Basch v Stekel and Another: CA 25 Jul 2000

The deceased had given a guarantee of the tenant’s covenant given by his company under a lease. The court was asked whether the obligations under the guarantee survived his death after he company was wound up.
Held: Chadwick LJ explained the Hindcastle case: ‘Lord Nicholls explained in Hindcastle v. Barbara Attenborough why the former practice [of including a put option in a guarantee] was unnecessary. He pointed out that the operation of section 178 of the Insolvency Act 1986 is limited by the provisions in paragraph (b) of subsection (4). The disclaimer takes effect under the section only in so far as is necessary for the purpose of releasing the insolvent company from liability. The disclaimer does not affect the rights and liabilities of other persons, in particular persons such as a surety or an original tenant. Nevertheless, the tenancy, itself, does cease to exist as an estate in the land demised by the lease. The relationship of landlord and tenant is preserved notionally for the purposes only of giving rise to an obligation on the surety or other third parties.’
Chadwick LJ, Buxton LJ
[2000] EWCA Civ 3033, [2001] LandTR 1, (2001) 81 PandCR DG1
Bailii
England and Wales
Citing:
CitedHindcastle Ltd v Barbara Attenborough Associates Ltd and Others HL 22-Feb-1996
The guarantor of an original tenant under the lease remains liable after the disclaimer the lease on insolvency. The disclaimer operates to determine the lease altogether with the result that the landlord’s reversion is accelerated. ‘In order to . .
CitedStacey v Hill CA 1901
The surety for performance of the tenant’s covenants under the lease which was ‘to remain in force concurrently with the lease for a period of five years’ was discharged by the disclaimer of the lease by the insolvent tenant’s liquidator. The lease . .

Cited by:
CitedShaw v Doleman CA 1-Apr-2009
The landlord had taken a guarantee of the lease from the tenant when granting a licence to assign to the new tenant. That new tenant had become insolvent and the liquidator had disclaimed the lease. The court considered the position under Hindcastle . .

These lists may be incomplete.
Updated: 14 February 2021; Ref: scu.330963