High Court clarifies application of third-party enforcement rights in lending agreements: HNW Lending Ltd v Lawrence

In financing transactions, many deal documents contemplate the involvement of third-parties – such as a receiver appointed under a security document, or affiliates of the lender – who are not signatories.

To ensure these third parties can enforce relevant terms, the documents often include a third-party rights clause. A third-party rights clause allows someone who is not a party to the contract to enforce specific provisions, typically by relying on the Contracts (Rights of Third Parties) Act 1999 (the Act). This legal mechanism was central to the dispute in HNW Lending Ltd v Lawrence [2025] EWHC 908 (Ch), where the High Court confirmed that the provisions of the Act mean that third-parties can enforce terms of a contract even if they receive no direct benefit under those terms as long as the contract expressly says they can.

Background

In HNW Lending Ltd v Lawrence the High Court considered whether a security agent, HNW, who was not a party to a loan agreement could enforce its terms. The case arose after the borrower, Ms Lawrence, defaulted on a loan used to fund a property development. HNW sought repayment of the amounts owed under the loan agreement, as well as possession of the property pursuant to the legal charge granted by Ms Lawrence to it as security agent.

Although HNW was not a party to the loan agreement, clause 26.7 stated that HNW could “take the benefit of and specifically enforce each express term” of the agreement pursuant to the Act.

The legal issue

Ms Lawrence argued that HNW had no standing to seek payment of the loan amounts because it was not a party to the loan agreement and it did not benefit from it. She relied on an unreported 2024 County Court decision - HNW Lending Ltd v Mark - where a similar claim by HNW had been dismissed on those grounds.

In HNW Lending Ltd v Mark, the judge focused on whether the security agent received a benefit under the contract sufficient to give it rights under Section 1(1)(b) of the Act (the Second Limb) to enforce terms of the contract, and concluded it did not. Crucially, the court overlooked Section 1(1)(a) (the First Limb), which allows enforcement of such terms by a third-party where the contract expressly provides and regardless of whether it obtains any benefit under it.

The High Court’s decision

The High Court in HNW Lending Ltd v Lawrence took a different view from that taken in HNW Lending Ltd v Mark. It held that:

• Clause 26.7 was sufficient to give HNW enforcement rights under the First Limb of the Act
• The clause did not need to confer a benefit on HNW; it only had to expressly state that HNW could enforce the agreement
• Even if the First Limb did not apply, the clause arguably did confer a benefit on HNW, satisfying the Second Limb as well

The court also confirmed that HNW could enforce the charge securing the loan, even though the borrower’s obligations which were secured were owed to the lender, not the security agent directly (being HNW).

Why this matters

This decision is a welcome clarification. It confirms that third-party enforcement rights can be effectively granted through express drafting without needing to prove that the particular third-party benefits from the contract.

Practical tips for contracting parties

• Be clear and specific about third-party enforcement rights. If you intend for a third- party, such as a security agent, trustee, or other intermediary, to be entitled to enforce terms of a contract, it is best to state this explicitly in the agreement (and so fall within the First  Limb).  Seeking to instead rely on the Second Limb, which requires the contract to confer a "benefit" on the third-party, is riskier, as the meaning of ‘benefit’ under the Act is open to interpretation and may not be consistently applied.

• Watch for exclusion clauses. Section 1(2) of the Act allows parties to exclude third-party enforceability, even if a term appears to confer a benefit. Review boilerplate clauses carefully to ensure they do not unintentionally cut across intended reliance.

• Identify third parties clearly. Section 1(3) of the Act provides that third-parties must be sufficiently identified by name, class, or description. This is especially important in syndicated lending or structured finance where parties may be acting through agents or trustees and so may not come within the scope of the third-party definition.

Looking ahead

With the decision in this case in direct conflict with the decision in HNW v Mark, the High Court granted permission to appeal, so we wait to see whether the issue will be considered by the Court of Appeal. The market would welcome a definitive answer on the application of the First and Second Limbs.