Coles & Ors (Trustees of the Ward Green Working Mens Club) v Samuel Smith Old Brewery (Tadcaster) (UnLtd Company) & Anor

Specific performance may be ordered against a contracting vendor who has transferred the land to a third party if the vendor retains power to procure that party to convey it. An unregistered estate contract is void against a purchaser for money or money’s worth under section 4(6) of the Land Charges Act 1972, but that does not release the original vendor from its contractual obligation or preclude an order requiring it to procure the conveyance.

A genuine and open transfer to a wholly owned subsidiary, made for real consideration to take advantage of non-registration, is not shown to be a sham merely because it was intended to defeat the optionees’ rights.

The trustees of a working men’s club exercised a 1958 option to purchase their leased clubhouse. After the option was exercised, the Brewery transferred the property at book value to its wholly owned subsidiary, Rochdale. The option had not been registered as an estate contract under the Land Charges Act 1972.

Judge Pelling held that the option and its exercise created an enforceable purchase contract, but refused specific performance. He held that the unregistered contract was void against Rochdale, a genuine purchaser, and directed an inquiry into damages against the Brewery. The trustees appealed. The Brewery also contended by respondent’s notice that the option had been exercised over only part of the option land following a 1961 sale to Worsbrough Urban District Council.

Appeal allowed. Rimer LJ, with whom Pill and Sedley LJJ agreed, held that the trustees were entitled to specific performance against the Brewery.

1. The Brewery was the contracting vendor. Although it had transferred the property to Rochdale, its wholly owned subsidiary, it remained able to procure Rochdale to convey the property. The principle applied in [1962] 1 WLR 832 therefore entitled the court to order the Brewery specifically to perform its contract by procuring that conveyance.
2. The failure to register the option meant that it was void against Rochdale as a purchaser for money or money’s worth under section 4(6) of the Land Charges Act 1972. That conclusion, consistently with [1981] 1 AC 513, did not provide a reason to refuse specific performance against the Brewery itself. The court did not need to order Rochdale directly to perform.
3. The court would not disturb the finding that the transfer to Rochdale was genuine and not a sham. Rochdale was a genuine company, the transaction was open, and the consideration, although low, was real. The court expressed no concluded view on whether alleged impropriety alone could justify piercing the corporate veil, because an order against the Brewery gave the trustees effective relief.
4. The respondent’s notice failed. Although the judge had been mistaken about which plan was annexed to a 1936 conveyance, the Brewery had not proved that land sold to Worsbrough in 1961 had formed part of the land subject to the tenancy and option. There was therefore no need to consider the consequences of a partial exercise of the option.
5. The order refusing specific performance against the Brewery was set aside. The Brewery was ordered to procure Rochdale to transfer the property to the trustees in completion of the contract.

• Court of Appeal (Civil Division) Allowed the trustees’ appeal and ordered the Brewery to procure its subsidiary to transfer the property: [2007] EWCA Civ 1461.
• High Court, Chancery Division (Leeds District Registry) On 9 November 2006, His Honour Judge Pelling QC upheld the option and purchase contract but refused specific performance, dismissed the claims against the subsidiary, and directed an inquiry into damages against the Brewery. The Court of Appeal set aside the refusal of specific performance against the Brewery.