Question whether a right of pre-emption created an interest in land–Right of pre-emption in 1944 conveyance–Subsequent option to purchase same land granted to another party by way of covenant in a lease–Decision of Court of Appeal in Manchester Ship Canal Co v Manchester Racecourse Co [1901] 2 Ch 37, which held that a right of pre-emption did not in that case create an interest in land, analysed and considered as a decision on particular facts–Two subsequent decisions at first instance not followed–Held that right of pre-emption given in 1944 was an interest in land and took priority over subsequent option
In this action
Robert Ellis Pritchard sought against Christopher Briggs, Joyce Briggs (his
wife), Arthur Henry Inman and George Hawksworth (the last two being the
personal representatives of Major Arthur Lockwood who died in 1973) specific
performance of an alleged contract arising from the exercise of an option
contained in leases granted to the plaintiff by Major and Mrs Lockwood in 1959
and 1964 of part of the lands which the Lockwoods had retained in 1944 when
they sold the hotel which they had run at Pen-y-Gwryd, near Snowdon. The 1944
conveyance of the hotel, to a Mr Ridett, had contained an option, in the nature
of a right of pre-emption relating to the same retained lands. Mr and Mrs
Briggs, who were successors in title to Mr Ridett, counterclaimed for vacant
possession of the property. the plaintiff by the Lockwoods in 1959 and 1964 of
part of the lands which the Lockwoods had retained in 1944 when they sold the
hotel which they had run at Pen-y-Gwryd, near Snowdon. The 1944 conveyance of
the hotel, to a Mr Ridett, had contained an option, in the nature of a right of
pre-emption relating to the same retained lands. Mr and Mrs Briggs were
successors in title to Mr Ridett.
Richard Scott
QC and Jonathan Parker (instructed by Gwyndaf-Williams & Roberts, of
Portmadoc) appeared for the plaintiff; Hugh Francis QC and A W Simpson
(instructed by Foysters, of Manchester) represented the defendants.
Giving judgment,
WALTON J said that the late Major and Mrs Lockwood sold the Pen-y-Gwryd hotel
near Snowdon to a Mr Ridett in 1944. They retained adjoining lands comprising a
house, petrol pumps and a lake.
The Lockwoods,
by a covenant with Mr Ridett which was intended to bind the lands they retained
for the benefit of the land they conveyed for as long as all the parties, or
their survivor, remained alive, agreed not to sell, or concur in selling, all
or any part of the land they retained without giving Mr Ridett the option to
purchase such retained land for the price of £3,000. There was a provision for
the purchase of the fixtures and petrol pumps at a valuation. In 1947 the hotel
was sold to a Mr Mather and in 1954 he conveyed it to Mr and Mrs Briggs, the
first and second defendants, and the option to buy the land, if sold in the
life-time of the Lockwoods, passed to them.
The Lockwoods
had in 1953 proposed to sell some petrol pumps on the retained land to the
plaintiff, Mr Pritchard, but Mr Mather had pointed out that this would be a
breach of covenant and the proposal was dropped. Instead the Lockwoods granted
to the plaintiff a lease of part of the land they retained including the petrol
pumps. That lease contained a covenant by the Lockwoods which provided for the plaintiff,
or his successors if they wished, to purchase the retained land for £3,000
after the death of the Lockwoods. To do this notice in writing had to be given
to the personal representatives of the survivor. This option was renewed in a
subsequent lease.
Mrs Lockwood
died in 1969 and the plaintiff later moved in to live with Major Lockwood and
look after him. The major was taken to hospital in 1971 and his nephew, Mr
Inman, was appointed his receiver under the Mental Health Act 1959.
Mr Inman was
caught in a variant of "Morton’s fork." Major Lockwood’s only substantial asset was
the retained land. If this was sold in the major’s life-time it had to be sold
to the Briggs for £3,000 unless they waived their rights. After the major’s
death it had to be sold to Mr Pritchard for the same figure. It was finally
agreed between Mr Inman and the Briggs that the retained lands should be sold
to the Briggs for some £14,150. The Briggs agreed to pay more than the figure
given in the 1944 conveyance.
Before the sale
to the Briggs was completed Major Lockwood died, in early February 1973.
Completion was effected on February 16, the conveyance being expressed to be in
consideration of £3,000 only. Mr Pritchard served notice in March claiming the
right to exercise his option. He sought specific performance of the contract
alleged to have been created by his exercise of the option. The Briggs claimed
vacant possession of the property. They were accepting rent in the meantime
from Mr Pritchard, although claiming that this was without prejudice to their
right to vacant possession. Mr Pritchard claimed that the conveyance to the
Briggs should be set aside. He contended that the Briggs and Mr Inman had
conspired to induce a breach by Major Lockwood of the latter’s contractual
obligations to him (Mr Pritchard) and sought damages for this breach or
alternatively for conspiracy.
If the rights
given by the 1944 contract with Mr Ridett amounted to an interest in the land
then, having been registered, they took priority over Mr Pritchard’s right to
the land. There appeared to be no essential difference, from the point of view
of creating an interest in land, between an option and a right of pre-emption: Megarry
and Wade’s Law of Real Property (4th ed, 1975, p 578). In London &
South Western Railway Co v Gomm (1882) 20 Ch D 562 Kay J in the
court of first instance, dealing with the application of the rule against
perpetuities, said: "A present right to an interest
(his Lordship) could see, was equally applicable to a right of pre-emption. It
was a present right to an interest in property which may arise in the future.
The judge was precise–"may arise" not "will arise." It would
have been understandable if there had been a distinction for present purposes
between an option which was immediately exercisable unconditionally, and one
which was not yet exercisable. But there was no such distinction or hint of
such distinction taken in the books or in any of the cases. The only possible
distinction was well stated by Oliver J in Imperial Chemical Industries Ltd
v Sussman (unreported, May 28 1976) when he said that an option was not
dependent on the volition of the owner of the land whereas a right of
pre-emption was so dependent because the owner might or might not decide to
sell.
However, Manchester
Ship Canal Co v Manchester Race-course Co [1901] 2 Ch 37 and two
subsequent first instance authorities, Murray v Two Strokes Ltd
[1973] 1 WLR 823 and Sussman strongly supported the proposition that a
right of pre-emption as distinct from the more usual type of option did not
create an interest in land. He (his Lordship) was reluctant to differ from
Goulding J and Oliver J and he was bound by the Manchester case. He
concluded, however, from an analysis of that case that the Court of Appeal were
doing no more than deciding that, on the facts, they were not prepared to hold
that the clause there in question created an interest in land. On that
interpretation the Court of Appeal had differed from the judge at first
instance, Farwell J, merely in a matter of construction as to which different
minds could take different views. This analysis had not been suggested to
Goulding J or Oliver J.
In his (his
Lordship’s) view the 1944 conveyance in the present case did create an interest
in the land and it was clear that the sale to the Briggs was a genuine one. On
that basis the question of conspiracy between Mr Inman and the Briggs to bring
about breach of contract did not arise. But, even assuming that his Lordship’s
decision so far was wrong, Mr Inman and the Briggs had not known that the
arrangement into which they entered was or might be a breach of contractual
rights. They were in the hands of their lawyers and Mr Inman had also been
acting with the approval of the Court of Protection. It was an essential
element in the tort of inducing a breach of contract that it should be
committed knowingly.
He found,
however, that the Briggs were not entitled to vacant possession against Mr
Pritchard, since they had accepted rent from him. Such acceptance implied a
continuing relationship of landlord and tenant between the parties and
thereafter neither party was entitled to deny its existence.
The result
was that Mr Pritchard’s claim and the Briggs’s counterclaim would both be
dismissed.
