To Consent Or Not To Consent

In Porton Capital Technology Funds v. 3M UK Holdings Ltd & 3M Company¹, the English High Court considered the concepts underlying the requirement to seek and obtain consent on the one hand, and the countervailing measure of other parties entitlement not to consent. The phrase "subject to consent, such consent not to be unreasonably withheld" is regularly used by lawyers and is often viewed as an innocuous concession that demonstrates the reasonability. The Porton Capital case considered the consent concept².

The High Court in England held that vendors of a business on an earn-out basis had not unreasonably withheld their consent to the cessation of the business and were entitled to damages for breach by the purchaser of its contractual obligations to diligently seek regulatory approval for the product and to market it actively. Such judgment and order was made in context where the defendants argued that they had always acted in good faith and in accordance with the share purchase agreement; they were entitled to terminate business in circumstances where they had requested consent, it was not forthcoming and they had offered compensation.

The Court analysed the commerciality surrounding the business in context of claim for damages and while a number of issues were considered there was one central to the case: Did the vendors act unreasonably in withholding consent from the Defendants to terminate the business in late 2008?

In answering this question, the Court gave detailed consideration to the meaning of the phrase itself and where the onus lies in proving whether withholding consent was reasonable. In considering the issue, the Judge agreed with the claimants who had highlighted the following principles:

the onus is on the party claiming that a refusal is unreasonable to demonstrate its unreasonableness; it is not for the party who may withhold consent to demonstrate that it was right or justified, merely that it was reasonable in the circumstances; in determining what is reasonable, the person granting/withholding consent are entitled to have regard to their own interests; and there is no requirement on the person...