BL-2024-000734 - [2025] EWHC 2166 (Ch)

The Claimants advance a second argument as regards proper purpose. They say that the requests were made in breach of an implied term that the contractual entitlement to information must not be abused, but exercised honestly and in good faith.

Paragraph 1.11.1 requires that:

“The Obligors shall.......give the Lender such information concerning the location, condition, use and operation of the Secured Assets as the Lender may require”.

It is the Claimants case that the words “as the Lender may require” import a discretion. The Lender is entitled to ask for information, but does not have to. The Lender has a discretion about whether it asks for information, when it asks for information and how often it asks for information.

They therefore argue that the existence of this discretion calls into effect the principle explained in Braganza v BP Shipping Ltd [2015] UKSC 17; that there is an implied term that the discretion (i.e. whether, when and what information to request) must not be abused, but exercised honestly and in good faith (Braganza, Baroness Hale [17] to [31]). If this principle were to apply here, they say that the Lender’s power to ask for information would not be unfettered. In this regard they cite Property Alliance Group v Royal Bank of Scotland [2018] EWCA Civ 355 (which concerned a power for a lending bank to ask for a valuation of its security):

“It can, however, be inferred that the parties intended the power granted by clause 21.5.1 to be exercised in pursuit of legitimate commercial aims rather than, say, to vex PAG [the borrower] maliciously. It appears to us, accordingly, that RBS [the lender] could not commission a valuation under clause 21.5.1 for a purpose unrelated to its legitimate commercial interests or if doing so could not rationally be thought to advance them.”

What is argued here is that Niven did not request information in pursuit of a legitimate commercial aim. The requests were made in an attempt to find out information to assist Niven’s hostile takeover bid and then to “vex” the Claimants and attempt to manufacture an excuse to declare them to be in default.

The case law on the incorporation of an implied term in the form contended for by the Claimants was considered by John Kimbell KC sitting as a judge of the High Court in Cathay Pacific Airways Limited v Lufthansa Technik Ag [2020] EWHC 1789 (Ch) from [150] – [174]. In particular at [153] Mr Kimbell KC noted that the Socimer-Braganza line of cases represents an exception to the general rule of English law. The general rule is as stated in White & Carter (Councils) Limited v McGregor [1963] AC 413 at page 430 (per Lord Reid): “It has never been the law that a person is only entitled to enforce his contractual rights in a reasonable way, and that a court will not support an attempt to enforce them in an unreasonable way…".

At paragraph [174] of Cathay Pacific Mr Kimbell KC approved as correct the statement of the law by Chief Master Marsh in UBS AG v Rose Capital Ventures Ltd and others [2018] EWHC 3137 at [49]:

“1.

It is not every contractual power or discretion that will be subject to a Braganza limitation. The language of the contract will be an important factor.

2.

The types of contractual decisions that are amenable to the implication of a Braganza term are decisions which affect the rights of both parties to the contract where the decision-maker has a clear conflict of interest. In one sense all decisions made under a contract affect both parties, but it is clear that Baroness Hale had in mind the type of decision where one party is given a role in the on-going performance of the contract; such as where an assessment has to be made. This can be contrasted with a unilateral right given to one party to act in a particular way, such as right to terminate a contract without cause.

3.

The nature of the contractual relationship, including the balance of power between the parties is a factor to be taken into account: Braganza per Baroness Hale. Thus, it is more likely for a Braganza term to be implied in, say, a contract of employment than in other less 'relational' contracts such as mortgages.

4.

The scope of the term to be implied will vary according to the circumstances and the terms of the contract.”

On the facts, Chief Master Marsh concluded that a clause permitting UBS to call in a loan was not the sort of discretionary power that Baroness Hale described in Braganza. He noted at [56] that the power under consideration was solely for the benefit of the mortgagee and that no Socimer / Braganza type clause ought to be implied. This conclusion was endorsed by Thompsell J in Murfett v Property Lending LLP [2024] EWHC 2787 (Ch) at [50].

The issue of whether rights to terminate and analogous rights could be subject to Braganza duties was the subject of careful consideration by His Honour Judge Pelling QC in TAQA Bratani Limited v Rockrose UKSC LLC [2020] EWHC 58 (Comm), at [44]-[53], who rejected the argument that rights of termination were to be analysed as contractual discretions.

In particular, HHJ Pelling noted at [48] the statement of the Court of Appeal in Lomas v JB Firth [2012] EWCA Civ 419 that:

“46.

The administrators did not pursue this third suggested implied term on the appeal. Had they done so, we would have rejected it because it is even more hopeless than the others. The right to terminate is no more an exercise of discretion, which is not to be exercised in an arbitrary or capricious (or perhaps unreasonable) manner, than the right to accept repudiatory conduct as a repudiation of a contract. We have already commented that the specific right to terminate makes theoretical the question whether an Event of Default constitutes a repudiation of the contract which can be accepted by the innocent party as bringing the contract to an end. But no one would suggest that there could be any impediment to accepting repudiatory conduct as a termination of the contract based on the fact that the innocent party can elect between termination and leaving the contract on foot. The same applies to elective termination. Even if, moreover, it could be said that in some sense a contracting party had a discretion to bring the contract to an end and that such discretion should not be exercised capriciously or arbitrarily, it by no means follows that the same considerations could apply to allowing the contract to continue which does not require any positive act on the part of the Non-defaulting Party.”

My conclusion is that the right of a chargee to exercise rights under the charge document is not, and should not be, subject to a Braganza duty. In my view, a chargee exercising a right under the charge document is in the same position as a lender exercising a right to terminate under a loan document – he is absolutely entitled to act in accordance with his own interests as he perceives them to be, and a man is not to be subject to any requirement of rationality in pursuing his own interest for his own account.

Since this is an application to strike out and for reverse summary judgment, I note that the question before me is not as to whether I think that there was a breach either of an implied term or of a common law duty, but whether I think that either of these positions has a realistic chance of success at trial. I accept that neither point is completely unarguable. However

I therefore do not accept that any of the consequences of the making of that request – including the appointment of the administrators – was invalidated by any such impropriety. They therefore have no realistic prospect of establishing that the administrators were not validly appointed on this ground.