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Court of Appeal hands down judgment in Musst Holdings Ltd v Astra Asset Management UK Ltd [2023] EWCA Civ 128 – Christopher Boardman KC and Tom Beasley

The Court of Appeal has upheld Freedman J’s finding that an agreement between an introducer and an investment manager was novated to two successors entities. It has also confirmed that certain changes in investment strategy by the successor did not end the introducer’s entitlement to its share of management and performance fees.

The case concerned investment opportunities that arose following the 2008 financial crash, in particular in synthetic asset backed securities (ABS) and collateralised debt obligations (CDOs). It had been found, at first instance, that Musst Holdings Ltd had introduced two investors to an original investment manager and was entitled to share in fees earned from their investments, as long as these followed a strategy designed to take advantage of the ABS/CDO opportunity. The management of those investments had subsequently been taken over by Astra Asset Management LLP and then Astra Asset Management UK Ltd, who were leading alternative credit managers specialising in structured credit investments. Christopher Boardman KC and Tom Beasley appeared for the two Astra entities, instructed by Lucas Moore and Nick Grant of Payne Hicks Beach LLP.

In reaching its conclusions, the Court of Appeal addressed what was required to establish a novation by conduct and how, in the alternative, such a novation might arise through an estoppel by convention. Of particular note was the court’s consideration of whether certain clauses in the original contract might prevent the novation from taking effect. Giving the leading judgment, Falk LJ found that there was no breach of a no-variation clause because a novation does not vary but discharges the original agreement, replacing it with a new one between different parties. However, the court noted it was possible that a novation might fall foul of a clause in the original agreement that said a party could not assign, transfer or “deal in any other manner with” any of its rights and obligations under the agreement. On the facts, however, the relevant clause had permitted such dealing if “prior written consent” had been obtained from the other party. Falk LJ determined that this requirement was capable of being waived as long as consent was given retrospectively, which she found had implicitly occurred on the facts.

For more on this latter aspect of the decision, Westlaw has published a short case report that can be found here:

The full judgement can be read, here.