Astra Asset Management UK Ltd v The Co-Operative Bank Plc

Negotiations expressly conducted on a subject to contract basis do not ordinarily create a binding contract before formal documentation is completed. The expression retains its established legal meaning in commercial negotiations, including transactions commonly documented under Loan Market Association terms. It may be waived only by clear words or conduct.

An agreement to negotiate in good faith will not be implied into an exclusivity agreement where it conflicts with express provisions preserving the parties’ freedom to withdraw or renegotiate. A restitutionary claim for benefits conferred during failed negotiations may nevertheless have a real prospect of success where the defendant arguably encouraged or facilitated valuable work, particularly where the contractual allocation of risk did not clearly address the circumstances.

The Bank applied for summary judgment under CPR 24, alternatively strike-out under CPR 3.4(2)(a), against claims by Astra concerning a proposed sale of loan rights and security interests. Astra alleged a binding contract concluded during telephone negotiations or subsequent correspondence, an express or implied obligation to negotiate in good faith, estoppel by convention, and restitution for work which resolved an issue affecting the value of the secured property.

The parties had entered exclusivity agreements stating that the proposed transaction was subject to contract. Astra later offered £900,000 and worked on the Standard Life issue, after which the Bank reconsidered the transaction and price. The central questions were whether any binding sale contract or good-faith obligation arose, whether estoppel was arguable, and whether Astra’s restitutionary claim should proceed to trial.

1. Summary judgment principles. The court applied the principles stated in The LCD Appeals [2018] EWCA Civ 220. Summary judgment is appropriate where a claim has no realistic prospect of success and there is no compelling reason for trial. The court must avoid a mini-trial, but may decide a short point of law or construction where the evidence is sufficient.
2. No binding sale contract. Recital (A) of the first Exclusivity Agreement established that the parties intended to proceed subject to contract. That phrase had its usual legal meaning. The Loan Market Association materials confirmed, rather than altered, that meaning: an oral trade is ordinarily binding unless the parties expressly state that it is subject to contract.
3. The evidence did not show any unequivocal waiver of that basis during the February telephone calls. The 10 February letter of intent expressly stated that it was subject to contract and would not create a binding agreement until all legal and contractual documentation had been completed. The Bank’s subsequent approval and communications therefore could not create a contract. The later Exclusivity Agreement, its price-variation provisions, and the parties’ continuing negotiations were inconsistent with an already binding sale.
4. Good faith and estoppel. The good-faith recital was not an enforceable obligation to negotiate or complete a transaction at £900,000. Such an obligation would conflict with the express rights to withdraw or seek to alter the proposed consideration and would in any event be an unenforceable agreement to agree. No arguable common understanding capable of supporting estoppel was shown. Estoppel could not create the alleged cause of action where no contractual cause of action existed.
5. Restitution. Astra had an arguable case that the Bank encouraged or facilitated work which resolved the Standard Life issue and produced a substantial benefit. The authorities did not establish that restitution was available only for accelerated performance of obligations under the anticipated contract, or that a subject-to-contract basis necessarily defeated every restitutionary claim. The effect of the Exclusivity Agreement’s contractual allocation of risk, and the relevance of unconscionability, required fuller factual examination.
6. Summary judgment was granted on the alleged sale contract, good-faith claim and estoppel argument. The unjust enrichment claim remained for trial. Astra’s separate claim for expenses under the Exclusivity Agreement was not summarily determined.

First-instance decision. The judgment does not state any prior appellate history.