Habibsons Bank Ltd v Standard Chartered Bank (Hong Kong) Ltd

A proposed amendment must disclose a properly particularised case with a real prospect of success. A contracting party may give advance consent to future novations through a sufficiently certain contractual mechanism.

The rule in Pigot’s Case invalidates a materially altered written instrument. Where the instrument merely implements an underlying contract, its invalidity does not automatically discharge that contract. Discharge may nevertheless follow where the alteration itself constitutes fraud, misconduct or other conduct justifying termination.

An agent contractually required to execute a duly completed transfer certificate may do so despite a party’s attempted unilateral withdrawal of authority, subject to any conditions imposed by the agreed transfer mechanism.

Habibsons Bank agreed to acquire US$2 million of a syndicated loan from Standard Chartered Bank (Hong Kong). The borrower entered administration before the contractual transfer mechanism was completed. A copy of the transfer certificate was altered to show an earlier settlement date, but the agent later executed the unaltered certificate reflecting the agreed transaction.

Habibsons sought to recover the settlement sum and to join the transfer agent and Standard Chartered’s New York entity. Cooke J refused permission to amend the claim because none of the proposed cases had a real prospect of success: [2010] EWHC 702 (Comm). The principal issues on appeal concerned advance consent to novation, the effect of materially altering an implementing instrument, the agent’s authority and the adequacy of the proposed claims.

1. Appeal dismissed. Permission to appeal was granted, except in relation to costs, because the substantive issues had been fully argued. The proposed amendments disclosed no case with a real prospect of success. Rix LJ agreed with Moore-Bick LJ.

2. Whether raised through striking out, summary judgment or an application to amend, a party may not pursue a case lacking a real prospect of success. The court ordinarily assumes that properly pleaded facts can be proved, unless the contrary is clear. The proposed case based on Dutch law was inadequately particularised and unsupported by any identified rule capable of producing the alleged effect.

3. A party may consent in the original contract to a later novation. Clause 26 contained the borrower’s advance consent to transfers made through a clear and certain mechanism; it did not dispense with consent. The lenders’ consideration supported an irrevocable standing offer by the borrower to contract by novation with an eligible institution complying with the transfer provisions. The administration order therefore did not prevent operation of the English-law transfer mechanism.

4. The rule in Pigot’s Case concerns the validity of written instruments. The altered certificate was materially altered and therefore invalid, but it merely implemented the transaction and did not embody the parties’ contractual obligations. Its invalidity did not automatically avoid or discharge the underlying contract. Fraud, misconduct or repudiatory conduct might produce a different result, but none was pleaded. A conforming certificate remained capable of tender and was in fact executed.

5. The agent was required to execute a duly completed transfer certificate as soon as reasonably practicable, subject to satisfying itself that legally required checks had been completed. Neither contracting party could revoke that authority unilaterally. No actionable loss could arise from execution of the certificate because the underlying transaction remained binding.

6. The proposed claims against the agent and the New York entity consequently had no real prospect of success. No cogent ground was shown for interfering with the judge’s indemnity-costs order.

1. Court of Appeal (Civil Division): Permission to appeal was granted, except as to costs, but the appeal was dismissed unanimously: [2010] EWCA Civ 1335.
2. High Court (Commercial Court): Cooke J refused permission to amend the claim or join additional defendants, with the result that the claim stood dismissed: [2010] EWHC 702 (Comm).
3. High Court: Teare J had earlier ordered the existing claim struck out, subject to determination of Habibsons’ application to amend.