Court of Appeal Confirms “Sub-guarantees” Are Enforceable

In a landmark decision with important commercial implications, K/S Victoria Street v House of Fraser (Stores Management) Ltd, the Court of Appeal has affirmed the principle in the Good Harvest case that an assignor’s guarantor may not guarantee the liability of an assignee. However, the court has placed important qualifications on that principle: a guarantee of the obligations of the assignor under an authorised guarantee agreement (an “AGA”) is enforceable (that is a so-called “sub-guarantee”), as is a guarantee of the obligations of a later assignee.