Beasant v Lexicon Holdings Ltd & Anor

An option condition requiring the proposed exercise to be preceded by notification of proof of funds is a condition precedent and must be strictly complied with. Proof normally requires independent confirmation that the funds needed to complete are available. In a back-to-back transaction, confirmation of funds available to the ultimate purchaser may suffice, but a statement referring generally to a prospective purchaser and its solicitors is inadequate. Express contractual provisions negotiated by professionally advised parties may exclude a suggested Pallant v. Morgan equity, particularly where the agreement regulates the parties’ respective rights if the option is not exercised. Where the contractual position is clear and no compelling reason for trial exists, summary judgment may be granted.

The defendants sought summary judgment and declaratory relief in a dispute concerning an option over property at Ansford Factory, Castle Cary. The claimant contended that he had validly exercised the option by written notice and that the agreement preserved wider joint venture, fiduciary or constructive trust rights. The defendants argued that the claimant had not satisfied the condition requiring prior notification of proof of funds. The claimant also alleged that the contractual terms should be read against a Pallant v. Morgan equity and that factual disputes made summary judgment inappropriate. The central issues were whether the proof-of-funds condition had been satisfied, whether any equity displaced the express agreement, and whether the matter was suitable for summary determination.

1. Summary judgment granted. The defendants were entitled to a declaration that the claimant’s caution against the property should be vacated. The purported exercise of the option was invalid.
2. Clause 2.2.1 was a proviso imposing a condition precedent to exercise of the option. It required notification of independent confirmation that funds to complete the transaction were available. A solicitor’s confirmation that funds were held for the transaction, or a banker’s confirmation that funds were available, would be examples of adequate proof. In a back-to-back transaction, proof of funds available to the ultimate purchaser could suffice.
3. The claimant’s letter did not amount to proof of funds. It referred to a prospective purchaser and identified solicitors, but did not provide independent confirmation sufficient to avoid further enquiry. A later letter from the other option-holder did not amount to an admission or establish the content of the contractual obligation.
4. The proposed Pallant v. Morgan equity failed. The agreement had been negotiated in writing by professionally advised parties, and its express provisions gave rights materially different from those asserted by the claimant. Clause 5 regulated the treatment of profits and losses if the option was not exercised, thereby addressing the alleged unfairness. No facts were identified capable of preventing Lexicon from asserting its beneficial ownership consistently with Clause 2.
5. The existence of allegations concerning collusion or breach of fiduciary duty did not provide a compelling reason for a trial of the caution issue. The claimant’s separate fiduciary-duty claim could not be summarily disposed of, but that did not prevent summary judgment on the validity of the option exercise.