20th Feb 2023 | News



Musst Holdings Limited, represented by Peter Knox KC and Katharine Bailey (instructed by Taylor Wessing LLP), has succeeded in the Court of Appeal. This judgment confirms the well-established principle that novation is distinct from contractual variation, and that therefore a clause requiring a variation to be in writing does not require a novation to be in writing, or preclude a novation by estoppel by convention.


Nugee LJ had granted Astra Asset Management UK Ltd and Astra Asset Management LLP (together ‘Astra’) permission to appeal against the judgment of Freedman J ([2021] EWHC 3432 (Ch)), on three grounds. The first ground was ‘the Novation issue’, under which Astra argued that Freedman J was wrong to hold that Musst’s contract had been novated to Astra and that there was an estoppel to like effect. The second and third grounds (which turned on the construction of the contract as novated) were ‘the Strategy issue’ and ‘the Funds issue’, under which Astra argued that Freedman J had erroneously adopted Musst’s contractual construction that Musst’s entitlement to fees in relation to particular investments hinged on the strategy being followed by the fund in question at the time at which each was made, rather than on what happened afterwards.

In a twenty-six page judgment handed down on 13 February 2023 (only 19 working days after the two-day hearing of the appeal on 17 and 18 January 2023), Falk LJ (with whom Lady Justice Whipple and Lord Justice Peter Jackson agreed) dismissed Astra’s appeal on all grounds.

The Novation issue

Falk LJ confirmed that Freedman J had considered the relevant, well-established legal principles on novation [54], which she concisely summarised herself [55-60]. Falk LJ confirmed that whether a novation by conduct has occurred is a question of fact with which an appellate court will not lightly interfere; Freedman J in this case had the benefit of consideration of all the evidence following a 13-day trial in Spring 2021 and was entitled on that evidence to find novation by conduct [69-73]. Falk LJ considered that there was ‘no substance’ in Astra’s point that Freedman J referred to only certain contractual provisions in his judgment on novation by conduct: ‘Consistent with the “name changing” exercise that the transfer was regarded by the parties as being, it was obviously part of the novated agreement that references to Octave would be treated as references to Astra’; Astra’s submission invited an approach which was ‘wholly unrealistic’ [74-75]. Falk LJ dismissed Astra’s submissions that certain provisions of the contract precluded the operation of a novation [81-86]; in particular, she held that it was ‘uncontroversial’ that a novation was not a variation [82], so the no variation  clause did not apply on the facts [84]. Further, the contractual obligation on each party not to transfer or otherwise deal with its rights and obligations without the other party’s prior written consent did not operate to preclude the novation in this case because, as Millett LJ recognised in Hendry v Chartsearch [1998] CLC 1382 at pp.1394, such an obligation is capable of waiver by the other party in the form of retrospective consent, which waiver Musst had provided [85-86]. Falk LJ found that, in any event, Freedman J had correctly summarised the law on conventional estoppel [61-62] and was entitled to find an estoppel by convention as an alternative to a (contractual) novation [88-91].

The Strategy issue and the Funds Issue

On the Strategy issue and the Funds issue, Falk LJ adverted to Carr LJ’s analysis of the most relevant Supreme Court cases in Network Rail Infrastructure Ltd v ABC Electrification Ltd [2020] EWCA Civ 1645 at [18] and [19] of that judgment (see [63]). On the Strategy issue, Falk LJ concluded that Musst’s construction (and that which Freedman J had adopted) made ‘far more commercial sense’ than Astra’s [111] and that because Musst’s role was one of introducer, it was right that their entitlement to a fee would be referable to the point at which an investment was made, and it was not affected by subsequent alterations to the strategy which that fund followed as long as the investments remained in the relevant managed accounts for the two clients it introduced. On the Funds issue, under which Astra argued that Musst’s right to fees for those two clients terminated when there was a change in the strategy of the main fund in which those two clients did not invest, Falk LJ similarly found that Astra’s construction ‘makes no commercial sense’ [120] when tested against the range of potential scenarios arising following the introduction of a client to Astra by Musst. Further, as to Astra’s argument on both the Strategy and the Funds issue, to the effect that upon a change in the strategy in the managed accounts, or a change in the strategy of the main fund, Musst would become entitled to an “accrued” performance fee by reference to the value of the relevant investments as at that date, she concluded: ‘[t]he reality is that a mechanism to share fees on some form of accruals basis would be complex and would raise a number of commercial issues’ when the contract ‘contains no hint of this, and there is no legitimate basis for implying it’ [128].

You can read the Court of Appeal’s judgment ([2023] EWCA Civ 128; [2023] 2 WLUK 191) here.


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