Fulham Partners LLC v National Australia Bank Ltd

In *Fulham Partners LLC v National Australia Bank Ltd*, the New South Wales Court of Appeal considered a dispute concerning the assignment of contractual rights. Fulham Partners LLC (the appellants) sought to obtain a charge over contractual rights held by a party to an agreement with National Australia Bank Ltd (the respondents). The core of the dispute revolved around a clause in the underlying agreement which stipulated that rights could not be assigned, encumbered, or dealt with without the prior consent of the other party, which consent was not to be unreasonably withheld. The appellants contended that the respondents' refusal to consent to the charge was unreasonable, and that such unreasonable withholding constituted an affirmative grant of consent or a breach of contract.

The Court of Appeal was required to determine several key legal issues. Firstly, it had to consider whether a party to a contract (the obligee) could grant a charge over its contractual rights to a third party without the consent of the other contracting party (the obligor), when the contract expressly prohibited assignment or encumbrance without consent. Secondly, the Court had to assess whether the respondents' refusal to consent to the grant of a charge was unreasonable, particularly in light of the fact that the obligor was protected from further suit by the assignor by an order barring proceedings unless a lump sum costs order was paid. The Court also considered the onus of proof for establishing the unreasonableness of the refusal to consent and the admissibility of evidence, specifically letters articulating the basis for the refusal, under s 136 of the *Evidence Act 1995* (NSW).

The Court of Appeal ultimately dismissed the appeal. The reasoning focused on the construction of the contractual clause and the principles of contract law. The Court held that the contractual prohibition on assignment or encumbrance without consent remained operative, and that an unreasonable withholding of consent did not, in itself, constitute an affirmative grant of consent or a discharge of the need to obtain consent. The Court found that the appellants had not established that the respondents' refusal was unreasonable, and that the respondents were entitled to consider the identity and solvency of the proposed assignee, as well as the ongoing legal and financial status of the parties, as legitimate considerations in assessing the request for consent. The Court also addressed the admissibility of evidence, finding that the letters articulating the basis for refusal were not unfairly prejudicial.

Consequently, the appeal was dismissed, and the appellants were ordered to pay the costs of the active respondents.