High Court declines to apply century-old ‘No Debt Claim Rule’ summarily
Cleon Catsambis, instructed by Mishcon de Reya, has successfully resisted an application for reverse summary judgment and strike out, and has obtained permission to amend, in Standard Gas Technologiess Ltd v Goodwin [2026] EWHC 2915 (BP).
Rosalind Phelps KC, sitting as a Deputy High Court Judge in the London Circuit Commercial Court, handed down judgment on 11 November 2026. The judgment is one of very few modern examinations of the ‘No Debt Claim Rule’, of which South African Territories Ltd v Wallington [1898] AC 309 (HL) is the leading authority, and which provides that a borrower cannot sue as a debt for monies the lender has failed to advance, or obtain specific performance of a promise to lend.
The judgment is available here.
Background
The claim arises from a ‘Shareholder Loan Agreement’ between Standard Gas and one of its shareholders, Mr Andrew Goodwin. Under the Agreement, Mr Goodwin agreed to advance £1.5 million in three tranches. He paid the first tranche but failed to pay the remaining £1 million.
The Agreement had unusual features. In return for the advances, Standard Gas agreed to suspend claims (held within its group) of at least £2.1 million against the contractor building its pyrolysis plant, a company over which Mr Goodwin has significant control. Repayment was interest-free (unless there was an event of default) and contingent on the plant passing its site acceptance tests and a new fundraising of at least £5 million. In certain circumstances, Standard Gas could discharge its obligations by assigning the contractor claims to Mr Goodwin instead of repaying the money.
The applications
Mr Goodwin applied for reverse summary judgment and strike out of the claim for the outstanding £1 million. He contended that the claim was barred by the ‘No Debt Claim Rule’, so that Standard Gas was confined to a claim in damages. He also argued that, having raised the money through a subsequent rights issue, Standard Gas had no need of an order compelling the advance.
Standard Gas applied for permission to amend to claim the £1 million as an agreed sum or by way of specific performance. It argued that the scope and rationale of the rule were uncertain, that the Agreement was not an ordinary loan but a sui generis agreement, and that, in any event, damages were not an adequate remedy.
The decision
The Judge dismissed the summary judgment and strike out application and granted permission for the opposed amendments. She held that Standard Gas has a real prospect of showing at trial either that the Court is not bound to dismiss the claim under Wallington, or that damages are not an adequate remedy.
On the law, the Judge reviewed the authorities and found the scope and theoretical underpinnings of the rule unclear. Although Wallington is authority at the highest level, it contains no real analysis of the rule. It also predates Beswick v Beswick [1968] AC 58, which confirmed that obligations to pay money can in principle be specifically enforced. In Loan Investment Corporation of Australasia v Bonner [1970] NZLR 724, the majority of the Privy Council observed that the objection to specific performance of a loan may not prevail in ‘exceptional cases’, but the scope of that potential exception is unclear. The Judge reasoned that, if there is no blanket rule and specific performance of an obligation to lend could be available in exceptional cases, the factual circumstances had to be considered.
On the facts, the Judge accepted that the Agreement was a sui generis contract and not a straightforward commercial loan. She relied in particular on two features: Standard Gas’ forbearance from pursuing the contractor claims, and its option to assign those claims in place of repayment. She considered that Standard Gas had a real prospect of showing that this package of rights could not readily be replaced in the market. Standard Gas also had a real prospect of showing that the later rights issue did not replicate the benefits of Mr Goodwin’s involvement.
Significance
As the Judge observed, the ‘No Debt Claim Rule’ has received “remarkably little judicial scrutiny” given its age. This is “an undeveloped area of law” and the blanket rule has been the subject of “fairly widespread extra-judicial criticism”.
Although given at an interlocutory stage, the judgment indicates that it is at least arguable that the ‘No Debt Claim Rule’ is not an absolute bar, and that a lender may in exceptional circumstances be compelled to advance funds, for example where the obligation forms part of a broader bargain, or where damages would not be adequate.
The decision will be of interest to lenders, borrowers and investors in shareholder funding, project finance and hybrid arrangements, where financing sits alongside the settlement or suspension of disputes, or other non-financial terms.
Mr Goodwin has sought permission to appeal. Subject to the outcome of that application, the substantive questions now fall to be decided at trial.
