Various leases of properties had been granted. D occupied the property under an arrangement under which they paid no rent. The landlord sought possession, saying that the agreements were licences not tenancies because of the absence of rent and that licenses were not interests in property. Held: The payment of rent is not an essential qualification for a tenancy agreement. Here, there was a tenancy due to the exclusive possession granted, which meant an overriding interest applied. CA also held that contractual licences were rights in personam and not in rem.
Fox LJ: The case of Errington ought to have reached the same conclusion but by a different route to that proposed by Denning LJ (that contractual licenses are rights in rem) since that was plainly wrong and an extension, not a true interpretation, of the Winter Gardens case, which did not include third parties. The conclusion could have been reached by (1) estoppel through misrepresentation, (2) an equitable interest was conferred in the form of an estate contract, or (3) by constructive trusts. On using constructive trusts: “The test, for the present purposes, is whether the owner of the property has so conducted himself that it would be inequitable to allow him to deny the claimant an interest in the property”. This does not automatically arise where a contract sells something “subject to” another interest, as this may simply be a way of giving notice the buyer of other interests currently existing and NOT requesting that the seller respect such interests. “The court will not impose a constructive trust unless it is satisfied that the conscience of the estate owner is affected.” Constructive trust is invoked if “the owner of the property has so conducted himself that it would be inequitable to allow him to deny the claimant an interest in the property”.