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

Permission to appeal may be granted where authorities on the enforcement of an unregistered option against a third party disclose a genuine tension requiring appellate review. Factual differences between the authorities do not necessarily resolve that tension. At the permission stage, the court need not determine which line of authority is correct. It is sufficient that the proposed appellant has a reasonable case that the issue should be tested in the Court of Appeal, particularly where the facts are simple and stark.

The claimants, trustees of the Ward Green Working Men’s Club, sought specific performance of an option thought to have been granted in 1958. The option was void for perpetuity against the second defendant but binding in contract against the first defendant.

After the claimants exercised the option, the first defendant discovered that it had not been registered under the Land Charges Act. It then sold the land at book value to its wholly owned subsidiary, the second defendant. HHJ Pelling QC refused specific performance, finding that the transfer was not a sham and preferring Midland Bank Trust Company v Green to Jones v Lipman. The claimants renewed their application for permission to appeal. The central issue was whether the apparent tension between those authorities warranted review by the Court of Appeal.

1. Disposition. The renewed application for permission to appeal was allowed. The court did not determine the substantive appeal or finally resolve the conflict between the authorities.
2. Background to the proposed appeal. The lower court had refused specific performance. It had treated the transfer to the subsidiary as a genuine transaction rather than a sham, applying the principle associated with Lord Diplock’s statement in Snook v London & West Riding Investments Ltd [1967] 2 QB 786. It had also preferred Midland Bank Trust Company v Green [1981] AC 513 over Jones v Lipman [1962] 1 WLR 832.
3. Appellate review. Midland Bank Trust Company v Green was recognised as an authority of the highest standing, but its facts differed from those in Jones v Lipman and the present case. The former concerned a sale by an individual option grantor to his wife; the latter concerned a sale by an individual to his own company; the present transaction was a sale by a company to its subsidiary.
4. Those distinctions did not necessarily remove the tension between the authorities. The claimants therefore had a reasonable case that the issue should be reviewed in the Court of Appeal on the simple and stark facts of the present case.
5. Order. Application allowed.

• Court of Appeal (Civil Division): The renewed application for permission to appeal was allowed on 21 May 2007.
• Leeds District Registry, HHJ Pelling QC: On 9 November 2006, the judge refused specific performance, finding that the transfer was not a sham and preferring Midland Bank Trust Company v Green to Jones v Lipman.