BL-2025-000377 - [2025] EWHC 2976 (Ch)

The Defendants’ case is, quite simply, that RE Capital was never a party to the Management Agreement and therefore cannot be sued for breach of contract for any breach thereof.

It is the Defendants’ case that whilst the Deeds of Assignment of Contract and Subcontract referred to in paragraphs 19 and 20 above provided for the benefit of the Management Agreement to be assigned to RE Capital, and for RE Capital to step into GMG Real Estate’s shoes so far as concerned the Management Agreement as between the two of them, RE Capital never became bound as between itself and the counterparty to the Management Agreement, CLL BVI. This is said to be because this would have required a novation giving rise, technically, to a new contract between RE Capital and CLL BVI, which there never was.

I will deal with this issue in short terms, because I am satisfied that there is a real prospect of Mr Dekel, if I am wrong as to the issues of reflective loss and as to whether Mr Dekel can rely upon s. 1 of the 1999 Act so as to entitle him to personally enforce the terms of the Management Agreement by seeking damages for breach of contract, demonstrating at trial that there had, in fact, been a novation of the Management Agreement so as to bind RE Capital as against CLL BVI.

There are a number of considerations that lead me to this conclusion.

Firstly, clause 11.2 of the Management Agreement provided that GMG Real Estate could not assign or transfer any rights or obligations under the Management Agreement without the consent of CLL BVI. There is no evidence to suggest CLL BVI did not consent to GMG Real Estate’s entry into the Deeds of Assignment of Contract and Subcontract.

It is unclear why there was an assignment by GMG Real Estate to GMG Holding, and then an assignment by GMG Holdings to RE Capital on the same day, 28 May 2021. However, significantly, the assignment to RE Capital provided, as referred to in paragraph 20 above, that RE Capital, amongst other things, agree to perform all GMG Holdings’ “obligations” under the Management Agreement. However, prima facie, GMG Holdings can only have become subject to obligations under the Management Agreement if there had been a novation including CLL BVI. It might be said that the wording of the relevant document was in error, and/or that what the relevant deeds were concerned with was the performance of obligations under the Management Agreement as between the parties to the deeds, rather than accepting an obligation to CLL BVI. However, these are issues that cannot, I consider, be decided in the context of a summary judgement application such as the present.

Further, it is not without significance that, contemporaneously with the execution of these deeds, the relevant assignees respectively, GMG Holdings and RE Capital, became the holders of the Management Shares in CLL BVI and were entered in in the Register of Members of the latter as such. This does, I consider, lend support to there having been some form of tripartite arrangement that, objectively considered, gave rise to a novation binding CE Capital as against CLL BVI. Any novated contract would have been on the same terms as the Management Agreement and thus would have included clause 20.1.2.

A novation occurs where A and B agree that B shall take on the rights and obligations of A under a contract with C, consideration being provided by the discharge of the original contract. This is a matter to determined objectively and it does not matter if the parties are not aware that a novation has occurred. See Chitty on Contracts, 35th edition, at 23-089 et seq. Whilst a novation cannot take place without the consent of all parties, this may be inferred - Musst Holdings Ltd v Astra Management UK Ltd [2023] EWCA Civ 128 at [55] – [56].

Having regard to these considerations, I consider there to be at least real grounds for there having been a novation binding RE Capital to a novated Management Agreement.