The claimant and defendant both lent money to a company (Y) under a credit facility. Y’s financial position deteriorated, the parties appointed investigating accountants and put Y into “workout”. Following an assignment of Y’s indebtedness to the claimant to the defendant’s subsidiary, the claimant brought proceedings against the defendant for breach of an anti-claim clause in the assignment.
The defendant counterclaimed rescission of the assignment for misrepresentation and damages for breach of an alleged good faith agreement in relation to the workout. The defendant alleged it was common practice between banks involved in a workout, that each would disclose to the other all facts known to it, that were relevant or material to the other’s decision-taking in the course of the workout, and that the claimant had failed to do this.
The court held that although it was good practice for workout banks to make such disclosures, in the absence of an express contractual framework, there was no legal duty to adhere to that practice, or to exercise reasonable care to do so. It was up to each co-workout bank to make its own enquiries and conduct its own due diligence in relation to the debtor. It could not just be assumed that it would have disclosed to it by the other bank all the information that it might consider material. There had been no misrepresentations by the claimant, and the terms of the assignment precluded the defendant from suing on any such good faith agreement. The claimant’s claim for damages for breach of the anti-claim clause succeeded.
National Westminster Bank Plc v Rabobank Nederland