Horn & Ors v Commercial Acceptances Limited [2011] EWC1757
In a loan agreement it was agreed that "each party shall act in absolute faith towards the other". In fact, the lender brought in another financier without telling the borrower. One of the questions that arose in the case was whether this was a breach of a duty of good faith. The High Court held in favour of the lender on other grounds, but, obiter, gave its view on the duty of good faith. The Judge made the following points:
- It is irrelevant whether the borrower would have gone ahead had he known that there was to be an additional lender. If there is non-disclosure by a fiduciary in breach of his duty, the fiduciary cannot maintain that disclosure would have not altered the decision to proceed.
- It was unnecessary to determine whether there was a fiduciary obligation. The obligation to act in absolute faith creates an express obligation which imports an obligation to disclose material facts. The borrower was deprived of an opportunity to make an informed decision as to whether or not to join in with this lending with full information as to who was going to contribute.
- Breach of the obligation of good faith does not require dishonesty.
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.
