In a considered judgment by HHJ Waksman QC on 1 March 2018 the Court determined a question of contractual construction. The relevant clause was in a facility agreement between a bank and its customer and provided that a property could be sold, subject to the bank’s consent (such consent not to be unreasonably withheld).
At the time the clause was agreed the property, which was held as s security for a loan from the bank, was not worth as much as the loan. An offer was made by an independent third party to purchase the property at a fair market value, but the bank refused its consent to the sale. The bank wished to make it a condition of sale that the borrower provided alternative security for the shortfall between the value of the property and the value of the loan. The borrower contended that the bank was acting unreasonably - there was no evidence that the property would be worth any more at the termination of the loan period; the purchase price was at a fair market value; and the bank was really seeking an uncovenanted-for advantage.
The Court agreed with the borrower that the clause was to be construed according to the principles in a landlord and tenant case: Mount Eden v Straudley Investments (and the other earlier cases referred to in that case) rather than in accordance with the principles in Barclays Bank v Unicredit - which considered a different sort of clause entirely.
Robert-Jan Temmink QC acted for the borrower.