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Vic Younis

In Chudley v Clydesdale Bank plc (t/a Yorkshire Bank) [2017] EWHC 2177 (Comm), the High Court set out its approach to the identification of third parties who can enforce contract terms under the Contracts (Rights of Third Parties) Act 1999 where they are not named in the contract.

The High Court has given guidance on the approach to establishing whether a class of unnamed persons can enforce a contract term under the Contracts (Rights of Third Parties) Act 1999 (1999 Act). Although the comments were obiter dicta, they are useful as a relatively rare instance of judicial thinking on the 1999 Act.

The claimant investors argued that they were entitled to enforce terms of a contract between the defendant bank and an investment company. The judge held that the document in question was not intended to be legally binding so the claim failed. However, the judge held that, if there had been a contract the claimants would have been entitled to enforce it under the 1999 Act. Having reviewed previous case law, the judge held that:

It was permissible for a court to identify a class of claimants for the purposes of section 1(3) of the 1999 Act by virtue of a process of the construction of the express terms of the agreement, provided that the process of construction did not involve implied identification.

The same contractual term could satisfy both the statutory requirements for express identification of the third party and the intention to confer a benefit under the 1999 Act. In this case, reference in the document to a client account, and hence clients who paid into that account, would have sufficed to identify the claimants as persons intended to benefit from the contract.

The judge appears to have taken an arguably more flexible approach than that taken by the Court of Appeal in Avraamides v Colwill [2006] EWCA Civ 1533, although the judge insisted that his approach was not inconsistent with that prior authority.

For all Litigation issues please contact Vic Younis on 01384 371622 or v.younis@wjclaw.co.uk.

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