Phillips v Mobil Oil Company Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE NICHOLLS,LORD JUSTICE PARKER,LORD JUSTICE MAY |
| Judgment Date | 19 May 1989 |
| Judgment citation (vLex) | [1989] EWCA Civ J0519-4 |
| Docket Number | 89/0507 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 May 1989 |
[1989] EWCA Civ J0519-4
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(His Honour Judge Bromley, Q.C.)
Royal Courts of Justice
Lord Justice May
Lord Justice Parker
and
Lord Justice Nicholls
89/0507
MR. SIMON BERRY (instructed by Messrs Ames Kent Rathmell & Walters, Wiltshire) appeared on behalf of the Respondent/Plaintiff.
MR. WILLIAM POULTON (instructed by Messrs Metson Cross & Co.) appeared on behalf of the Appellant/Defendant.
This appeal raises a conveyancing point. The issue is whether a renewal covenant in a lease needs to be registered as a land charge.
The material facts can be stated very shortly. By a lease dated 12th August 1961 Mills and Rockleys Limited, the original lessor, granted to the defendant, Mobil Oil Company Limited, a lease of a petrol filling station at Frome, Somerset. The lease was for 25 years from 25th March 1961. Thus it was due to expire on 25th March 1986. The lease contained, in unexceptional form, a covenant by the lessor to grant to the lessee at its request a further term of 25 years. By a conveyance dated 29th April 1971, the original lessor sold the property, subject to the lease, to Vace Properties Limited. In 1976 Vace Properties mortgaged the property to Barclays Bank. On 20th December 1982 Mobil granted a three-year underlease of the property to D.S. Phillips Limited, a company owned and controlled by the plaintiff Mr. David Stanley Phillips. Nine months later, on 12th September 1983 Barclays Bank as mortgagees sold the freehold to Mr. Phillips personally. The end result, thus, was that Mr. Phillips owned the freehold subject to the 1961 lease, and his company occupied the property and carried on a petrol filling station business there as undertenant from Mobil.
On 15th February 1985 Mobil exercised its option to renew contained in the lease. (In fact there were two options, one contained in the 1961 lease and a similar option contained in a supplemental lease of an additional small strip of land. Nothing turns on this supplemental lease and I need not refer to it further). Mr. Phillips declined to grant a new 25 year term pursuant to the covenant in the lease, on the ground that the covenant had never been registered in the land charges register. He issued a writ claiming a declaration that the renewal option was void against him for want of registration. Judge Leonard Bromley, Q.C., sitting as a judge of the High Court, made a declaration to that effect on 8th July 1988. Because the option had not been registered, Vace Properties and through that company in due course Mr. Phillips, acquired the freehold reversion free from the burden of the option. The judge also determined adversely to Mobil other issues such as estoppel. None of these is germane to the only issue arising on the appeal which Mobil has brought before this court.
The land charges system is now governed by the Land Charges Act 1972. This Act came into force on 29th January 1973. The Act in force at the time of the sale of the property from the original lessor to Vace Properties was the Land Charges Act 1925. The crucial provision in the 1925 Act, which does not differ materially from the corresponding section in the 1972 Act, is section 10(1). This section provides for the registration of certain classes of charges on or obligations affecting land in the register of land charges. Class C(iv) is in these terms:
"Any contract by an estate owner or by a person entitled at the date of the contract to have a legal estate conveyed to him to convey or create a legal estate, including a contract conferring either expressly or by statutory implication a valid option of purchase, a right of pre-emption or any other like right (in this Act referred to as 'an estate contract')."
One further statutory provision can be noted. Section 20(8) provides that unless the context otherwise requires:
"'Purchaser' means any person (including a mortgagee or lessee) who, for valuable consideration, takes any interest in land; and 'purchase' has a corresponding meaning."
The only other provision I need mention is that section 13(2) enacts that the consequence of non-registration of an estate contract is that it is void as against a purchaser of a legal estate for money or money's worth.
It will be seen, therefore, that the statutory definition of an estate contract in section 10 expressly embraces "a contract conferring…a valid option of purchase, a right of pre-emption or any other like right." From this wording and the wording of the whole definition, three points at least are clear. First, an agreement whereby A confers on B an option to buy A's land is within the statutory definition. This is so whether A owns the freehold or only a lease. In each event he is the owner of a legal estate in the land, and as such is an "estate owner". Second, if A and B enter into a contract whereby A agrees to grant and B agrees to take a lease, the contract is within the definition as a "contract by an estate owner…to…create a legal estate". Third, if A and B enter into an agreement whereby A confers on B an option to acquire a lease, that also falls within the definition as "a contract conferring…a valid option of purchase…or any other like right". Whether that is because such an option is an "option of purchase" by reason of the extended meaning given to the word "purchase" by section 20(8), or is because such an option is a contract conferring "any other like right" is not, in my view, a matter of moment. Given that an option to buy a freehold or leasehold is within the definition, and given that an agreement to grant a lease is also within the definition, a construction of the definition which would exclude the grant of an option to acquire a lease would be without rhyme or reason.
None of the points I have so far mentioned was in dispute before us. Mr. Poulton's erudite argument was that the position so far described does not obtain in one particular case, namely a renewal option contained in a lease. He accepted that if L grants to T a lease containing an option to buy the reversion, that option does fall within the statutory definition and is registrable even though it is contained in a lease. He submitted that the position is otherwise where L grants to T a lease containing an option to call for a further term (in the present case, another 25 year lease). In that case the option is not within the definition of an estate contract and is not registrable.
I can summarise the rationale on which this suggested distinction is based as follows. An option in favour of a tenant to buy the reversion to his lease is not a covenant which touches or concerns the demised land ( Woodall v. Clifton [1905] 2 Ch. 257). The burden of such an option does not run with the reversion under section 142 of the Law of Property Act 1925. In contrast, an option to renew does run with the reversion. Whether anomalous or not, this has been established law ever since Spencer's case (1583) Co.Rep. 16a itself: see Isteed v. Stoneley (1580) 1 And. 82, Roe d. Bamford v. Hayley (1810) 10 EAst 464, and the observations of Farwell J. in what is, by comparison, the relatively recent decision in Muller v. Trafford (1901) 1 Ch. 54,60. It was submitted that in the former instance, where the option does not run with the reversion, purchasers of the reversion before 1926 would only have been bound by the option if they had notice of the option. Under the 1925 property legislation, registration replaced the requirement of notice. In the latter case, of an option to renew, where the burden runs with the reversion at law, notice had no application before 1926 and, hence, no question arose of introducing a requirement of registration in place of notice.
I do not find that this line of argument furnishes a compelling reason for construing the statutory definition of estate contract in section 10 of the Land Charges Act 1925 in the manner contended by Mr. Poulton. His task might have been much eased if he had been able to submit that no option conferring a right to the grant of a lease fell within the statutory definition or if, alternatively, he had been able to submit that no...
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Esselte AB and Another v Pearl Assurance Plc
...arrangements are likely to have been made. Such a principle is well established and was most recently referred to in this court in Phillips v Mobil Oil Co. Ltd [1989] 1 W.L.R. 888, 893/4. For my part I do not think that weight should be given in this case to any such considerations. The dec......
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CF CAF 720 2009
...Interpretation, Section 235. In that Section of the textbook the author cites, by way of example, the case of Phillips v Mobil Oil [1989] 1 WLR 888, in which it was argued before the Court of Appeal that a decision that a renewal covenant in a lease falls within the definition of “estate co......