We use cookies to give you the best online experience. By using our website you agree to our use of cookies in accordance with our cookie policy. Learn more here.Close Me
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 granting/withholding
consent to balance their interests with the other party or to have
any regard to the costliness withholding consent may have, unless
the balance is completely disproportionate.
In summary, the party requesting consent must show that the
other party's refusal is unreasonable, which is a question of
fact. The refusing party is not obliged to show that its refusal is
right, simply that it was reasonable in light of the surrounding
facts. It is not required to balance its own interests with those
of the other party, unless the balance is completely
disproportionate.
In light of the evidence brought before the Court, the Judge
found that the claimants were entitled to damages, which were
calculated at a level which, at approximately $2m, was twice that
of the original 3M compensation offer.
Comment
Where consent is required, then a contract party is entitled to
give or refuse consent. The onus is placed on the counterpart to
establish the unreasonable nature of a refusal. When seeking relief
from the Courts on the issue of such refusal of consent, its
reasonableness will be an issue of fact to be decided by a Court
objectively in each individual circumstance, but with regard to the
position that the onus is on the party seeking consent to
demonstrate the unreasonableness of the decision.
Footnotes
1 [2011] EWHC 2895 (Comm)
2 Although the phrase "such consent not to be
unreasonably withheld" (or delayed) is very commonly used in
contracts in Ireland, we are unaware of a similar judicial
consideration of the issue in Ireland.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
A discussion on a recent judgment in relation to a case which considered whether a charterers' failure to pay hire is a breach of a condition which entitles owners to cancel the charter, and claim damages for the unperformed part.
Law Nr. 6461 on the Liberalization of the Turkish Railway Transportation (the "Law") has been published on 1st of May in the Turkish Trade Registry Gazette with Nr. 28634.
On 25 February 2013 Kazakhstan adopted the new Rules on Entitlement of Airline Companies to Performance of Regular Internal Commercial Air Transportations (the "Rules").
Every year since the start of navigation on inland waters of Ukraine for ship owners of yachts, sailing and sport vessels under foreign flag set becomes relevant internal waters...
The Department for Transport has recently announced a new rail franchising programme following the cancellation of the West Coast mainline procurement and the discovery of serious technical flaws in the tendering process.
In the current climate, we are seeing increasing attempts by charterers to withhold hire on the basis that the vessel did not meet its contractual performance warranty.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
