Rajan Lekhraj Mahtani & Ors v Atlas Mara Limited & Anor

A contractual obligation to act reasonably when considering a nominated agent requires the party to have reasons connected with the agent’s contractual role. The decision need not be correct or objectively justified if it falls within the range of reasonable responses. The party may have regard to its own interests and need not balance them against those of the counterparty.

Contractual mechanisms must be construed as a whole. A party could not bypass a required marketing process, determine the sale price unilaterally, or require performance of an unlawful transfer. A further-assurance clause generally assists with performance of an existing obligation; it does not create new substantive obligations. Loss of a chance requires a real and substantial chance, assessed on the evidence.

The claimants were former shareholders of Finance Bank Zambia. They sought damages and specific performance from Atlas Mara Limited and African Banking Corporation Zambia Limited for alleged breaches of a share sale and purchase agreement concerning the acquisition of Finance Bank Zambia.

The claims concerned the appointment of a fund-raising agent, the proposed sale of Finance Building Society, and the late release of escrow shares. The claimants alleged that the defendants had acted unreasonably, failed to assist with contractual processes, and failed to release shares when due. The central issues were the construction and performance of the SPA, causation and loss, regulatory approval, and the effect of a further-assurance clause.

1. Fund-raising agent. The SPA required Atlas Mara to act reasonably when accepting or rejecting a fund-raising agent nominated by the seller representative. It did not impose wider positive obligations to enter into direct contractual relations with the agent, provide a formal acceptance, or agree an extension of the funding deadline. The defendants’ concern that Faber might misuse or disclose confidential information while acting for both the subsidiaries and a counterparty in another transaction was connected with its proposed role. Their refusal therefore fell within the range of reasonable responses and involved no breach. The claimants’ alternative causation case also failed. The evidence did not establish a real and substantial chance of the requisite funding being available by the contractual deadline. The court applied the approach in PCP Capital Partners LLP v Barclays Bank Plc [2021] EWHC 307 (Comm) and treated a chance below 11 per cent as insufficient.
2. Finance Building Society. Clause 7.2 required the appointment of a representative to market FBS and negotiate its sale. That mechanism applied even if Dr Mahtani was the eventual purchaser. He could not acquire FBS for a nominal price without the prescribed process, and the SPA did not confer a unilateral right to choose the price. In any event, he had not supplied a draft sale agreement capable of acceptance and had not obtained the prior regulatory approval required for a lawful transfer under section 23 of the Banking and Financial Services Act 1994. The defendants were therefore not in breach.
3. Escrow shares. Release required a joint instruction to the escrow agent. The defendants were not in breach merely because shares were not released on the dates alleged, absent a request for a joint instruction or a failure to provide information necessary to enable one. Clause 18.2 was a further-assurance provision and did not create the additional information obligations pleaded. The claimants also failed to prove loss.
4. All the claimants’ claims failed. The defendants’ counterclaim, which arose only if the late-release claim succeeded, was dismissed.