Plain English: Withholding consent to a transfer

Plain English: Withholding consent to a transfer

Many joint venture agreements, royalty agreements, leases and other mining instruments make provision that a party may not transfer its rights without the written consent of the other party (which shall not be unreasonably withheld).

The recent decision of Beech J in St Barbara Ltd v Hockley [No 2] [2013] WASC 358 highlights the need to carefully consider any response to a request for consent to transfer. In this case Mr Hockley had sold a mining tenement to a predecessor in title to St Barbara. The sale agreement provided that a party could assign its interest in the tenement provided that it first obtains the written consent of the other party (which consent shall not be unreasonably withheld). St Barbara sold its interest in the tenement and sought the consent of Mr Hockley to the assignment of the tenement to the purchaser.

Mr Hockley withheld his consent. Beech J held that Mr Hockley’s refusal to consent was unreasonable, granted a declaration to that effect and consequential orders requiring Mr Hockley to do all things necessary to enable the transfer of the tenement.

The following principles can be derived from the decision:

  1. The onus of proving that consent has been unreasonably withheld is on the party seeking the consent.
  2. Whether consent has been unreasonably withheld is to be determined as at the date on which the consent is refused.
  3. Whether consent was unreasonably withheld is to be determined objectively, in light of the actual facts and circumstances at the time the consent was withheld. The unreasonableness enquiry is not limited to facts actually or constructively known to the decision maker at the time.
  4. Only one of the influencing reasons needs to be a legitimate consideration and it matters not if there were other illegitimate reasons.
  5. A Judge will only consider the pleaded reasons for withholding consent. In this case Mr Hockley was refused leave to amend his defence at trial to add an additional reason for validly withholding consent.

One of the reasons pleaded by Mr Hockley as a legitimate reason for withholding consent was that he had not be provided with evidence of the assignee’s financial standing. The Judge found that this was not a valid reason because Mr Hockley had not requested such information. This illustrates the need to be careful in responding to a request for consent to an assignment. One has to be careful in how one asks for further information and how one refuses the consent. The failure to ask the correct questions could lead to a court holding that the consent has been unreasonably withheld.

No Comments

Sorry, the comment form is closed at this time.