

The reason Mr. Seitler says that the possibility of this happening offends the 1995 Act is because of the provisions of s. 16(4)(b) which reads: “An agreement is not an authorised guarantee agreement to the extent that it purports— (b) to impose on the tenant any liability, restriction or other requirement (of whatever nature) in relation to any time after the assignee is released from that covenant by virtue of this Act.”

According to Counsel this is not a sub-section of the Act which has received any judicial attention before now. His argument is that if “while” means “during”, it does then the AGA offends against s. 16(4)(b) and is therefore void by reason of section 25(1)(a).

Mr. McGhee argues that the use of the term “while” was deliberate and provides for the circumstance contemplated by the alienation covenant in the Lease that a tenant might give an AGA before an assignment takes place but it would only be operative while the assignee was bound by the tenant covenants.

“While” is an expression which might contemplate a state of affairs which goes on for a time, stops and then starts again. However, it seems unlikely that the parties were contemplating a state of affairs where the lease was assigned back at some future time to a tenant and I am attempting to discern what the parties intended by their words. Mr. McGhee points to the definitions of Assignor and Assignee in the Lease which clearly contemplate a single assignment being in the parties’ contemplation at any one time. In other words the parties were not contemplating the possibility of a tenant having the Lease assigned back to it.

In my view “while” in this context was clearly intended to mean a single period when the tenant is bound by the covenants and does not contemplate a future and unlikely assignment back to that tenant. It is perhaps here that the validation principle does have some role to play in that there are two competing constructions and I prefer that which validates the provisions in question in the Lease. In my view it is an entirely realistic construction.

Further, like section 25 section 16(4) invalidates only to the extent necessary and so I accept the argument that the AGA would be valid until the assignment on by Forever21. I cannot see in this case why that would not render the AGA valid insofar as it complied with the Act, invalidating only insofar as it did not.

Mr. Seitler QC’s further argument on his first and main argument was that even if he is wrong on his construction of “Principal” (and for the reasons set out above, I hold that he is) then paragraph 5 has to release HMV and EMI to the same extent. It does not do so because whereas the landlord has to be reasonable in requiring the tenant to give an AGA, the guarantor is automatically bound to provide a GAGA under paragraph 5. In other words, the imposition of a GAGA is not subject to an independent test of reasonableness. Therefore, this provision offends s. 24(2) of the

Mr. McGhee QC argues that section 24(2) concentrates on the circumstances in which the guarantor is released and not the circumstances in which the requirement for a guarantee is imposed. If the purpose of the 1995 Act is to release tenants from their obligations under the Lease on assignment, the obligations of the guarantor have to be released as well. Otherwise, if the guarantor was successfully sued he could look to the tenant for an indemnity. The tenant would not therefore be released contrary to the whole purpose of the 1995 Act.

In K/S Victoria Street when expressing the view that there was nothing to prevent a Landlord seeking that a guarantor guarantee an AGA Lord Neuberger MR (as he then was) said (at para 46):-

“By section 24(2), on any assignment, a guarantor of the assignor is only required to be released to the same extent as the tenant. Accordingly, if, where section 16(2) applies, the landlord is entitled to require the assignor to reassume liability under an AGA, it does not appear to us to be inconsistent with section 24(2), and hence it would not be void under section 25(1), for the landlord in such a case to require the guarantor to guarantee the liability of the tenant under the AGA. Where an assignor is lawfully required to enter into an AGA, then, when he assigns the lease, he is released from his obligations under the lease, save to the extent that he re-assumes those obligations under the AGA. There appears to be nothing inconsistent with section 24(2) if the assignor’s guarantor is required to guarantee the assignor’s liability under the AGA: the guarantor is released to precisely the same extent as the assigning tenant.”

Therefore, what makes a GAGA valid is the operation of section 24(2). The requirements for an AGA set out in section 16 do not apply to the GAGA but the guarantor can enter into the GAGA because he will be released at the same time as the tenant. This analysis in K/S Victoria Street makes it clear in my view that the focus is on the fact that the guarantor will be released when the tenant is released and not on the terms which require the AGA .

Mr. McGhee further argued that the effect of section 19(1A) of the Landlord and Tenant Act 1927 (inserted by the 1995 Act) was that any question of the tenant being able to object to the requirement of an AGA (if the lease so provided) on the basis that it was unreasonable, was illusory: the parties had already agreed it as a condition in the Lease. It seems to me that this too is right. Section 19(1A) has the effect of determining in advance if the lease so specifies that an AGA is a reasonable requirement.

Mr. Seitler’s second point is that paragraphs 3 and 5 of schedule 1 and the AGA itself in Schedule 2 provide that EMI’s liability only exists “while the principal is bound”. HMV has been dissolved and no longer has any existence and therefore cannot be bound. When a company is dissolved its property vests in the Crown (section 1012 Companies Act 2006). Its liabilities continue but there is nothing in existence which can be sued.

Paragraph 2.4 of Schedule 1 to the Lease provides that the liability of the Guarantor shall not be affected by the Principal being dissolved or otherwise ceasing to exist which at first blush would appear to be an answer to the point. However, Mr. Seitler points to the provisions of paragraph 4 of the Lease which apply on a Trigger Event. A Trigger Event includes dissolution of the Principal. The Landlord on such an event but subject to the provisos dealt with below, can require the Guarantor to enter into a new lease, or can require the payment of six months’ rent or the rent reserved until the premises are re-let. Clause 2.4, it is argued, therefore applies to those provisions and not more generally.

The difficulty with this argument is that paragraph 4.1 (which introduces the provisions as to what should happen on a Trigger Event) states that those provisions apply “without prejudice to any other rights of the Landlord against the Guarantor or any other person”. Further, the provisions of paragraph 4.2 to 4.4 of the Lease quite clearly do not provide a complete code as to what happens on the dissolution of the Tenant. The Landlord can require the Guarantor to enter into a new lease (but only if

Mr. Seitler argued that the provisions of section 178(4) of the Insolvency Act 1986 which provides that “a disclaimer under this section (a) operates so as to determine, as from the date of the disclaimer, the rights, interests and liabilities of the company in or in respect of the property disclaimed; but (b) does not, except so far as is necessary for the purpose of releasing the company from any liability, affect the rights and liabilities of any other person’’ was specifically required because otherwise the guarantors would be released by the disclaimer. There being no such similar provision about the dissolution of the tenant company, then it must mean that the guarantors would cease to be bound. I confess that I do not find any assistance in this argument. The subsection deals specifically with the termination of the lease and not the status of the tenant.

In my view the Lease is clear in providing by paragraph 2.4 of Schedule 1 that the dissolution of the tenant will not affect the liabilities of the Guarantor. That is what the parties agreed, and there is nothing in paragraph 4 of Schedule 1 which seems to me to affect that in any way.

I therefore reject the declarations sought by EMI that both the GAGA and the wider guarantee in the Lease of which it forms part are void as they fall foul of section 25 of the 1995 Act and the alternative declaration that EMI was released from its ongoing obligations under the guarantee and the GAGA on the dissolution of HMV.

It therefore follows that I will give the declaration sought by Prudential that the GAGA imposed by the Lease is valid and give the money judgment sought. I will hear submissions (or deal with them in writing) as to the amount outstanding in respect of rent at the present time.