A High Court judge has ruled that record company EMI is liable for almost £5m of unpaid rent on HMV’s former flagship store on Oxford Street, W1.
HMV’s collapse in 2013 and the closure of its iconic store on London’s most famous shopping street was emblematic of the ongoing crisis on the high street.
After HMV closed, the lease was assigned to fashion retailer Forever 21, which went into administration in September and closed in October. It had not paid rent since June 2019.
The landlord is insurer Prudential. It is seeking the unpaid rent back from record company EMI because it guaranteed HMV’s lease.
The case was heard at the High Court last month, and Penelope Reed QC gave judgment (virtually, under the Covid-19 protocol) last week.
The legal argument centred on the drafting of the 1995 Landlord and Tenant Act, and its treatment of authorised guarantee agreements. Specifically, the legal battleground was over the act’s definition of the word “principal”.
According to the Act, “‘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”.
Lawyers for EMI argued that this meant that this clause was impermissible because authorised guarantee agreements cannot impose obligations on parties who are not an immediate assignee.
However, in her ruling, the judge disagreed.
She said that, looking at the ordinary and natural meaning of the words, EMI was liable because it had guaranteed HMV, which sublet to Forever 21.
“It therefore follows that I will give the declaration sought by Prudential that the GAGA [guaranteed authorised guarantee agreement] imposed by the lease is valid and give the money judgment sought,” she said in her ruling.
“I will hear submissions (or deal with them in writing) as to the amount outstanding in respect of rent at the present time.”
EMI Group Ltd v Prudential Assurance Company Ltd
Business & Property Courts (Penelope Reed QC sitting as a Deputy Judge of the High Court)
Jonathan Seitler QC and Nicholas Taggart (instructed by GSC Solicitors LLP) for the claimant
John McGhee QC and Maxim Cardew (instructed by Hogan Lovells International LLP) for the defendant
