INTRODUCTION
- The Claimants who are mother and son (respectively "Mrs Wilson" and "David Wilson") are the freehold owners of Cross Roads Farm ,Priors Marston, Warwickshire ("the Farm"). The husband and father of the Claimants ("Mr. Wilson"), was also a joint owner of the Farm but he died on 21st October 1981.
- The Farm was originally part of a larger Estate another part of which was a further farm known as The Grange. Mr. Wilson was the tenant of The Grange. A time came when he also became the tenant of the Farm, which he sublet to the First Defendant ("Michael Truelove") who is the husband of the Second Defendant ("Ruth Truelove"), she being the daughter of Mr. and Mrs. Wilson and the sister of David Wilson.
- A yet further time came when the freeholds of the Farm and The Grange became available for purchase. Mr. and Mrs. Wilson and David Wilson bought The Grange and Michael Truelove and Ruth Truelove formed M.E. Truelove (Farms) Limited ("the Company") which purchased the Farm.
- An agreement in writing was made on 22nd February 1971 ("the 1971 Agreement") between Mr. and Mrs. Wilson and David Wilson and the Company. Clause 2 of the 1971 Agreement recorded the Company's agreement to sell the Farm (or alternatively the shares in the Company) to Mr. and Mrs. Wilson and David Wilson for £37,000. It was recorded in clause 3 of the 1971 Agreement that £15,000 had already been paid in part payment of that consideration. Clause 7 of the 1971 Agreement provided as follows:
"On completion of the transfer of the said property or of the said shares as hereinbefore mentioned or any dissolution of their farming partnership occurring after such completion the Wilsons will give to Trueloves or their issue the sole right to re-purchase the said property or the said shares at the price of Thirty Seven Thousand Pounds"
No time limit was prescribed for the exercise of the right to purchase.
- The 1971 Agreement was never put into effect. However, a further Agreement in writing was made on the 7th April 1974 ("the 1974 Agreement") between (i) the Company (defined as "the Vendor") (ii) Michael Truelove and Ruth Truelove (again referred to as "the True1oves") and (iii) Mr. and Mrs. Wilson and David Wilson (defined as "the Purchasers").The 1974 Agreement expressed the 1971 Agreement to be "null and void" and provided for the Vendor to sell the Farm for £20,000 with completion on 16th May 1974, which was the date of the Conveyance ("the Conveyance").
- Clause 3 of the 1974 Agreement provided as follows:
"On the death of the survivor of the two first named Purchasers the third named Purchaser shall give to the Trueloves jointly or in the event of either predeceasing to the of them or in the event survivor of both predeceasing to Trueloves issue the right to re-purchase the property at the price of Twenty thousand Pounds to with the benefit of vacant possession".
Again, no time limit was prescribed for the exercise of the right to Purchase.
THE ISSUES
- The following questions arise for determination:
(1) Has the right to re- purchase which was granted by the 1974 Agreement become void and of no effect by reason of section 9(2) of the Perpetuities and Accumulations Act 1964 ("the 1964 Act")?
(2) If so, ought such right to re-purchase to be rectified so as to be in terms which
would not attract the rule against perpetuities?
(3) If not, ought equity to intervene so as to prevent Mrs. Wilson and David Wilson
from seeking to rely on section 9(2) of the 1964 Act?
I propose to consider these questions in turn, and in the same order.
(1) THE RULE AGAINST PERPETUITIES
- Mr. Stephen Shaw, Counsel for Mr. and Mrs. Truelove, submitted that, for the purposes of section 9(2) of the 1994 Act, no
"option to acquire for valuable consideration any interest in land"
came into existence until one of the triggering events specified in clause 3 of the 1974 Agreement had occurred which thereby (and only then) required the "issue" of the right to re-purchase. Mr. Shaw also submitted that the right to re-purchase, given the need first for a triggering event, was analogous with a conditional option, in respect of which the perpetuity period did not begin until the fulfilment of the condition in question : as to which see generally Maudsley's The Modern Law of Perpetuities at p.188.
- I agree with the submission of Mr. Andrew Cosedge, Counsel for Mrs. Wilson and David Wilson, that the right of re-purchase is properly regarded as an interest in land which arose on the coming into existence of the 1974 Agreement or, at the very latest, the Conveyance. This is because the fact of the grant of the right of re-purchase constituted by the 1974 Agreement had the effect that the "right" to "take ... away" the estate or interest of the Wilsons in the Farm was immediately vested in the grantees of the right to re-purchase : see London & South Western Railway Co v Gomm (1881) 20 Ch.D 562 at 581.
- In my judgment, the reference to the right to re-purchase being issued later does, at most, amount to no more than a procedural requirement. And, beyond this, the fact that there was a requirement in the 1974 Agreement for the right to re-purchase to be issued had the effect that there was an immediate requirement for such issue, albeit that the time for issue was later, with the result that, again, the "right" to "take ... away" the estate or interest of the Wilsons in the Farm was immediately vested in the grantees of the right to re-purchase.
- As to the submission that the right of re-purchase was analogous with or similar to a conditional option, it seems to me that this is not correct. In my judgment, the various triggering events are, of their nature, events in respect of which it is to be expected that one will occur. Accordingly, they identify when the right of re-purchase will become exercisable. Their purpose is not to specify a condition which may or may not occur and which must first have been fulfilled.
(2) RECTIFICATION
- I heard oral evidence from David Wilson and also Mr. and Mrs. Truelove. In addition, I was taken to written statements by Mrs. Wilson and shown correspondence passing between the parties' respective solicitors. It is quite clear to me that the parties to the 1974 Agreement did intend that there should be a right to purchase which was unlimited in terms of time. The mistake which was common to the parties was that such an unlimited right was permissible in law. Notwithstanding the fact that both sides had their own solicitors acting for them in relation to the 1974 Agreement, none of the parties were aware of the rule against perpetuities as it affects options.
- Accordingly, this is not a case in which the agreement which the parties did reach was not correctly recorded in the 1974 Agreement. Nor is this a case in which rectification is being sought by way of the Court rectifying the 1974 Agreement so that it accurately reproduces what the parties, in fact, agreed. Rather, the rectification which is sought is the substitution of a right of re-purchase in different terms from those agreed or as a different creature so that it does not offend against the rule.
- In my judgment, the claim to rectification which is made does not at all accord with the most elemental principles of rectification. I, therefore, decline to order rectification of the 1974 Agreement.
- As to whether rectification should be ordered by way of satisfaction of an equity, this only arise as a candidate order if a relevant equity has arisen. I now turn to this question.will
INTERVENTION OF EQUITY
- In their Defence, Michael and Ruth Truelove rely on:
"an implied, resulting or constructive trust in favour of the Defendants [that the Farm is] to be conveyed to the Defendants upon the demise of [Mrs. Wilson], and upon payment of the sum of £20,000"
They also rely on:
"the operation of the doctrines of estoppel by convention, equitable or promissory estoppel or equitable forbearance"
The essential submissions of Mr. Shaw were (i) that equity will prevent a person from relying on his strict legal rights, even such rights as arise under statute, when it would be inequitable for him to do so : see Crab v Arun DC [1976] Ch 1 79CA at I87G-188A; or (ii) that the instant case is one in which there is an estoppel by convention which precludes the Claimants from relying on the 1964 Act.
(i) Inequitable to Rely on the 1964 Act
- There is an important distinction to be drawn between two matters. First, and I accept the submissions of Mr. Shaw in this respect, the mere fact that one is concerned with a statutory right or a statutory requirement does not of itself necessarily prevent equity from providing relief which will override the right or requirement in question: see Crab v Arun DC (supra), Yaxley v Gotts [2000] Ch 162CA at 175B-D and Shah v Shah [2001] 3 WLR 31CA. Secondly, however, such relief can only be available to the claimant if there has been some unconscionable behaviour on the part of the defendant which gives rise to an equity: see eg. The "Ion" (1980) Lloyds LR 245, Habib Bank Ltd v Habib Bank AG [1981] 1 WLR 1265 at 1286 and Jennings v Rice and others [2002] EWCA Civ 159 at para 21.
- As I have mentioned above, I did hear oral evidence from David Wilson and also Mr. and Mrs. Truelove. I do find that Mr. and Mrs. Truelove would not have entered into the 1974 Agreement and the Conveyance, at any rate with the 1974 Agreement containing a right for them to re-purchase the farm which would expire in 21 years, had they known that such right would expire within such a time. I also find that, without the right of re-purchase, the terms of the 1974 Agreement in some respects (eg. the purchase price and the free living accommodation for Mr. and Mrs. Wilson in Hardwick Grange) were adverse to the interests of Mr. and Mrs. Truelove. I further find that, as a result of their failure to appreciate that the right of re-purchase was limited in time, Mr. and Mrs. Truelove failed to take steps which they might otherwise have taken eg. pension arrangements, challenging the Will of Mr. Wilson and taking steps to secure the future of their mentally disabled son.
- However, it does not seem to me that any of these matters can be said to have been occasioned by any unconscionable behaviour on the part of any of the Wilsons. In particular, they did not expressly or impliedly represent to Mr. and Mrs. Truelove that the right of re-purchase had no time limit. Nor did they encourage or allow Mr. and Mrs. Truelove to make such an assumption about the right to re-purchase or to act to their detriment on the basis of such an assumption. This is no more than a case in which both parties entered into an agreement with an erroneous view as to its true effect and Mr. and Mrs. Truelove thereafter acted unilaterally on the basis of their own assumption about the terms of that agreement. Without more - without some unconscionable conduct - there is no ground for the intervention of equity.
Estoppel by Convention
- Mr. Shaw correctly submitted that there was no requirement as to unconscionability in relation to claims which are founded on estoppel by convention. However, as Lord Denning MR said in Amalgamated Investment v Texas Bank [1982] QB 84CA at 121H-122A:
"When the parties to a contract are both under a common mistake as to the meaning or effect of it -and thereafter embark on a course of dealing on the footage of that mistake - thereby replacing the original terms of the contract by a conventional basis on which they both conduct their affairs, then the original contract is replaced by the conventional basis. The parties are bound by the conventional basis. Either party can sue or be sued upon it just as it had been expressly agreed between them."
As I have found above, this is not that which has happened in the instant case. The parties did not embark on a course of dealing on the footage of the mistake which they had both independently made as to the life of the right to re-purchase. Rather, Mr. and Mrs. Truelove did no more than act independently in a way which they would not otherwise have done in the absence of their mistake.
- Mr. Shaw submitted that two decisions in the Lands Tribunal on estoppel by convention in relation to limitation periods, namely CWS v Chester Le Street DC (1996) 73 P&CR 111 and Lillis v North West Water Unreported, 10th September 1998 were in a territory which was similar to the instant case and supported his submissions. In my judgment, on the contrary, these are examples of cases which make it clear that the parties must be jointly proceeding on the basis of a shared common assumption : in those cases the shared common assumption was that the parties could negotiate without the risk of the time thereby taken leading to the expiry of the relevant limitation period.
- In the instant case the parties did not jointly proceed on the basis of a shared common assumption. They did no more than both enter into an agreement in circumstances in which they individually misunderstood the legal effect of one of its terms. They did not thereafter proceed jointly on the basis of that misunderstanding: things were done or not done individually in particular by Mr. and Mrs. Truelove on the basis of their own misunderstanding, and not on the basis of any encouragement, still less representations on the part of the Wilsons.
- In my judgment, the following dicta of Oliver LJ in Keen v Holland [1984] 1 WLR 251 at 261 F-G are equally applicable to the instant case:
"This is not strictly a case of the parties having established, by their construction of their agreement or their apprehension of its legal effect, a conventional basis upon which they have regulated their subsequent dealings as in the Amalgamated Investment case ... The dealing alleged to give rise to the estoppel is the entry into the agreement itself in the belief that it would produce a particular legal result. In fact, for reasons which had nothing to do with the defendant, the Plaintiffs got it wrong ..."
So too in the instant case : this is no more than a case in which the parties got it wrong".
- Mr. Shaw made a number of submissions in relation to the question which was considered in the Shah case (and see also Actionstrength v International Glass [2002] 1 WLR 566CA at 577) as to whether statute can be rendered "nugatory" by an estoppel. In particular, as was considered in the Shah case, there is the question whether the policy behind the provision made in section 9(2) of the 1964 Act, as revealed by the Law Reform Committee Report, Cmnd 18 (1956), excluded an estoppel from overriding that provision. In this connection, Mr. Shaw also took me to the criticisms of the rule against perpetuities which appear in Grays Elements of Land Law (2nd ed) at p 672.
- However, for the reasons which appear above, it does not seem to me to be necessary to reach any conclusions about these questions: there was no unconscionable conduct nor any conduct giving rise to an estoppel. In particular, this is not a case, of a kind which could be considered distinguishable from both the Shah and Actionstrength cases, in which there was some representation by the Wilsons to Mr. and Mrs. Truelove that they would not rely on the effect of Section 9(2) of the 1964 Act.
- For similar reasons, I do not find it necessary to make findings about some of the factual disputes which were canvassed in the evidence. I refer, in particular, to the questions whether the payment of £15,000 which was made to Ruth Truelove by her father was a gift or a loan to fund the then expected later acquisition of the Farm, as to the nature of the relationship between Mr. Wilson and Michael Truelove and as to the reason why Mr. Wilson wanted to come back to the area in which the farm was situated.
CONCUSION
- Accordingly:
(1) I hold that the right to re-purchase which was granted by the 1974 Agreement
become void and of no effect by reason of section 9(2) of the Perpetuities and Accumulations Act 1964.
(2) I further find that such right to re-purchase ought not to be rectified so as to be in
terms which would not attract the rule against perpetuities.
(3) I also find that there is no ground for the intervention of equity so as to prevent Mrs. Wilson and David Wilson from seeking to rely on section 9(2) of the Perpetuities and Accumulations Act 1964, nor is there any estoppel by convention which would lead to such an effect.
I also order, pursuant to section 1(6) of the Land Charges Act 1972, that the registration of the Class C(iv) Land Charge numbered 128751 in respect of the right to re-purchase be vacated.
