Irrevocable Consent To Novation May Be Given In Agreement

Habibsons Bank Limited v Standard Chartered Bank (Hong Kong) Limited [2010] EWCA Civ 1335.

Standard Chartered was one of the original lenders under a syndicated loan to a Dutch bank. The facility agreement permitted the transfer by the original parties of all or part of their rights to third parties. A transfer was to be completed by the agent (a German bank) executing a transfer certificate completed by the existing lender and a new lender. The consent of the borrower was expressly not required. Habibsons agreed to buy a share of the loan from Standard Chartered and completed the transfer certificate. The borrower then went into administration and was unable to meet its obligations. Habibsons refused to sign a new transfer certificate bringing forward the date for settlement, so the agent executed the original transfer certificate. Standard Chartered deducted the settlement sum due from amounts held by Habibsons in an account with Standard Chartered. Habibsons disputed that the transaction had been completed, partly on the grounds that the consent of the borrower was not given following administration.

The Court of Appeal rejected the claim. There was no reasonable prospect of persuading a Court that the administration order was effective to prevent the novation of the loan. Under English law a party to a contract could effectively give consent in the...