Court rules that secure lender unreasonably withholds consent to disposal of property

  • In Crowther and another v Arbuthnot Latham & Co Ltd [2018] EWHC 504, the High Court determined that a secured lender had unreasonably withheld its consent to a disposal of property.
  • The borrower’s outstanding indebtedness was €5.9 million which was secured by their property in France which was worth around €4 million.
  • The proceedings that the borrowers brought against the lender were settled on the terms of a Tomlin order which inserted a provision into the remaining loan agreement stating that: “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”.
  • An offer was made on the borrower’s property for over €4 million but the lender refused to consent to the sale on the grounds of no further security for the remaining indebtedness and an agreed repayment plan.
  • It was ruled that the lender was in breach of the requirement to not withhold consent unreasonably. A reasoning is Wednesbury unreasonable (or irrational) if it is so unreasonable that no reasonable person acting reasonably could have made it.
  • It was known that the property did not provide security for the whole indebtedness when the provision was agreed.
  • If a better price may have been obtained then to delay consent may have been unreasonable, but this was not suggested in this case.
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