Taylor v Couch

For the purposes of the rule against perpetuities, a single instrument may create both an option and a right of pre-emption. A right of pre-emption is treated as a species of option under section 9(2) of the Perpetuities and Accumulations Act 1964. Its 21-year perpetuity period runs from the disposition that created the right, not from the later event which makes the right exercisable. An option or right of pre-emption which is not exercised within that period is void for remoteness. A contingent option remains an option where it can be triggered independently of the grantor’s volition.

The claimant sought declarations and specific performance concerning an option in a 1984 agreement to purchase two plots of retained land. The agreement made the right exercisable if specified planning events occurred or if the vendors offered the plots for sale. The land was conveyed to the defendant and his sister in 1989, and the claimant purported to exercise the right in August 2009. The defendant resisted enforcement on the ground that the right was void for remoteness. The central issue was whether the perpetuity period began when the agreement was made, when the right became exercisable, or when the right of pre-emption was converted into an option.

1. The claim was dismissed. The right purportedly exercised in August 2009 had become void for remoteness.

2. Clause 17 created two rights. Subclauses (i) and (ii) created an option because the relevant planning events were outside the grantor’s control. Subclause (iii) created a right of pre-emption because its operation depended entirely on the vendor’s decision to offer the land for sale. The same contractual clause could therefore create rights of different legal character.

3. Section 9(2) of the Perpetuities and Accumulations Act 1964 applied to the right of pre-emption as a species of option. The proviso to section 9(2) would otherwise be unintelligible. The applicable perpetuity period was therefore 21 years.

4. Even if the right of pre-emption became an option only when the land was offered for sale, the 21-year period had to be measured from the date of the original disposition. That provided the necessary certainty and avoided an uncertain or difficult-to-define starting point. The period consequently ran from 14 December 1984 and expired on 14 December 2005.

5. The court distinguished a right of pre-emption from a conditional contract. An option may depend on external events and remain an option, provided that it can be triggered independently of the grantor’s volition. The reasoning in Wilson v Truelove concerning a conditional option and the construction of the relevant clause was treated as requiring qualification.

The judgment is a first-instance decision of the High Court. The claim was issued in the Chancery Division on 13 December 2010 and was allocated to the multitrack by order of District Judge Khan dated 22 November 2011.