Coles & Ors v Samuel Smith Old Brewery (Tadcaster) & Anor

This is a renewed application for permission to appeal against an order of HHJ Pelling QC sitting in the Leeds District Registry on 9 November 2006, by which he refused to grant specific performance of an option. The option is of some antiquity, having been granted by an undated document thought to date to 1958. That gave rise to one problem as against the second defendant because the option was void for perpetuity. But it was binding in contract against the first defendant. A number of points were taken against its efficacy, but only one of those points succeeded and that arose in this way. After the claimants sought to exercise the option, the first defendant discovered that it had not been registered under the Land Charges Act and they promptly sold the land to the second defendant at its book value in their books, the second defendant being a wholly owned subsidiary of the first defendant.

The judge considered the case carefully in respect of this point just as much as on all the various other points that had been argued before him. He decided that the transfer on the sale to a second defendant was not a sham in the terms of Lord Diplock’s well known statement in Snook v London & West Riding Investments Ltd [1967] 2 QB 786 and, considering the various authorities about enforcement of an unregistered option against third parties, he decided that he should follow Midland Bank Trust Company v Green [1981] AC 513 rather than Jones v Lipman [1962] 1 WLR 832.

Midland Bank v Green is, of course, of the highest authority but could be said to be distinguishable because the sale in that case was by the individual grantor of the option to his wife, whereas the sale in Jones v Lipman was by an individual to his own company, and in the present case it was by a company to its subsidiary company. There is a great deal to be said for the judge’s reasoning, but it seems to me that there is a tension, to put it at its lowest, between Midland Bank v Green on the one hand and cases such as Jones v Lipman on the other, and the claimants have a reasonable case for saying that that issue is one that ought to be able to be tested in the Court of Appeal on the extremely simple and stark facts of the present case.

Accordingly, I would grant permission to appeal on the basis that these lines of authority, which are no doubt in various ways distinguishable but in other ways ought not necessarily to be regarded as distinguishable, need to be reviewed at this level.

I agree.