Sainsbury and a Belgian company held 75% and 25% respectively of a joint venture company. Sainsbury had an option, not exercised for 5 years, to acquire the 25% holding. The option was never exercised and was cancelled. The court was asked whether the taxpayer remained the beneficial owner of certain shares notwithstanding the existence of an unexercised option to purchase them given to another.
Held: He did so remain.
Nourse LJ said: ‘Then take the previous example [company A enters into an unconditional contract to sell shares in company B to company C], but suppose that the contract is subject to a condition precedent. Until the condition is satisfied the equitable interest in the shares will not pass to Company C. It will remain in Company A. What ground is there for thinking that the beneficial ownership of the shares will also not remain in company A? In order to answer that question we must look to Wood Preservation Ltd v. Prior [1969] 1 W.L.R. 1077. That is a difficult decision. Goff J. at first instance did not distinguish between the beneficial ownership of the shares and the equitable interest in them. In my view he was right not to make that distinction. However, he thought that, because the purchaser could obtain specific performance of the contract by waiving the condition precedent at any time, ‘the beneficial interest had sufficiently passed to the purchaser.’ I respectfully think that that was an error on the part of the judge. Unless and until the condition was either waived or satisfied there could be no right to specific performance and no passing of the equitable interest.’
Judges:
Nourse LJ
Citations:
[1991] 1 WLR 963
Jurisdiction:
England and Wales
Cited by:
Cited – Chattey and Another v Farndale Holdings Inc and others CA 11-Oct-1996
The plaintiffs had paid deposits for apartments which were to be built. After the developer became insolvent the plaintiffs sought recovery of the deposits, saying they had a lien which preceded the claims of chargees.
Held: The one appeal . .
Lists of cited by and citing cases may be incomplete.
Contract
Updated: 26 November 2022; Ref: scu.259715
