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Crowther v Arbuthnot Latham & Co Ltd: Difference between revisions

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Crowther v Arbuthnot Latham & Co Ltd (view source)

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{{cn}}A case which doesn’t, despite appearances, row back on the excellent principles uncovered in {{casenote|Barclays|Unicredit}}, but rather validates them.
{{cn}}A case which doesn’t, despite appearances, row back on the excellent principles uncovered in {{casenote|Barclays|Unicredit}}, but rather validates them.


Crowther v Arbuthnot turned on whether private bankers Arbuthnot, who had (rather cluelessly) lent Crowther €5.9m secured on a £4m property, could withhold its consent to the sale of that property.
{{casenote|Crowther|Arbuthnot Latham & Co Ltd}} turned on whether private bankers 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:
The relevant clause provided:
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Crowther argued that “reasonableness” in this case 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” in this case 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 (per {{casenote|Barclays|Unicredit}}) it was seeking to protect its own commercial interests: if they had thought their loan would be unsecured to the tune of 1.7m, they would have asked for a bigger spread on the interest. The problem with this argument was that this is exactly what Arbuthnot ''had'' done: By common agreement the property was never worth more than £4m, even when Arbuthnot advanced the loan. {{t|Schoolboy error}} from the private bankers here. Nor did Arbuthnot have any evidence that the property value had slumped, nor that there was much sign it was likely to rally.
Arbuthnot said (per {{casenote|Barclays|Unicredit}}) it was seeking to protect its own commercial interests: if they had thought their loan would be unsecured to the tune of 1.7m, they would have not have made it without asking for a bigger spread on the interest.  
 
The problem with this argument was that this is exactly what Arbuthnot ''had'' done: By common agreement the property was never worth more than £4m, even when Arbuthnot advanced the loan. Schoolboy error from the [[Stupid banker|private bankers]] here. Nor did Arbuthnot have any evidence that the property value had slumped, nor that there was much sign it was likely to rally.


Waksman QC decided that Arbuthnot ''had'' unreasonably withheld consent: why, he asked, should Arbuthnot be entitled to insist on anything more than the sale of a property at a fair price? Arbuthnot’s stated reason for withholding consent seemed to be to secure more collateral, thereby correcting the bad bargain they had made in the first place.
Waksman QC decided that Arbuthnot ''had'' unreasonably withheld consent: why, he asked, should Arbuthnot be entitled to insist on anything more than the sale of a property at a fair price? Arbuthnot’s stated reason for withholding consent seemed to be to secure more collateral, thereby correcting the bad bargain they had made in the first place.
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