Crowther v Arbuthnot Latham & Co Ltd: Difference between revisions
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Crowther argued that reasonableness could only be determined by reference to the proposed sale price: if it was a fair market value and nothing else was likely to happen to materially affect the property's value between the sale and maturity of the loan, Arbuthnot could not reasonably withhold consent. | Crowther argued that reasonableness could only be determined by reference to the proposed sale price: if it was a fair market value and nothing else was likely to happen to materially affect the property's value between the sale and maturity of the loan, Arbuthnot could not reasonably withhold consent. | ||
Arbuthnot said it was seeking to protect its own commercial interests: If | Arbuthnot said it was seeking to protect its own commercial interests: If they had thought their loan was to be unsecured to the tune of 1.7m, they would have asked for a bigger spread on the interest. Arbuthnot’s problem here was that this is exactly what they ''had'' done: the property was agreed not to have been worth more than £4m even at the time of creation of the loan. {{t|Schoolboy error}} from the private bankers here. Nor was there evidence that the property value had slumped, or that there was much sign it was likely to rally. | ||
Waksman QC in Crowther v Arbuthnot decided that the bank had unreasonably withheld consent. It was hard to see why Arbuthnot should be able to insist on anything mroe than the sale of a property at a fair price and the bank’s stated reason for withholding consent seemed to be aimed at securing more collateral than they has achieved at first — that is correcting a bad deal they had made. | Waksman QC in Crowther v Arbuthnot decided that the bank had unreasonably withheld consent. It was hard to see why Arbuthnot should be able to insist on anything mroe than the sale of a property at a fair price and the bank’s stated reason for withholding consent seemed to be aimed at securing more collateral than they has achieved at first — that is correcting a bad deal they had made. | ||
Revision as of 11:42, 4 July 2018
A case which doesn’t, despite appearances, row back on the excellent principles uncovered in Barclays v Unicredit, but rather validates them.
Crowther v Arbuthnot turned on whether private bankiers Arbuthnot, who had (rather cluelessly) lent Crowther €5.9m secured on a £4m property, could withhold its consent to the sale of that property.
The relevant clause provided:
- “If with the prior approval of the bank (such approval not to be unreasonably withheld or delayed) the property is sold, you shall immediately repay to the bank the net proceeds of sale.”
Crowther received a fair market offer for the property of €4.1m — and one with Arbuthnot even said was “agreeable” — but refused to approve the sale without Crowther providing further security. They relied on Barclays v Unicredit
Crowther argued that reasonableness could only be determined by reference to the proposed sale price: if it was a fair market value and nothing else was likely to happen to materially affect the property's value between the sale and maturity of the loan, Arbuthnot could not reasonably withhold consent.
Arbuthnot said it was seeking to protect its own commercial interests: If they had thought their loan was to be unsecured to the tune of 1.7m, they would have asked for a bigger spread on the interest. Arbuthnot’s problem here was that this is exactly what they had done: the property was agreed not to have been worth more than £4m even at the time of creation of the loan. Schoolboy error from the private bankers here. Nor was there evidence that the property value had slumped, or that there was much sign it was likely to rally.
Waksman QC in Crowther v Arbuthnot decided that the bank had unreasonably withheld consent. It was hard to see why Arbuthnot should be able to insist on anything mroe than the sale of a property at a fair price and the bank’s stated reason for withholding consent seemed to be aimed at securing more collateral than they has achieved at first — that is correcting a bad deal they had made.
Whether withholding consent is is reasonable will depend on the clause, the facts and the reasons given for withholding consent.