Standard Gas Technologies v Goodwin: High Court allows claim to enforce undrawn loan to proceed to trial

The High Court has refused to strike out a claim to compel a shareholder to pay £1 million he had agreed to advance, holding that the long-standing rule against forcing a lender to lend is arguably neither absolute nor applicable to an unusual hybrid agreement.

In Standard Gas Technologies Ltd v Goodwin [2026] EWHC 2915 (BP), Rosalind Phelps KC, sitting as a Deputy High Court Judge in the London Circuit Commercial Court, dismissed applications for summary judgement and strike out and granted permission for the contested amendments to the particulars of claim.

Background

Mr Goodwin, a shareholder in Standard Gas, also has significant control over the contractor building the group's pyrolysis plant, against which the group had claims of around £2.17 million.

Under a September 2025 "Shareholder Loan Agreement", Mr Goodwin agreed to advance £1.5 million in three tranches, interest-free absent default. Repayment depended on the plant passing acceptance testing and a fresh £5 million fundraising. In return, Standard Gas suspended its claims against the contractor, and in some circumstances it could assign those claims to Mr Goodwin instead of repaying. He paid the first tranche late and never paid the rest.

Mr Goodwin consented to a damages claim but argued that the claim for the £1 million as an agreed sum, or for specific performance, was barred. He relied on the "No Debt Claim Rule" stated in Chitty on Contracts, which derives principally from South African Territories Ltd v Wallington [1898] AC 309. Under that rule, a borrower cannot sue for undrawn loan money as a debt, since that would amount to specific performance of a contract to lend.

An undeveloped area of law

The judge found the rule's scope and rationale unclear. The speeches in Wallington did not speak with one voice. Some suggested a blanket bar on debt claims, while others treated it as a bar to specific performance that ordinary loans could not overcome. There was little analysis, and the decision predated Beswick v Beswick [1968] AC 58, which confirmed that obligations to pay money can be specifically enforced.

In Loan Investment Corporation of Australasia v Bonner [1970] NZLR 724, the majority of the Privy Council left open that the objection might not prevail in "exceptional cases", and Sir Garfield Barwick dissented. Academic commentators have also widely criticised a blanket rule. The judge accepted that this was an "undeveloped" area of law, rejecting the argument that the scarcity of cases showed the law was clear.

A sui generis agreement

The agreement was not a straightforward loan. Forbearance from pursuing the contractor claims was central to the bargain, and the option to assign those claims instead of repaying went beyond an alternative route to repayment. The chief executive's evidence, supported by board minutes describing "Swift Settlement Payments", was that the agreement was principally a settlement, with repayment almost an afterthought. Describing the agreement as sui generis was not the same as alleging a sham.

There was a real prospect of showing that damages were inadequate. The package of rights could not be bought on the market. Keeping Mr Goodwin bound into the project carried benefits that were hard to quantify, and losses from delayed funding on a continuing project were speculative. A later rights issue did not replicate those benefits. The judge rejected the separate argument that the pending damages trial was itself a compelling reason for trial. Standard Gas will pay the costs occasioned by the amendments.

Cleon Catsambis, instructed by Mishcon de Reya LLP, appeared for Standard Gas. Peter Head, instructed by McDermott Will & Schulte UK LLP, appeared for Mr Goodwin.