In the current economic climate, there are a number of key issues facing borrowers in the event of lender insolvency or default.

Committed facilities/term loans

Provided they are fully drawn and the borrower is not in breach itself, the impact in the short term may not be too severe.

Gowling WLG's finance litigation experts bring you the latest on the cases and issues affecting the lending industry.

Single signature bank mandate binding on partnership

The High Court has recently considered whether a one signature bank mandate was sufficient to bind a partnership to various loan agreements.

Shareholders often overlook the need to properly document loan advances in their haste to provide funds to the company, without being aware of the significant consequences that can result.

The defendant supplied drink to the owner of a club, the cost of which was secured by a charge over the club premises. The owner wished to re-finance his debt to the defendant and took a remortgage with the claimant to be secured as a fist legal charge on both the club and the owner’s house. Part of the remortgage monies were paid to the defendant in partial satisfaction of the sums outstanding. Both the claimant and defendant were granted legal charges over the house.

This month we consider the court's refusal to imply an obligation into a loan agreement that a lender should take steps in foreign proceedings to preserve security; the court's view on the failure to heed alarm bells in relation to potential undue influence; and more cases and issues affecting the industry.

No implied term in a loan agreement that creditor should take steps in foreign proceedings to preserve security

Notice of assignment

Notice of assignment can be given by either the assignee or assignor under the Consumer Credit Act 1974 (CCA).

This was the High Court's finding in Smith v 1st Credit (Finance) Ltd and another. Smith was notified by her credit card company that her credit card debt had been assigned to 1st Credit. 1st Credit wrote to Smith shortly afterwards confirming the assignment and advising how payment could be made. Smith failed to pay and was made bankrupt by 1st Credit which subsequently repossessed and sold Smith's property.

Having obtained a possession order against the claimant’s property, the bank then sold it. Issues arose as to whether certain fixtures, fittings and chattels in the property formed part of the sale of the property. The claimant brought claims, amongst others, to recover the fittings and other items, a claim for damages for conversion of those items, and a claim that the property had not been effectively transferred to the buyer as the bank had no title to transfer the chattels to the buyer.

This month we consider the court's view on the extent to which firms' activities in handling complaints are themselves subject to adjudication by the Financial Ombudsman Service; the exercise of the court's discretion in refusing an unopposed application to annul a bankruptcy order; and more cases and issues affecting the industry:

The High Court considers the remit of the FOS's jurisdiction

1. Historical Background

Unlike the United States, Canada was not created by a unilateral declaration of independence from the colonial occupation of England.

The claimant and defendant both lent money to a company (Y) under a credit facility. Y’s financial position deteriorated, the parties appointed investigating accountants and put Y into “workout”. Following an assignment of Y’s indebtedness to the claimant to the defendant’s subsidiary, the claimant brought proceedings against the defendant for breach of an anti-claim clause in the assignment.