Summary
A contractual consent power is not necessarily absolute merely because the underlying prohibition is expressed in unqualified terms. Where a professionally negotiated facility agreement permits a secured lender to approve disposals of secured assets, the lender may act in its own commercial interests and need not balance those interests against the borrower’s. However, consent cannot be refused for a purpose unrelated to the lender’s legitimate commercial interests or where no reasonable lender in its position could refuse it. A Braganza-type term may therefore be implied where the consent mechanism would otherwise have no meaningful effect. The claim failed because the lender had rational commercial reasons for rejecting the proposed refinancing, and the pleaded alternative was not shown to have caused the alleged loss.
Factual background
The claimants alleged that Bank of Scotland PLC forced the disposal of three hotels. The Randolph Hotel claim concerned an alleged breach of express good-faith obligations in a shareholders agreement and was also challenged by reference to a deed of waiver. The Old England and Marine Hotel claims concerned alleged implied controls on the bank’s consent to disposals under a 2014 facility agreement.
The Marine claim was brought by assignment after the original claimant was found unable to recover the subsidiary’s loss. The bank disputed the assignment and limitation. The court determined construction, implication, misrepresentation, causation, assignment and limitation issues. It dismissed the claim without deciding quantum.
Held
- Randolph Hotel. The shareholders agreement required honesty and absence of bad faith in administering agreed transactions, but did not require the bank to subordinate its commercial interests, accept new facilities on the borrower’s terms, or agree to forgive debt. The pleaded Starwood proposal was neither sufficiently definite nor capable of acceptance, and the bank had not rejected it in breach of duty. The claim also fell within the deed of waiver and was released.
- Consent to disposals. The prohibition on disposals in the 2014 facility agreement was absolute unless the bank gave prior written approval. The express approval mechanism nevertheless meant that the borrower could seek consent and that the bank had to consider the request. A term was implied that consent could not be refused for a purpose unrelated to the bank’s legitimate commercial interests or where no reasonable lender in its position could refuse. The bank was not required to balance its interests against those of the claimants.
- Old England and Marine Hotels. The bank rationally rejected the proposed Barclays refinancing because it would not achieve the required deleveraging, would worsen the effective debt-to-EBITDA position, and would materially weaken the bank’s security and control over the Manchester Hotel. The claimants accepted that the Old England and Marine disposals were required to repay Facility B, so the alleged breach could not have caused the pleaded loss.
- Marine assignment and limitation. The assignment restriction covered accrued causes of action and continued after the facility agreement ended. The subsidiary had not used the contractual resignation machinery, so the assignment was ineffective. Alternatively, the facility agreement was not a deed within section 1(2) of the Law of Property (Miscellaneous Provisions) Act 1989, and the six-year limitation period applied.
- The claim was dismissed. Quantum issues were not determined.
The court’s approach to earlier authorities
Available to signed-in members.
Key cases cited
The 30 most senior of 31 authorities cited.
- The Financial Conduct Authority v Arch Insurance (UK) Ltd and others [2021] UKSC 1
- Wood v Capita Insurance Services Limited [2017] UKSC 24
- Nazir Ali v Petroleum Company of Trinidad and Tobago [2017] UKPC 2
- Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Limited and another [2015] UKSC 72
- Reda v Flag Limited [2002] UKPC 38
- Bank of Credit and Commerce International v. Ali and Others [2001] UKHL 8
- Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd (St Martins Property Corpn Ltd v Sir Robert McAlpine Ltd (formerly Sir Robert McAlpine and Sons Ltd)) [1994] 1 AC 85
- Mark Faulkner & Ors v Vollin Holdings Limited & Ors [2022] EWCA Civ 1371
- SK Shipping Europe Limited v Capital VLCC 3 Corp [2022] EWCA Civ 231
- Equitas Insurance Ltd v Municipal Mutual Insurance Ltd [2019] EWCA Civ 718
- Kogan v Martin [2019] EWCA Civ 164
- Property Alliance Group Ltd v The Royal Bank of Scotland Plc [2018] EWCA Civ 355
- Mid Essex Hospital Services NHS Trust v Compass Group UK and Ireland Ltd (t/a Medirest) [2013] EWCA Civ 200
- Bailey & Anor v Graham (aka "Levi Roots") & Ors [2012] EWCA Civ 1469
- Lomas & Ors v JFB Firth Rixson Inc & Ors [2012] EWCA Civ 419
- Socimer International Bank Ltd v Standard Bank London Ltd [2008] EWCA Civ 116
- Yorkshire Bank Plc v Hall (Hall v Yorkshire Bank Plc) [1999] 1 WLR 1713
- Western Bank Ltd v Schindler [1977] Ch 1
- Letang v Cooper [1965] 1 QB 232
- Farol Holdings Limited & Ors v Clydesdale Bank PLC & Anor [2024] EWHC 593 (Ch)
- The Financial Conduct Authority (FCA) v Arch Insurance (UK) Ltd & Ors [2020] EWHC 2448 (Comm)
- Taqa Bratani Ltd & Ors v Rockrose UKCS8 LLC [2020] EWHC 58 (Comm)
- Sheikh Tahnoon Bin Saeed Bin Shakhboot Al Nehayan v Kent [2018] EWHC 333 (Comm)
- Astor Management AG & Anor v Atalaya Mining Plc & Ors [2017] EWHC 425 (Comm)
- BP Gas Marketing Ltd v La Societe Sonatrach & Anor [2016] EWHC 2461 (Comm)
- Gestmin SGPS SA v Credit Suisse (UK) Ltd & Anor [2013] EWHC 3560 (Comm)
- TSG Building Services Plc v South Anglia Housing Ltd [2013] EWHC 1151 (TCC)
- Raiffeisen Zentralbank Osterreich AG v The Royal Bank of Scotland Plc [2010] EWHC 1392 (Comm)
- IBRC v Camden Market Holdings Corp [2017] 2 All E R (Comm) 781
- Nelson v British Broadcasting Corporation [1977] IRLR 148
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Cases citing this case
1 later case · 1 neutral
Most senior citing decisions:
- Peter Scholey Dunn v Kostas Kazolides [2025] EWHC 2212 (Ch) considered
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