Property development venture — Option to purchase land — Condition of exercise requiring notification of proof of funds to other option holder — Whether option validly exercised — Summary judgment for defendants
The claimant was a building and property developer. The second defendant, a solicitor, introduced the first defendant to him as a potential vehicle for a development venture. The first defendant proceeded to acquire the property in question. The parties entered into an agreement that contained an option for the claimant and second defendant jointly or individually to purchase the property at any time on or before 17 October 2000 on certain conditions. These included clause 2.2.1, which provided that in the event that one of them wished to purchase individually, that party would, on or before the exercise of the option, notify the other party the first party that he wished the option to be exercised jointly.
In September 2000, the claimant wrote to the second defendant, informing him that two companies had made what he believed to be unconditional offers for the property and that their solicitors had proof of funds. By a further letter to the first defendant, he purported to exercise the option. However, the second defendant also gave notice to the first defendant of an intention to exercise the option. The first defendant rejected the claimant’s purported exercise of the option on the ground that he had not complied with clause 2.2.1. The claimant then registered a caution against the property. In proceedings brought by the claimant, the defendants applied for summary judgment on the ground that compliance with clause 2.2.1 was a condition precedent to the exercise of the option and that the claimant’s letter to the second defendant had not amounted to “proof of funds” so as to comply with that condition.
Held: A summary judgment was granted for the defendants.
Clause 2.2.1 imposed a condition precedent to the exercise of the option. The notification that it required had to include independent confirmation that funds to complete the transaction under the option were available, such as a letter from a solicitor confirming that it held the appropriate funds to the account of the transaction, or a banker’s letter confirming that the funds were available to the party exercising the option. The purpose of the notification was to avoid the necessity for further enquiry; the claimant’s letter had failed to achieve that result and did not amount to proof of funds. Thus, the claimant’s purported exercise of the option was invalid. Moreover, there was no evidence of any equity in the case that would prevent the first defendant from asserting that the option had not been effectively exercised: Pallant v Morgan [1952] Ch 43 distinguished. There was no compelling reason why the case should be disposed of at trial and, accordingly, the defendants would be granted summary judgment and a declaration that the claimant’s caution should be vacated.
Anthony Peto (instructed by Ross & Craig) appeared for the claimant; Jonathan Brock QC and Andrew Lenon (instructed by Fuglers) appeared for the defendants.
Sally Dobson, barrister
