Phillips v Mobil Oil Co Ltd

Lease containing option to renew — Failure to register as land charge Class C(iv) — Whether section 10 of the Land Charges Act 1925 applied — Whether context and legislative antecedents relevant — Lessee’s appeal dismissedIn August 1961 a predecessor in title to the respondent granted a 25-year lease to Mobil Oil Co Ltd, the appellant, from March 25 1961, of a petrol station and land at The Portway, Frome, Somerset. In December 1982 a company controlled by the respondent was granted an underlease by the appellant and went into occupation of the same property. In September 1983 the respondent acquired the freehold reversion to the appellant’s 25-year term. The appellant’s lease contained a covenant by the lessor to grant to the lessee at its request a further term of 25 years. In February 1985 the appellant exercised its option to renew the lease in accordance with that covenant. The respondent declined to grant a new 25-year term on the ground that the covenant was void against him as it had not been registered as a land charge Class C(iv). In the Chancery Division His Honour Judge Bromley QC (sitting as a judge of the High Court) made a declaration in favour of the respondent ([1988] EGCS 105). The appellant appealed, contending that an option to renew a lease was not registrable as a land charge and that the context and legislative antecedents must be considered in construing section 10 of the Land Charges Act 1925, the Act in force at the time. Held The appeal was dismissed. The statutory definition of an estate contract in section 10(1) of the 1925 Act expressly embraces ” … a contract conferring … a valid option to purchase, a right of pre-emption or any other like right”. An option to purchase a freehold or a leasehold interest is within the definition; so also is an agreement to grant a lease. A construction of the definition that would exclude the grant of an option to acquire a lease would be without rhyme or reason. Arguments based on context and legislative antecedents which sought to distinguish options to renew leases from other similar rights, or which contended that such options ran with and bound the reversion, could not be accepted. The option had not been registered and therefore was void as against the respondent. Beesly v Hallwood Estates Ltd [1961] Ch 105 approved. William Poulton (instructed by Metson Cross & Co) appeared for the appellant; and Simon Berry (instructed by Ames Kent Rathmell & Walters, of Westbury, Wiltshire) appeared for the respondent.