Different standards applicable to a bank’s exercise of contractual discretion

04 Jul 2018

In Crowther v Arbuthnot Latham & Co Ltd [2018] EWHC 504, the English High Court interpreted a clause in a settlement agreement, which provided that the defendant-bank would not unreasonably withhold its consent to the sale of a property over which it held security. The English High Court held that this clause required the bank to act in accordance with an objective standard of reasonableness, as opposed to a lower standard of Wednesbury reasonableness or rationality in arriving at its decision.

This case illustrates that depending on the proper construction of the relevant clause, the Courts may apply different standards to a bank’s exercise of its contractual discretion.

Authored by: Benedict Teo, Head, Banking & Financial Disputes; Pauline Chong, Head, Banking & Finance; Elaine Lim, Senior Associate, Dispute Resolution.

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